Primary users Owner/investors ...

Primary users Owner/investors - the one who puts in capital in a business

Primary users Manager ...

Primary users Manager - the one who is responsible for running the business

Primary users Supplier ...

Primary users Supplier - Offers goods for the sale of the business

2 classification of Qualitative characteristics: di pwede mawala. The content or the substance (pag nawala to ay wala ng sense or usefulness and information)

Fundamental Qualitative Characteristic -

prelim Flashcards by Mark Johnson Lee

June 1973 -
OBJECTIVE:
1. Uniformity of accounting principles all around the world.
  “International Accounting Standards (IAS)“

International Accounting Standards Committee (IASC)

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New name of IASC and IAS

International Accounting Standards Board (IASB)

“International Financial Reporting Standards (IFRS)”

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Sila kung gumagawa or nagha-handle ng board

Professional Regulation Commission (PRC)

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BOA recommended to make FRSC

BOA or Board of Accountancy

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To assist BOA in carrying out its power and functions

MAIN FUNCTION: Establish and improve accounting standards that will be generally accepted in the Philippines

FRSC or Financial Reporting Standard Council

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FRSC Promulgates accounting standards aka

Philippine Accounting Standards (PAS)(old) (pagnarinig mo big sabihin Hindi pa nauupdate / applicable pa run ngayon)
Philippines Financial Reporting Standards (PFRS)

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Summary of the terms and concepts that underlie the preparation and presentation of financial statements
Used as basis for the development and revision of accounting standards
BASIC PURPOSE:
- To assist IASB to develop IFRS
- To assist the preparers of FS to develop consistent accounting policy when no standard applies to a particular transaction
- To assist preparers of FS to develop accounting policy when a standard allows a choice of an accounting policy
- To assist all parties to understand and interpret IFRS

CONCEPTUAL FRAMEWORK

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Primary users

* Owner/investors …

Primary users

* Owner/investors - the one who puts in capital in a business

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Primary users

* Manager …

Primary users

* Manager - the one who is responsible for running the business

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Primary users

* Lenders and other creditors…

Primary users

* Lenders and other creditors - Assesses the paying ability of the business(borrower) .

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Primary users

* Supplier …

Primary users

* Supplier - Offers goods for the sale of the business

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Other users

* Employees …

Other users

* Employees - Assesses the ability of the company to grant their demands

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Other users

* Customers ….

Other users

* Customers - Assesses the ability of the company to continuously supply the goods they buy

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Other users

* Government…

Other users

* Government - Assesses the correct payment of taxes and filing of all required documents

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Why / Purpose / Goal of accounting :
- Provide financial information for decision making
  - Financial Statement
Specific Objectives:
- Provide information useful in making decisions about providing resources to the entity (Statement of Changes in Equity)
- Provide information useful in assessing the cash flow prospects of the entity (Statement of Changes in Cash flow)
- Provide information about entity resources, claims and changes in resources and claims (Statement of Changes in Financial Position Income statement)

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LIMITATIONS OF FINANCIAL REPORTING (Hindi lahat ng kailangan ng investors at creditors ay napapakita mo - may monetary value lang or amount. Pinapakita mo lang yung estimate)

Do not and cannot provide all information that existing and potential investors lenders and other creditors need
Not designed to show the value of an entity but these reports provide information to help the primary users estimate the value of the entity
Intended to provide common information to users and cannot accommodate every request for information
Based on estimate and judgment rather than exact depiction

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WHAT IS QUALITATIVE CHARACTERISTICS?

Qualities and attributes that makes financial information useful to the users.

Answers the question, “Paano ba masasabi na yung information ay useful?”

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2 classification of Qualitative characteristics:

di pwede mawala. The content or the substance (pag nawala to ay wala ng sense or usefulness and information)

Fundamental Qualitative Characteristic -

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Intented to increase the usefulness of the information.

regards to presentation / forum (the way mo siya prinesent (was Baganda prinesent was useful)

Enhancing QC -

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eto yang kakayahan or capacity of the information to influence a decision

relevance

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helps users correct / forecast outcome of event naimagine yung mangyari sa company?

predictive value

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enables users to confirm earlier expectations (Tama ba yung na predict ko?)

Confirmatory value

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if commission, misstatement (Mali) and obscuring(tinago) of the information could reasonably affect the decision of users (dapat isama kung makakaapekto, pero kung Hindi wag na isama)

Materiality information / doctrine of Convenience =

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kailagan daw yung actual effect of transaction are properly accounted for and represented. (Kung and Malaga yung information or nangayri sa transaction pinapakita mo)

faithful representation

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you presented everything to facilitate understanding and avoids erroneous implications (lahat ng kailangan ng users satin pinapakita natin)

completeness

All significant and relevant information shall be reported.

STANDARD OF ADEQUATE DISCLOSSURE -

dapat yung gagawin mong financial statement shall not favor any party (dapat walling bias or fair)

neutrality

no error or omission (kulang)

free from error

present the transaction based on the economic substance rather than the legal form (dapat kung and talaga yung nangyari yun yung ipakita mo, example accrual, kappa nagbenta ka na even though di ka pa binabayaran irecord mo na)

substance over form

you exercise care and caution (magiingat ka kung you are dealing with uncertainties ) you must make sure na yung asset or income mo ay Hindi sobra / overstated liability / expense ay Hindi kelang or understated

prudence

incase of doubt (may choices ka), chose the alternative that has the least effect on equity

principle of conservatism

different observers could reach a consensus (Kisangani decision) same evidences, same conclusion results can be duplicated

verifiability

users are able to identify and understand the similarities and differences

comparability

2 TYPES OF COMPARABILITY | 1. Naiidentify / kinokompare yang infos WITHIN AN ENTITY it is

HORIZONTAL COMPARABILITY / INTRACOMPARABILITY

2 TYPES OF COMPARABILITY Kung si user kinompare Nila yung company natin sa ibang company / ACROSS ENTITIES and Tawag ay

DIMENSIONAL COMPARABILITY / INTERCOMPARABILITY

same method from period to period (kung ang ginamit last year ganon pa rin this year)

consistency

- yung mag users can readily understand yung pinapagawa mo | - users are expected to have a reasonable understanding of economic activities

understandability

kung kelan kailangan tung information available dapat in time. Having infos available in time to influence decision

timeliness

- the benefit derived from the infos should exceed the cost incurred (pagkuha) in obtaining the information. (10 years or 5 years or kung sa tingen mo yang benefit na makukuha mo kayos sa paghahanap mo ay was mallet, wag na isama)

cost constraint

provide information about economic resources of an entity, claims against the entity, and changes in the economic resources and claims

Financial statements

Entity that prepares financial statement

reporting entity

period of financial statement annual basis

reporting period

process of capturing for inclusion in the FS

recognition

recognized income when earned regardless of collection of money recognized expense incurred regardless of payment

accrual basis

different type of expense cost incurred to generate income / revenue recoignized in the same period (yung ginastos mo ng 2022, irerecognized mo rin ng 2022)

MATCHING PRINCIPLE

Expense is recognized when the revenue is also recognized. strict matching principle ``` ex. Inventory cash or a/r sales Cost of good sold Inventory ```

Cause and effect association

cost or expense by allocating over the periods infold there's no direct association with income ex. depreciation

SYSTEMATIC AND RATIONAL ALLOCATION

EXPENSE OUT RIGHT BECAUSE OF DIFFICULTY OF ASSOCIATING WITH REVENUE (no connection) EXAMPLE SALARY EXPENSE

IMMEDIATE RECOGNITION

RECORD OF ALL OR PART FROM FINANCIAL STATEMENT

DERECOGNITION

is the quantifying in monetary terms in the elements of financial statements.

Measurement

cost in cured in acquiring or creating the asset entry price or entry value asset = consideration paid + transaction cost Liability = consideration receipt + transaction cost

Historical Cost

CURRENT VALUE * fair value price that would be received or paid between market participants (seller and buyer) kung magkano mo mabebenta or mabibili exit price / exit value Term for LIABILITY IS PRESENT VALUE

present value of cash flows that is expected to drive from continuing to use of asset. it includes transaction cause or disposal of asset also called exit price or exit value

VALUE IN LIFE (ASSET)

present value of cash that is expected in paying or selling Include transaction costs on collection of debt exit price / exit value

Fulfillment life (LIABILITY)

current cost also known as .... kung 3 years dapat 3 years din ipapalit

replacement cost

sorting of asset liability equity income and expense

CLASSIFICATION

adding together as assets liabilities and equity income and expense

AGGREGATION

JOURNAL

TRANSACTION APPROACH

Net income mangyayari lang pag may sumobra sa beg. capital yung capital dapat mamemaintain mo, pag may sumobra income yun

Capital Maintainance Approach

2 methods of C.M.A Net asset is based on monetary amount investment

FINANCIAL CAPITAL (HISTORICAL COST)

2 methods of C.M.A Net assets is based on physical productive capacity to release goods and / or service

Physical capital (CURRENT COST)

Accounting entity is viewed as continuing in operation indefinitely n the absense of evidence in contrary explicit assumption

GOING CONCERN / CONTINUITY CONSUMPTION

entity is separate from the owners, managers and employees who constitutes the entity \ implicit assumption

accounting entity assumption

the indefinite life of the entity is subdivided into accounting period which are usually have a equal length for the purpose of preparing reports on financial position, financial performance, and cash flows calendar year - ending on dec 31 fiscal year - ending any on any month except dec. 31 implicit assumption

time period assumption or periodicity

elements of FS should be stated in terms of a measure (PHP) implicit assumption

Monetary unit assumption

ELEMENTS OF FINANCIAL STATEMENTS * Financial position ASSET LIABILITY OWNERS EQUITY * Financial performance INCOME EXPENSE

PRESENT ECONOMIC RESOURCE CONTROLLED BY THE ENTITY AS A RESULT OF PAST EVENT (RIGHT)

ASSET

PRESENT OBLIGATION OF AN ENTITY TO TRANSFER AN ECONOMIC RESOURCE AS A RESULT OF PAST EVENT (DUTY / RESPONSIBILITY)

LIABILITY

RESIDUAL INTEREST IN THE ASSETS AFTER DEDUCTING LIABILITIES

EQUITY

increase in assets or decrease in liabilities that result in increase of equity, other than those relating to contributions from equity holder

Income

decrease in assets or increase in liabilities that result in decrease of equity, other than those relating to distributions from equity holder

expense

Arises in the course of ordinary activity (araw araw na ginagawa ng business mo)

revenue

other items that meets the definition of income but do not arise in the course of ordinary activities

gains

expense = arise in the course of ordinary business losses = do not arise in the course of ordinary business

prelim Flashcards

(74 cards)