FUNDAMENTALS OF ACCOUNTING

• american accounting association


  process of identifying, measuring, and communicating economic information to permit informed judgements and decisions by users of the information
• accounting standard council


  service activity. provide quantitative information, primarily financial in nature, about economic entities, that are intended to be useful in making economic decisions
• american institute of cpa


  art of recording classifying and summarizing in a significant manner and in terms of money
• identifying


  assessing transactions that merit recognition
• classifying


  grouping similar types of business transactions
• measuring


  determining the monetary amounts
• recording


  relates business transactions in monetary terms are recorded in an orderly manner in the books of original entry
• summarizing


  presents classified information in a form that is understandable and useful to accounting information
• analyzing


  establishes the relationship between items in the financial statement
• interpreting


  explaining the meaning and significance of the relationship established by the analysis
• communicates


  communicates results obtained from the summarized information to end users
• private property


  ownership of an asset can be transferred and there is a need to record the transaction
• capital


  recording of transactions is worthwhile and cost-effective because wealth is productively employed
• commerce


  the exchange of goods on an extensive level and the volume of transactions
• credit


  the existence of buying and selling goods on credit had created the need for an accounting system
• writing


  recording of transactions are all in writing
• money


  need for a common denominator for the exchange of transactions
• arithmetic


  calculation is needed in a formal system
• sole proprietorship


  one owner
• partnership 


  2 or more owner
• corporation

  5 incorporators
• cooperative


  15 members
• economic entity assumption


  owners transaction is hiwalay sa business transaction
• accrual basis assumption

  revenue must be recorded when it is earned not when it is received
• going concern assumption


  business will not liquidate and will continue to carry out its objectives
• monetary unit assumption


  all events are measured in philippine peso
• time-period assumption


  periodic reports on economic activities
• cost principle


  amount spent when an item was originally obtained; original cost of acquisition
• full disclosure principle


  accountant should include sufficient information to permit the stakeholders to make an informed judgement
• matching principle


  revenues should have an equivalent expense recorded
• revenue recognition principle


  as soon as goods have been sold regardless of when the money has been received, revenues are to be recognized
• materiality principle


  decide whether an amount is significant or material or immaterial that may affect the decision of the end user
• conservatism principle


  accountant will choose the alternative that will result in less effect or less asset amount
• objectivity principle


  free of bias and prejudice