FABM QUIZ

• Accounting is a service activity that provides quantitative financial information about economic entities for making economic decisions
• Accounting involves identifying, measuring, and communicating economic information for informed judgment and decisions by users
• Functions of Accounting:

  • Identifying: selecting relevant economic events for business transactions
  • Recording: writing and effects of transactions using different books of accounts
  • Classifying: sorting or grouping similar transactions in a specific period
  • Summarizing: grouping accounts into assets, liabilities, O/E, revenue, cost, and expenses
  • Reporting: preparing financial statements like BS, IS, SOCE, CFS
  • Interpreting: using financial reports for future planning and business policies
• Accounting is a service activity that assists decision-makers with financial reports

  • It is a process that collects, processes, and communicates financial information
  • Accounting is both an art and a discipline
  • It involves the preparation and use of financial statements to determine a company's profitability
  • Accounting is recognized as an information system
• Difference between Bookkeeping and Accounting:

  • Bookkeeping: routine recording of economic activities, a mechanical process
  • Accounting: analysis and interpretation of financial information, conduct of audits, and preparation of financial statements
• Basic Financial Statements:

  • Statement of Financial Position (Balance Sheet)
  • Statement of Comprehensive Income (Income Statement)
  • Statement of Changes in Equity
  • Cash Flow Statement
  • Notes with significant accounting policies and explanatory information
• Users of Financial Information:

  Internal Users:

  • Managers/Management
  • Employees/Labor Union
  • Owners/Stockholders

  External Users:

  • Potential Investors
  • Creditors/Potential Creditors
  • Customers
  • Tax Authorities
  • Regulatory Authorities
• Brief History of Accounting:

  • 3600 BC: Clay tablets used for accounting records
  • 14th Century: Double-entry bookkeeping
  • 17th Century: Luca Pacioli disseminated double-entry bookkeeping
  • 1760-1830: Development of accounting theory
  • 19th Century: Industrial Revolution importance on fixed assets and mass production
  • 20th Century: Modern accounting development in America and Europe
• Three Main Branches of Accounting:

  • Cost Accounting: reporting for external users
  • Management Accounting: reporting for internal users
  • Financial Accounting: meant for both internal and external users
• Other Branches of Accounting:

  1. Government Accounting: analyzing, classifying, summarizing, and communicating government transactions

  2. Auditing: examining an organization's financial records for accuracy and compliance

  3. Tax Accounting: accounting methods focused on taxes governed by the Internal Revenue Code

  4. Accounting Education

  5. Accounting Research: Economic and Academic Accounting Research
• the first step to making a budget is to determine the income
• income refers to all sources of money that can be used to pay expenses or save
• expenses are payments made by an individual, family, business, government, etc.
• budgeting involves estimating future income and expenses over a specific period of time
• budgeting involves estimating future income and expenses over a specific period of time (usually one month)
• budgeting involves planning how much will be spent on various items during a specific period of time
• expenses refer to all costs associated with running a household
• cash flow refers to the movement of cash into and out of your bank account
• there are two types of budgets: personal and organizational
• personal budgets involve individuals while organizational budgets involve businesses, governments, nonprofit organizations, and other groups
• a budget is a plan for managing your finances
• Budgets serve as a guide for spending decisions and allow individuals to monitor their progress toward achieving goals.
• personal budgets include both fixed and variable expenses
• a personal budget is a plan for managing your finances
• A budget is a written statement of planned expenditures and revenues during a specified period of time.