Mercado, Kathleen O.

01 Activity 1
BSA-301 Intermediate Accounting

1.) What is the importance of financial statements in business?

Financial statements are important for it contain significant information about

the business’ financial health. It helps the companies in decision making from
analyzing the financial statements that support growth and long-term
profitability. Businesses can evaluate efficiencies, profit margins, and if they
are looking for investors, financial statements will be the information they
need to investigate for investing and determine if disbursements are worthy
investments that create profit.

2.) What happens if companies do not practice the proper recording of

transactions and events?

Without accurate recording of transactions, contracts and delivery receipts

would cause corruption. There also will not have basis for checks and
balances when finding discrepancies. There is also a risk of having an off-the-
books accounts. There is also a law, where establishment and use of slush
fund breach into bribery and relevant laws.

3.) What is the importance of accounting?

Running a business needs data, records, reports, analysis, accurate

information about assets, debts, liabilities, profits that is in Accounting, that’s
why it is important in an business, which business is essential to us.
Accounting gives the management information regarding the financial position
of the business, in the proper execution of the functions of the management,
planning, controlling the business.
4.) What are the historical developments of accounting from Sumerian
Times to Modern Accounting?

Around 4000 B.C., the Sumerians would put seals in the envelope, to know
how many tokens are inside and would know if its tampered. Following their
leaders and the standards it possesses. There are more complex tokens were
used, denoting different units or type of goods. In modern accounting, there
are standards, regulations and ethical standards accountants need to follow.
Even businesses, corporations, government must follow in our daily lives.

5.) Explain at least one (1) function of any accounting standard-setting

bodies for financial reporting in the Philippines.

Financial Reporting Standards Council (FRSC) is the accounting standard-

setting body created by the Professional Regulation Commission upon the
recommendation of the Board of Accountancy to assist the Board in carrying
out its powers and functions provided under R.A. No. 9298. Its main function
is to establish and improve the accounting standards that will be generally
accepted in the Philippines. The highest hierarchy of GAAP in the Philippines
was promulgated by FRSC, adopted the pronouncements made by IASB and
approves the implementation of the local version.

6.) Enumerate the two (2) qualitative characteristics for financial reporting
and its subtopics.
Fundamental Qualitative Characteristics – relate to the content or
substance of financial information.
 Relevance – enables the financial information to make difference
in a decision made by users.
 Faithful Representation – information to be complete, neutral, and
free from error.
Enhancing Qualitative Characteristics – relate to the presentation or
form of financial information.
 Comparability – enables users to identify and understand
similarities in, and difference among items.
 Verifiability – allows different knowledge and independent
observers to reach consensus.
 Timeliness – information is available to decision-makers in times
of decision-making.
 Understandability – requires financial information to be presented
clear, intelligible, and concise.