CFAS - OVERVIEW O ACCOUNTING

• What is the basic purpose of accounting?

  To provide information that is useful in making economic decisions.
• What are the three important activities included in the definition of accounting?

  Identifying, measuring, and communicating.
• How does the American Association of Accountants define accounting?

  As the process of identifying, measuring, and communicating economic information.
• What does the term 'recognition' refer to in accounting?

  Including the effects of an accountable event in financial statements through a journal entry.
• What is an accountable event in accounting?

  An event that affects the assets, liabilities, equity, income, or expenses of an entity.
• What types of events are emphasized and recognized in accounting?

  Only economic activities.
• What are external events in accounting?

  Events that involve an entity and another external party.
• What is a reciprocal transfer in accounting?

  An event where there is a giving and receiving of economic resources between an entity and an external party.
• What is a non-reciprocal transfer?

  A "one way" transaction where one party gives something without receiving anything in return.
• What are internal events in accounting?

  Events that do not involve an external party.
• What does measuring in accounting involve?

  Assigning numbers, normally in monetary terms, to economic transactions and events.
• What is the most commonly used measurement basis in accounting?

  Historical cost.
• How are financial statements prepared in terms of costs and values?

  Using a mixture of costs and values.
• What is the role of estimates in accounting measurement?

  Estimates provide relevant information and affect the valuation of items.
• What is the process of communicating in accounting?

  Transforming economic data into useful accounting information for dissemination to users.
• What are the three aspects of the communicating process in accounting?

  Recording, classifying, and summarizing.
• What is the basic purpose of financial statements?

  To provide useful information for making economic decisions.
• What is the definition of an economic entity?

  A separately identifiable combination of persons and property that uses or controls economic resources.
• What are the two types of economic entities?

  Not-for-profit entities and business entities.
• What are economic activities in accounting?

  Activities that affect the economic resources and obligations of an economic entity.
• What is quantitative information in accounting?

  Information expressed in numbers, quantities, or units.
• What is qualitative information in accounting?

  Information expressed in words or descriptive form.
• What is general purpose accounting information?

  Information designed to meet the common needs of most statement users.
• What is special purpose accounting information?

  Information designed to meet the specific needs of particular statement users.
• What is the role of external sources in financial statements?

  Some information is obtained from external sources, such as fair value measurements.
• How is accounting viewed as a science?

  As a body of knowledge that has been systematically gathered, classified, and organized.
• How is accounting viewed as an art?

  It requires the use of creative skills and judgment.
• What does accounting as an information system involve?

  Identifying and measuring economic activities, processing information into financial reports, and communicating these reports.
• Why is accounting referred to as the "language of business"?

  Because it is fundamental to the communication of financial information.
• What is the importance of creative and critical thinking in accounting?

  It is essential for problem-solving and evaluating alternative solutions.
• What are the steps in problem solving in accounting?

  1. Recognizing a problem
  2. Identifying alternative solutions
  3. Evaluating the alternatives
  4. Selecting a solution from among the alternatives
  5. Implementing the solution
• What are accounting concepts?

  Principles upon which the process of accounting is based.
• What is the double-entry system in accounting?

  Each accountable event is recorded in two parts - debit and credit.
• What is the going concern assumption?

  The entity is assumed to carry on its operations for an indefinite period of time.
• What is the separate entity concept in accounting?

  The entity is viewed separately from its owners.
• What is the stable monetary unit assumption?

  Assets, liabilities, equity, income, and expenses are stated in terms of a common unit of measure, which is the peso in the Philippines.
• What is the time period concept in accounting?

  The life of the entity is divided into series of reporting periods.
• What does the materiality concept refer to in accounting?

  Information is material if its omission or misstatement could influence economic decisions.
• What is the cost-benefit concept in accounting?

  The cost of processing and communicating information should not exceed the benefits derived from it.
• What is the accrual basis of accounting?

  The effects of transactions are recognized when they occur, not when cash is received or paid.