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CFAS Midterms

The document outlines the fundamental processes of accounting, including identifying, measuring, and communicating economic information for informed decision-making. It distinguishes between accountable and non-accountable events, detailing the importance of recording, classifying, and summarizing financial data. Additionally, it discusses the types of events (external and internal) and the various methods of measuring financial statements, emphasizing the blend of factual and estimated values.

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abigailcruzucc
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22 views1 page

CFAS Midterms

The document outlines the fundamental processes of accounting, including identifying, measuring, and communicating economic information for informed decision-making. It distinguishes between accountable and non-accountable events, detailing the importance of recording, classifying, and summarizing financial data. Additionally, it discusses the types of events (external and internal) and the various methods of measuring financial statements, emphasizing the blend of factual and estimated values.

Uploaded by

abigailcruzucc
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd

CFAS

Accounting is the “process of identifying, measuring, and -​ depreciation and amortization (estimates
communicating economic information to permit of useful life and residual value)
informed judgments and decisions by users of the information -​ estimated liabilities (ex: Provisions)
“(AAA). -​ retained earnings (various estimates of
Income and Expenses)
Important Activities in Accounting ●​ Valued by Fact – measurement not affected by
Identifying – analyzing events and transactions to determine estimates
whether or not they will be recognized -​ Ordinary share capital valued at Par Value
Recognition – including the effects of an accountable event -​ Land stated at acquisition cost
through journal entry -​ Cash measured at Face Value
-​
Communicating – transforming economic data into useful
Accountable Events (Economic Activity)
accounting information for dissemination and interpretation
Non-Accountable Events
3 Aspects of Communicating Process in Accounting
one that affects -​ Not recognized but [Link] – writing accountable events thru journal entry
economic activities disclosed in the notes if [Link] – grouping of similar items into their respective
(ALEIE) has accounting relevance. classes through posting
-​ maybe recorded through a [Link] – expressing in condensed form which include
memorandum entry preparations of financial
-​ example:
statements and accounting reports
1.​ Natural Disaster or
Calamities after reporting
period Interpreting
2.​ Major Business Expansion -​ understanding what the numbers really say about a
3.​ Pending Mergers, company’s financialhealth, performance, and future
Acquisition or Divestitures potential.
4.​ Lawsuit or Contingent -​ involves computation of financial statement ratios
Liabilities (uncertain
(liquidity, profitability, solvency)
outcome)
-​ Examining trends (revenue growth, profit margins
-​ Comparing performance over time or against
Type of Events or Transactions competitors
a. External Events – involve external party -​ Explaining why changes occurred (drop in net
1.​ Exchange (reciprocal transfer) – give and receive income)
(ex: Sale, Payment of liabilities) -​ Making informed judgments or decisions based on
2.​ Non-reciprocal transfer – give but not receive (e.g., the data
donation, tax, fines, theft, provisions of capitals by -​
owners, distribution to owners)
3.​ External event other than transfer- changes in
economic resources or obligationsbut no transfer
happened (e.g., price levels, technological changes,
obsolescence)
b. Internal Events – do not involve external party
1.​ Production - resources are transformed into finished
goods
2.​ Casualty – unanticipated loss from disaster (fire,
flood)

Measuring – assigning numbers in monetary terms to the


economic transactions and events
-​ FS are prepared using mixture of costs and values
(historical cost, current cost, replacement cost,
inflation-adjusted cost)
(fair value, present value, realizable value)
-​ FS are mixture of fact and opinion
●​ Valued by Opinion – measurement affected by
estimates
-​ estimated of uncollectible amounts of AR

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