ABM 1 TRANSES  Historical Cost- measure used in

BY: YANCH SANCHEZ accounting in which the value of an

TEACHER: DORIS PATENO asset on the balance sheet is recorded
at its original cost when acquired by the
Chapter 1: Accounting and Its company
 Revenue Recognition Principle-
Environment feature of accrual accounting, requires
that revenues are recognized on the
MSME’s (Micro, Small and Medium income statement in the period when
Enterprises) realized and earned
 Expense Recognition Principle-
Assets No. of Workers expenses should be recognized in the
Micro 3 million 1-9 same period as the revenues to which
Small Over 3 million 10-99 they relate
to 9 million  Adequate Disclosure- confirming that
Medium Over 9 million 100-199 all essential information is included in
to 100 million financial statements
 Materiality- principle which states that
Activities in Business Organization all items that are reasonably likely to
 Financing- process of providing funds impact investors’ decision-making must
for business activities, making be recorded or reported in detail
purchases or investing. (related to  Consistency Principle- states that
raising their capital, where they will get once you adopt an accounting principle
their capital. Another way in raising or method, continue to follow it
capital is borrowing in bank) consistently in future accounting periods
 Investing- act of allocating resources,
usually money, with the expectation of Scope of Practice
generating an income or profit. (related  Practice of Public Accountancy-
to buying assets or disposing assets) performance of or any offer to perform
acquiring assets that can be use in one one or more services for a client or
period potential client (ACPAAP)
 Operating- all things a company does  Practice in Commerce and Industry-
to bring its products and services to known as private accounting. An
market on an ongoing basis. (operating accountant serves only one company
activities of school is accepting (ACPACI)
students, in hospital receiving patients)  Practice in Government- (GACPA)
 Practice in Education/ Academe- shall
Fundamental Concepts constitute in a person in an educational
 Entity Concept- a business or an institution which involve teaching of
organization and its owners are treated as accounting, auditing, management
two separately identifiable parties (folds advisory services (ACPAE)
that the business is separate from the
owners) Professional Organizations
 Periodicity Concept- also called time  ACPAPP (Association of Certified
interval concept, is a period during Public Accountants in Public
which business enterprises are required Practice)
to prepare financial statement at  ACPACI (Association of Certified
specified intervals.
Public Accountants in Commerce
 Stable Monetary Concept- assumes and Industry)
that the value of peso is stable over time  GACPA (Government Association of
(allows accountants to disregard the
Certified Public Accountants)
effect of inflation)
 ACPAE (Association of Certified
Public Accountants in Education)
General Accepted Accounting Standards
(GAAS)
Scope of Examination
 conventions, rules, procedures
 Theory of Accounts
necessary to define accepted
accounting practice at a particular time.  Business Law and Taxation
 collections of commonly followed  Management Services
accounting rules and standards for  Auditing Theory
financial reporting.  Auditing Problems
 Practical Accounting Problems I
Basic Principles  Practical Accounting Practice II
 Objectivity- the concept that the
financial statements of an organization Core Competencies
be based on solid evidence  Knowledge
- General
 - Organizational and Business skin of crocodiles then make it bag.
- Information and Technology Canned goods: buy processed
- Accounting meats and make it canned goods)
~ Basic  Agriculture (one would use nature
~ Taxation like land, seeds)
 Skills
- Intellectual FORMS OF BUSINESS OWNERSHIP
~ Analysis
~ Problem Solving Form No. of Name of
~ Critical Thinking Owners Owner
- Interpersonal Single 1 Proprietor/
- Communication Proprietorship/ Entrepreneur
 Values Entrepreneurship
- Professional Ethics Partnership 2 or more Partner
- Moral Values Corporation 5 or more Shareholder/
Stockholder/
Fundamental Principles Member
 Integrity- straightforward, honest, Cooperative 15 or Member
truthful more
 Objectivity- no bias, no conflict of
interest
Approving Bodies
 Professional Competence and
Due Care- maintain professional Corporation Securities & Exchange
knowledge and skills Commission
 Confidentiality- should not disclose Cooperative Cooperative
any information obtained during Development Authority
engagement
 Professional Behavior- comply Partnership
with relevant laws and regulations A contract whereby two or more persons
bind themselves together to contribute
Branches of Accounting money, property or industry(services) into a
 Auditing - independent examination; common fund with the intention of dividing
issue opinion on fairness of the reports the profits among themselves. Two or more
 Bookkeeping – collection of basic persons may also form a partnership for the
financial data; journalizing to financial exercise of a profession.
statements
 Cost Accounting – same as Corporation
bookkeeping but more detailed; cost of Sec. 2. Corporation defined. - A corporation
producing goods is an artificial being (not natural person)
 Financial Accounting – recording and created by operation of law, having the right
periodic preparation of financial reports of succession and the powers, attributes
 Financial Management – managers are and properties expressly authorized by law
responsible in setting financial objectives, or incident to its existence. (it can be sued)
making plans based on the objectives, Ex: St. Mary’s
safeguarding assets
 Management Accounting – Look for actual business engage in service,
incorporates all financial and non- trading, manufacturing, agriculture (just 1
financial data form a wide range of each, the company and the service)
sources
 Taxation – preparation of tax returns and
its consequences
 Government Accounting – sources and
uses of government funds

Chapter 2: The Business Environment

2

NATURE OF BUSINESS
 Service (school, hospital)
 Trading (business buys merchandise
and sell merchandise in same form)
malls
 Manufacturing (business buy raw
materials and the finesse goods is
being sold (bag: business would buy