The theoretical chapters in this book have been formulated according to the latest issue of the conceptual framework for financial accounting that published on March and approved by International Accounting Standards Committee IASC , while practical chapters were formulated for the student who is keen to practice further as the chapter progresses.
The theoretical and practical chapters of the book include a set of the most important questions. Answers for each of the review questions appear at the end of the textbook. This book uses material which is prepared by the author based on his experience in teaching accounting during the latest years, because the central to the success of any accounting book is the expertise of its author.
In addition, this book is based on a series of International references, which mean that it can be used by students across the world rather than any one country in particular. Price-level Accounting. Otherwise known as Accounting for Hyperinflationary Economies — simply defined, is accounting that recognizes in the financial statements changes in the purchasing power of money. They need accounting data to improve the efficiency and effective of the organization.
These are: o Investors The providers of risk capital are interested in information which enables them to assess the ability of the enterprise to pay dividends. They need information on whether they should buy, hold or sell their shares in. An accounting entity is an organization or a section of an organization that stands apart from other organizations and individuals as a separate economic unit. Simply put, the transactions of different entities should not be accounted for together.
Each entity should be evaluated separately. For the purpose of reporting to outsiders, one year is the usual accounting period.
Fiscal Year — starts in any month and ends after 12 months. Stable Monetary Unit Concept The Philippine Peso is a reasonable unit of measure and that its purchasing power is relatively a greater increase in the supply of money or credit than in the stable. This is the basis for ignoring the effects of production of goods and inflation in the accounting records. The set of guidelines and procedures that constitute acceptable accounting practice at a given time is GAAP, which stands for generally accepted accounting principles.
In order to generate information that is useful to the users of financial statements, accountants rely upon the following principles. Objectivity Principle. Accounting records and statements are based on the most reliable data available so that they will be as accurate and as useful as possible.
Reliable data are verifiable when they can be confirmed by independent observers. This principle states that acquired asset producing or buying an should be recorded at their actual cost and not at what item, which may management thinks they are worth as at reporting date.
Revenue is to be recognized in the accounting period when goods are delivered or services are rendered or performed. Expense Recognition Principle. Expenses should be recognized in the accounting period in which goods and services are used up to produce revenue and not when the entity pays for those goods and services. Adequate Disclosure. Financial reporting is only concerned with information that is significant enough to affect evaluations and decisions.
Materiality depends on the size and nature of the item judged in the particular circumstances of its omission. Consistency Principle.
The firms should use the same accounting method from period to period to achieve comparability over time within a single enterprise. However, changes are permitted if justifiable and disclosed in the financial statements. Under this assumption, the effects of transactions and other events are recognized when they occur and they are recorded in the accounting records and reported in the financial statements of the periods to why they relate.
In cash basis accounting, however, does not record a transaction until cash is received or paid. Generally, cash receipts are treated as revenues and cash payments as expenses. Going Concern Financial statements are normally prepared on the assumption that an enterprise is a going concern and will continue in operation for a foreseeable future. It is assumed therefore that the enterprise has neither the intention nor the need to liquidate its operations.
This business organization has a single owner called the proprietor who generally is also manager. It tends to be small service-type e.
The owner receives all profits, absorbs all losses and is solely responsible for all debts of the business. From the accounting viewpoint, the sole proprietorship is distinct from its proprietor. A business owned and operated by two or more persons who bind themselves to contribute money, property or industry to a common fund, with the intention of dividing the profits among themselves.
Each partner is personally liable for any debt incurred by the partnership, except limited partner. A business owned by its stockholders.
It is an artificial being created by operation of law, having the rights of succession and the powers, attributes and properties expressly authorized by law or incident to its existence. They are the transactions and events that enter into the determination of profit and loss. Basic Accounting Made Easy 14th Edition.
Ledesma, Ester L. Financial Accounting Theory Review Booklets. Rante, Gloria Aradaniel. Accounting for Service Entities. Mandaluyong City: Millenium Books, Inc. Accounting is a service activity.
Its function is to provide a. Quantitative information b. Qualitative information c. Quantitative and qualitative information d. None of the above 2. The basic purpose of accounting is a. To provide the information that the managers of an economic entity need to control its operations.
To provide information that the creditors of an economic entity can use in deciding whether to make additional loans to the entity. To measure the periodic income of the economic entity.
To provide quantitative financial information about a business enterprise that is useful in making rational economic decision. Which of the following best describes the attributes of a partnership a.
Limited ability to raise capital; unlimited personal liability of owners. Limited ability to raise capital; limited personal liability of owners. Ability to raise large capital; unlimited personal liability of owners. Ability to raise large amounts of capital; limited personal liability of owners. Which of the following is true? Stockholders are personally liable for the liabilities of the corporation if the company us unable to pay.
Normally, stockholders can only sell their ownership interests when the corporation terminates. Partners are personally liable for the liabilities of the partnership if the partnership is unable to pay. Partners can normally transfer their partnership interests with ease.
Which accounting process is the recognition or non-recognition of business activities as accountable events? Identifying b. Communicating c. Recording d. Measuring 6. The concept of the accounting entity is applicable a. Only to the legal aspects of business organizations b.
Only to the economic aspects of business organizations c. Only to business organizations d. The entity concept means that a. Because a firm is separate and distinct from its owners, those owners cannot have access to its assets unless the firm ceases to trade. Accounts must be prepared for every firm. The financial affairs of a firm and its owner are always kept separate for the purpose of preparing accounts. None of the above 8. Accountants do not recognize that the value of the peso changes over the time.
This concept is called the a. Stable money unit concept b. Going concern concept c. Cost principle d. Entity concept 9. The principle of objectivity includes the concept of a. Summarization b. Verifiability c. Classification d.
Conservatism Which of the following is not a user of internal accounting information? Store Manager b. Chief executive officer c.
Creditor d. Chief financial officer An event that affects the financial position of an organization and requires recording is called: a. Transaction b. Account c. Business documents d. Operating activities All of the following are external users of accounting information except: a. Creditors, lenders and suppliers b. Present and potential investors c. Government regulatory bodies d.
Managers and employees It is the simplest of business organization a. Service Entity b. Merchandising Entity c. Partnership d. Sole Proprietorship The following are examples of service business except: a. SM Supermarket b. Amana Hotel and Resorts c. Cebu Pacific d. Manila Water Inc.
The following are examples of manufacturing business, except: a. Toyota Motors, Inc. Sony Philippines c. Red Ribbon Bakeshop d. Rolex Watch Repair Shop All of the following are qualitative characteristics of financial statements except: a.
Understandability b. Relevance c. Materiality d. Going Concern Financial information must possess this characteristic in order for the users to easily understand the contents of the financial statements. Reliability b. Completeness c. Relevance d. Understandability The measurement phase of accounting is accomplished by a. Storing data b. Reporting to decision makers c. Recording data d.
Processing data The communication phase of accounting is accomplished by a. A professional accountant should be straightforward and honest in all professional and business relationships. This is in consonance with the fundamental principle of a.
Integrity b. Objectivity c. Confidentiality d. Fundamental qualitative characteristics a. Relevance b. Faithful Representation B. Enhancing Qualitative characteristics a. Comparability b. Timeliness d. Understandability RELEVANCE Relevant financial information is capable of making a difference in the decision made by users, influences the economic decisions of users by helping them to evaluate, past, present, or future events or confirming, or correcting, their past evaluations.
Predictive value. Financial information has predictive value if it can be used as input to processes employed by users to predict future outcomes. For e. Confirmatory value or feedback. Financial information has confirmatory value if it provides feedback about confirms or changes previous evaluation. Information with feedback value enables users to confirm or correct expectations. A complete depiction includes all information necessary for a user to understand the event or information being presented, including all necessary descriptions and explanations.
A neutral presentation is one without bias. Freedom from error. Means there are no errors or omissions in the description of the phenomenon, and the process used to produce the reported information has been selected and applied with no errors in the process.
It enables the users to identify and understand similarities in, and differences among, items. Consistency, although related to comparability, is not the same. Means that different knowledgeable and independent observers could reach consensus, although not necessarily complete agreement, that a particular depiction is a faithful representation. Means having information available to decision-makers in time to be capable of influencing their decisions.
Means classifying, characterizing, and presenting information clearly and concisely. These termed the elements of financial statements. This involves the selection of a particular basis of measurement. A number of these are used to different degrees and in varying combinations in financial statements. Assets are recorded at the amount of cash or cash equivalents paid or the fair value of the consideration given to acquire them at the time their acquisition.
Assets are carried at the amount of cash or cash equivalents that would have to be paid if the same or an equivalent asset was acquired currently. Assets are carried at the amount of cash or cash equivalents that could currently be obtained by selling an asset in an orderly disposal.
Settlement value. Liabilities are carried at the undiscounted amounts of cash or cash equivalents expected to be paid to satisfy the liabilities in the normal course of business. Present Value.
The name of the reporting entity; ii. Whether the financial statements cover the individual entity or a group of entities.
Note: For Balance Sheet, use As of date. Housed within Connect, SmartBook is an adaptivestudy tool that helps identify specific topics and learning objectivesindividual students need to study. As students read, SmartBook assesscomprehension and dynamically highlights where they need to focus more. Theresult is that students are more engaged with course content, can betterprioritize their time, and come to class ready to participate.
End-of-Chapter Material helpsyou apply the concepts in accounting and, in more comprehensive material,analyze the information to form business decisions. Assignable materialincludes exercises, problems and test bank material.
Based on yourinstructor settings, you can receive instant feedback on your work either whileworking on an assignment or after the assignment is submitted for a grade. Developing Skills for the Classroom and Beyond:Fundamentals of Cost Accounting lets the student see the development of cost accounting tools and techniques as a natural response to decision making.
By learning this intuition, students will have an easier time understanding new developments that arise during their careers. Procedural Approach: The material in the text is presented from the perspective of both the preparer of information as well as those who will use the information. This allows both accounting majors and those students planning other careers to appreciate the issues involved in preparing and using such information.
Love Jcw. Stephanie Bui. Nazmul islam. Mimi Merani Milhani. Princess Charize Bauto Espiritu. Alaiza Maas Lanon. More From Aurora. Jeric Torion. Popular in Banking.
Srikrishan Rathore. Lorcan Bond. Jaram Johnson. Fuaad Dodoo. Toren Oref. Mariel Crista Celda Maravillosa. The authors discuss and illustrate international petroleum contracts and related contract accounting issues that arise and contrast U.
Also included are discussions of petroleum tax regimes encountered around the world" This book uniquely presents a comprehensive guide to both U. Financial Accounting Standards Board, and the U.
Securities Exchange Commission.
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