FAR Acc111
Terms and Definition (Theoretical)
Identifying
Definition of Accounting
 ASC (Accounting
Standard Council)
 FASB(Financial
Accounting Standards
Board)
 AICPA (American
Institute of CPAs)
 AICPA (oldest definition
of accounting)
Accounting
Types of Business Activity
 Financing activity
 Operating Activity
 Investing activity
External Auditing
ASEAN
Code of Hammurabi
Scribe
Amatino Manucci
Frater Luca
Industrial Revolution Stage
Entities
 Micro Entities
 Small Entities
 Medium Entity
the phase of accounting where transactions are
analyzed whether accountable or non-accountable
events.
Accounting is a service activity,
financial in nature that provides quantitative
information about economic entities
intended to useful in making economic decisions.
Accounting is an information
system that measures, processes and
communicates financial information about
economic entity
Accounting is the process of
identifying, measuring and communication
economic information to permit informed
judgments and decision by users of the information.
Accounting is an art of
recording, classifying, and summarizing in a
significant manner and in terms of money,
transactions and events which are, in part at least,
of a financial in character, and
interpreting the results thereof.
an information system that measures, processes
and communicates financial information about an
economic entity.
Company ABC obtained loan from Metrobank
company to finance plant expansion.
Mr. Reyes invested cash into his business to
engage in repair shop
Collected the accounts of the customer and
payment of account to supplier
Returned of defective items to the supplier
Paid salaries and taxes of the business
Constructed a building for the factory
It is an independent examination that ensures the
fairness and reliability of the reports that
management submits to users.
An organization in Asia that envisioned a stable,
prosperous and highly competitive economic region
An ancient law that requires merchants to give
buyers a sealed memorandum containing the
agreed price (in the present times this is the BIR
Code)
The accountant of primitive age
Invented the double-entry bookkeeping
Father of Accounting
It is during this time where Corporations were
established and the factory system was used to
create products
Group of businessmen whose assets is P3m or less
This refers to enterprises with assets of above P3.0
to P15Million and employ 10 to 99 workers.
Enterprises with assets of above P15Million to
P100Million and
employ 100 to 199 workers.
Materiality an accounting principle which states that omitting or
misstating this information could influence users of
the financial statements
Consistency An accounting principle that states that similar items
should receive a similar accounting treatment
Accounting changes are often made and the
monetary impact is reflected in the financial
statements of a company
Separate Entity Concept accounting concept that should be considered when
an owner of a business takes goods from inventory
for his personal use
The financial affairs of a firm and its owner are
always kept separate for the purpose of preparing
accounts
Historical Cost This is a principle in accounting that support the
practice of recording an asset based on the amount
actually paid and not what the management thinks
Assets are usually valued here.
Time Period/Periodicity Financial accounting process provides information
Concept about economic activities of an enterprise for a
specified accounting period that is shorter than the
life of the enterprise, this practice
A business which prepares financial statements
every year
Involves dividing the life of a business entity into
accounting periods of equal length thus enabling
the financial users to periodically evaluate the
results of business operations
The financial accounting process provides
information about economic activities of an
enterprise for a specified accounting period that is
shorter than the life of the enterprise.
Private Accounting An accountant employed by a particular business
firm or not-for-profit organization, perhaps as chief
accountant, controller or financial vice president
Forms of Businesses
-Cooperative A business organization is owned by people called
members
-Sole Proprietorship Wendelove sari-sari store buys goods at NCCC
department store and sells these goods in the
neighborhood. The store is owned by Ms.
Wendelove Ceniza.
-Partnership a form of organization whose owners are personally
liable for the debts incurred by the business.
-Corporation a form of business organization whose owners are
not liable for debts of the business.
Type of business organization owned by
shareholders
Form of business organization is characterized by
limited liability
Professional competence and Carrying out professional responsibilities diligently
due care and in accordance with applicable technical and
professional standards
Carrying out professional responsibilities diligently
and in accordance with applicable technical and
professional standard
Integrity A professional accountant should be straightforward
and honest in all professional and business
relationships
FRSC This is an organization whose main function is to
establish and improve accounting standards that

Stable monetary unit concept
GAAP
Accountants should possess
these knowledge
Financial Accounting
Financial Management
Confidentiality
Adequate
disclosure/completeness
Relevance
Revenue recognition principle
Expense recognition principle
Professional Behavior
Financial Statements
-Income Statement/ Statement
of Comprehensive Income
-Statement of Financial
Position
-Statement of Changes in
Equity (SCE)
- Statement of Cash flows
(SCF)
will be GAAP.
The main function is to establish and improve
accounting standards that will be generally
accepted in the Philippines.
Accountant do not recognize that the value of the
peso changes over time
The financial statements should be stated in terms
of a common financial denominator.
The set of guidelines and procedures that constitute
acceptable accounting practice at a given time
They encompass the conventions, rules and
procedures necessary to define what is accepted
accounting practice
General Knowledge
Organizational and business knowledge
Accounting knowledge
IT knowledge
A branch in accounting that concern with the
preparation and publish of complete financial
statements to intended users
General- purpose reports on financial position and
financial performance
Area in accounting that is tasked to manage
financial resources of the business
Violation when a CPA without any permission
divulge an information about an entity under audit
This term means that a CPA should not disclosed
information acquired as a result of professional and
business relationships without proper and specific
authority or unless there is a legal or professional
right or duty to disclose.
An information that is relevant but not captured on
the face of the financial statements is normally
reflected in the notes to financial statement
criteria of GAAP that supports the practice of
preparing financial statements on time so that it can
be used in making a decision
Accrual accounting of income
Accrual accounting of expense
Basic ethical principle requires that CPA must
adhere to relevant laws and regulation and should
avoid acts that discredit the profession
This is a report where the entity’s financial
performance.
Information about the financial performance of an
entity is required in order to assess potential
changes in the economic resources that is likely to
control in the future. This information is primarily
provided in the
This is a report where the entity’s financial stability,
liquidity and profitability is reflected.
presents a summary of changes in
capital such as initial investments of owner,
additional investments of owner,
profit or loss from business operations and
withdrawals of owner during a
specific period.
presents the cash flows of cash received
(Cash inflow) and disbursed (cash outflow) during
the period categorize as
 Investing, Financing and Operating Activities.
Management Accounting branch of accounting includes financial and non-
financial data from various sources and utilized it for
specific decision
Bookkeeping This area involves collection of financial data and
entering these data in the books of accounts
This is a branch of accounting which involves a
mechanical task involving the collection of basic
financial data. Bookkeeping is normally involve of
entering data in the books of accounts, classify or
sort the data, extract balances and summarized in
the form of SPF and SCI and cash flows.
Accrual Basis An assumption which recognizes income when
earned and expenses when incurred
Going Concern The ability of an entity to continue in operation for
the foreseeable future
The concept assumes that the business has an
indefinite economic life.
Managerial Accounting Developing accounting information for use within an
entity
Cost Principle The records of properties acquired and services
availed of by a business
Financial Accounting Area of accounting are generally accepted
accounting principles primarily relevant
Unit of Measure Stating assets and liabilities and changes in them in
terms of a common financial denominator is a
prerequisite in measuring financial position and
periodic net income.
Intellectual Skill This skill requires that a CPA can demonstrate
analytical, problem solving and critical thinking skills
at all times.
Account Titles
Owner’s Drawing This is temporary account used to record withdrawal of
cash or other assets made by the owner of the entity
Interest expense Used to record the interest on borrowed funds and also
called finance charges
Doubtful Accounts Account title used to record the estimated amount of
receivables that is doubtful of collection and is charged
to expense during an accounting period.
Prepaid Salaries This is the account title used for the salaries and wages
of employees that has remained unpaid at the end of
the reporting period.
Cash Used for unrestricted cash on hand, cash in bank
(those deposited in banks in savings, or demand
deposits and fund for current purpose such as petty
cash fund and payroll fund
Prepaid Rent Expense This is the account used for rent which is paid in
advance and not yet consumed at the reporting date
PPE Accumulated depreciation-office building
Accumulated interest Liability
Income
Prepaid insurance expense Current Asset
Accrued interest expense Current liability
Accrued interest income asset
Unearned service income Liability
Cost of sales Expense
Wages and compensation G&A
expense
Drawing OE
Accrued rent income TOR
Misc Income Income
Notes receivable TOR
Building SPF
Customer’s deposit SPF
Capital beginning SOCE
Medical fees income IS
Petty cash fund SPF
Accounts payable SPF
Operating cycle the time between the acquisition of assets for
processing and their realization in cash or cash
equivalents. When the entity's normal operating cycle
is not clearly identifiable, it is assumed to be twelve
months.
Asset an economic resource owned or controlled by the entity
as a result of past events