Accounting Reviewer

Topics: Balance sheet, Generally Accepted Accounting Principles, Accounts receivable Pages: 20 (4446 words) Published: August 20, 2010

*Business Ownership ( Sole Proprietorship / Partnership / Corporation *Activities ( Service Concern / Merchandising (Trading) / Manufacturing *Types of Business (Source of Income) ( Service & Merchandising / Trading {Sole Proprietorship}

*Functions of Accounting Work ( Recording / Classifying / Summarizing

*Accounting- “art of recording, classifying & summarizing in a significant matter and in terms of money; transactions and events w/c are in part at least of a financial character and interpreting the results thereof.” ( How? (AICPA – American Institute of CPA)

*Science- existing body of knowledge that governs accounting practice (Accounting Theory) *Art- creative skill & ability

*4 Functions of Accounting
1. Recording- commit to writing (business transactions)
*Business Transactions- quantifiable business events w/c can be expressed in terms of money. Exchange of values. ( What?
*Books of Accounts (journals / ledgers) ( Where?
*Chronologically & Systematically (accordance to procedures & established rules of acctg) ( How? 2. Classifying- similar & inter-related transactions of events *Account / Account Title- device used to classify*3 Broad Categories – Assets / Liabilities / Capital 3. Summarizing- preparation of financial statements / financial reports *Financial Statements- Balance Sheet, Income Statement, Capital Statement, & Statement of Cash Flow 4. Interpreting- quantitative & qualitative interpretation of information in financial statements *Significant Information- Profitability, Growth Potential, Managerial Effectiveness, Stability (ability of a business to pay its long term obligations), Liquidity (how much cash the business has), & Solvency (does the business meet its current debts or obligations [less than 1 year]

*Accounting- “service activity whose purpose is to provide quantitative information, primarily financial in nature, about economic entities, that is intended to be useful in making economic decisions.” ( Why? Fundamental Essence. (PICPA – Philippine Institute of CPA) ( umbrella / national organization

*Fundamental Objectives of Accounting: ( Communication
-Communicates financial statements & reports. Gives information about / medium of the business to the outside world.

*Nature of Accounting
-A service activity. Communication of financial info.
-Quantitative info. Primarily financial in nature useful for making economic decisions. -Medium through w/c business entity speaks w/ various stakeholders (interested parties) – stockholders, prospective stockholders, management, creditors, etc.

*Uses of Accounting Information
Direct Users- managers, owners, creditors, prospective owners / investors, taxing authorities, employees, & customers. *Internal- managers, stockholders / owners & employees *External- creditors, investors, BIR / IRS, & customers Indirect Users- -trade unions, SEC, financial analysts / advisors, stock exchange, financial press, & trade associations

*Different Areas of Accounting / Branches of Accounting
-Financial Acctg. / General Acctg, Accounting Education, Auditing (Public Acctg. Practice), Tax Acctg, Gov’t Acctg, Management Acctg. / Management Services, & Accounting Systems

*Field of Specializations
-Systems Installation, Cost Accounting, Gov’t Acctg, Research, Teaching, Property Appraisal, Budgetary Control, Auditing, Taxation, & Management Consultant.

*Accounting (conceptual / why) VS. Bookkeeping (how / procedural) -Bookkeeping is procedural & is largely concerned w/ the dev’t & maintenance of acctg records. The “how” of acctg. -Acctg is conceptual and is concerned w/ the “why,” reasons, or justification for the action adopted.

*Commission on Audit- Government Accounting
*Employees use accounting information to see if there’s security of employment & satisfactory compensation. *Accountancy- specialized body of knowledge
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