Conceptual Framework and Accounting Standards

Conceptual Framework and Accounting Standards

A conceptual framework can be defined as a system of ideas

and objectives that lead to the creation of a consistent set
of rules and standards. Specifically in accounting, the rule
and standards set the the nature, function and limits of
financial accounting and financial statements.

Answers Questions

Is an independent private sector body, with the objective of

achieving uniformly in the accounting principles which are used
International Accounting Standards Committee
by business and other organization for financial reporting
worldwide.

Sets out the concepts that underlie the preparation and

Conceptual Framework
presentation of financial statements for external users.

Generally Accepted Accounting Principle GAAP stands for?

In this statement, explains what the government's (or owner's)

Statement of changes in equity interest is comprise of. It also highlights the movement between
the various classes of equity.

Are defined in the conceptual framework as "present obligations

of an entity arising from the past transaction or events, the
Liabilities
settlement of which is expected to result in an outflow from the
entity of resources embodying economic benefits.
 Answers Questions

Encompasses not only financial statements but also other

Financial Reporting members of communicating information that relates directly or
indirectly to the financial accounting process.

Showing all components of net income or loss and all

Single statement of comprehensive income
components of other comprehensive income.

This statement outlines the revenues and expenses over the

Statement of comprehensive income year. It also includes non-cash transactions such as depreciation,
and increases or decreases in the value of assets.

The statement of Financial Position is an expansion of the

Asset equals Liability plus Equity
accounting equation:

Is any medium of exchange that a bank will accept fore deposit

Cash at face value. It includes coins, currency, checks, money orders,
bank deposit and drafts.

Is the source of financing for the assets of the enterprise. It

indicates what amount of assets has been financed by creditors,
Financial Structure
which is borrowed capital, and what amount of assets has been
financed by owners, which is invested capital.

Accounting information of a business enterprise is used by many

TRUE
stakeholders.

Conceptual Framework purpose is to assist the Board in the

TRUE
development of future IFRS and in its review of existing IFRS.

To deliver cash or another financial instrument

to a second entity, To exchange other financial Imposes on one entity a contractual obligation either: (Choose
instruments on potentially unfavorable terms two)
with the second entity.

The overall objective of Financial Reporting is to provide

TRUE
information that is useful for decision making.

To receive cash or another financial instrument

from the first entity, To exchange other financial
Conveys to that second entity a contractual right either:
instruments on potentially favorable terms with
the first entity.

Accounting information doesn't important information to

FALSE customers about current position of a business organization and
to make a judgment about its future.

TRUE General Purpose Financial Statements provide financial

 Answers Questions

information about the reporting entity that is useful to existing and

potential investors, lenders and other creditors in making
decisions about providing resources to the entity.

Is a written pledge that the customer will pay the business a fixed
Note Receivable
amount of money on a certain date.

This account is used to record the original and additional

Capital
investments of the owner of the business entity.

Natural Presentation This presentation referred to as the nature of expense method.

Republic Act No. 9298 is the law regulation the practice of

Philippine Accountancy of 2004
accountancy in the Philippines. This law is also known as:

Philippine Accounting Standard PAS stands for?

Account Form As the title suggests, the presentation follows that if an account,
meaning, the assets are shown on the left side and the liabilities
and equity on the right side of the statement of financial position.

Financial Reports Represent the main products of financial reporting.

Prudence In view of the uncertainty of future events, profits are not

anticipated but recognized only when earned, though not
necessarily in cash.

Is capable of making a difference in the decisions made by

users. Information may be capable of making a difference in a
Relevant financial information
decision even if some users choose not to take advantage of it or
are already aware of it from other sources.

Statement of financial position In this statement, assets and liabilities are split into current and
non-current which generally means if they are expected to be
settled within 12 months.

TRUE All certified public accountants shall abide by the requirements,

rules and regulations on continuing professional education to be
promulgated by the Board.

Disclosure of accounting policies or of the changes is the remedy

FALSE
for any wrong or inappropriate treatment of items in the accounts.

An income statement displaying the components of net income

TRUE
or loss.

Are business individuals or organizations that normally sell

Suppliers
merchandise or raw materials to other businesses on credit.
 Answers Questions

Is the price that would be received to sell an asset or paid to

Fair Value transfer a liability in an orderly transaction between market
participants at the measurement date.

Resources controlled by entity as a result of past transactions

Asset and events and from which future economic benefits are
expected to flow to the entity

Are the specific principles, bases, conventions, rules and

Accounting Policies practices adopted by an enterprise in preparing and presenting
financial statements.

Arising from derecognition, reclassification, impairment or in the

Gains and losses case of a financial asset, the moralization process, will be
recognized in profit or loss.

Balance Sheet Other term for Statement of Financial Position

Simply put, is cash, an equity instrument of another entity, or a

Financial Assets
contract to receive cash at a future date.

This form sets forth the three major sections in a downward

Report Form
sequence of assets, liabilities and equity.

Government accountants and auditors work in the public sector

to maintain and examine the records of government agencies
GOVERNMENT ACCOUNTING
and also to audit private businesses and individuals who pay
taxes.

Deals with the financial information of a single company they're

PRIVATE ACCOUNTING employed by, usually preparing or analyzing reports for an
internal manager.

The fundamental qualitative characteristics are relevance, faithful

FALSE
representation and materiality.

The objectives of general purpose financial reporting in the public

sector should be, to not information useful for decision making,
FALSE
and to demonstrate the accountability of the entity for the
resources entrusted to it.

The ability of the enterprise to use its available cash for

Capacity for adaption
unexpected requirements and investment opportunities.

Are a structured representation of the financial position and

Financial Statements
financial performance of an entity.
 Answers Questions

Financial Reports does not include non financial information such

FALSE as description of major products and a listing of corporate officers
and directors.

The accounting treatment and presentation of transactions and

Substance over Form events in financial statements should be governed by their
substance and not merely by the legal form.

Financial statements should disclose all "material" items, i.e.

Materiality items, the knowledge of which might influence the decisions of
the user of the financial statements.

This form classifies expenses according to their function as part

Functional Presentation of sales, selling activities, administrative activities and other
activities.

Use financial information of businesses for the purpose of

Government Agencies
imposing taxes and regulations.

The role of the external auditors in sustaining good corporate

FALSE
governance is not acknowledged.

Involve maintaining financial records and preparing and auditing

Accounting and auditing services
financial statements for use by outside investors and banks.

Is the branch of accounting where an accountant works with a

Public Accounting range of clients to review and prepare financial documents that
an individual or corporation is required to disclose to the public.

Are usually trained accountants who specialize in checking

Auditor
accounts rather preparing them.

In this statement, categories all cash payments made and

Statement of cash flows
received through-out the year

A financial asset shall be recognized in accounting when, and

TRUE only when, an entity receives or in accordance with the ongoing
contract obtains a right to receive cash or another financial asset.

Involve financial planning services for individuals as well as

business consultation services to help management design,
Consulting services
develop and implement accounting systems and employee
compensation packages.

Financial liabilities shall recognized in accounting when, and only

TRUE when, an entity assumes an obligation to deliver cash or another
financial asset.
 Answers Questions

Work for the organization as internal employees to examine

Internal Auditor records and help improve internal processes such as operations,
internal controls, risk management, and governance.

Defines a financial instrument as cash, evidence of an ownership

Generally Accepted Accounting Principles
interest in a company or other entity, or a contract.

Any contract that evidences a residual interest in the assets of an

Equity Instrument
entity after deducting all of its liabilities.

The art of recording, classifying, and summarizing in a significant

manner and in terms of money, transactions, and events which
ACCOUNTING
are, in part at least of financial character, and interpreting the
results thereof.

Refers to an asset that is not traded on the financial markets, and

Non-financial Assets its value is derived from its physical characteristics rather than
from contractual claims.

Involves the preparation of tax returns as well as advising clients

Tax Services
on tax deductions, tax planning, and other tax-related issues.

Come in from outside the organization to examine accounting

External Auditor and financial records and provide an independent opinion on
these records.

Is the process of identifying, measuring and communicating

Accounting economic information to permit informed judgment and decision
by users of the information.

Is the amount for which an asset could be exchanged, or a

Fair Value liability settled, between knowledgeable, willing parties in an
arm's length transaction.

International Financial Reporting Standard IFRS stands for?

An entity shall derecognize a financial asset only when the

TRUE contractual rights to the cash flows expire or it transfers the
financial asset and that transfer qualifies for derecognition.

Refers to the availability of cash in the near future after taking

Liquidity
account of financial commitments over this period.

Refers to the availability of cash over the longer term to meet

Solvency
financial commitments as they fall due.

Board of Accountancy Is the body authorized by law to promulgate rules and regulation
 Answers Questions

affecting the practice of the accountancy profession in the

Philippines.

Is a service activity. Its function is to provide qualitative

Accounting information, primarily financial nature, about economic entities,
that is intended to be useful in making economic decision.

Accounting policies refer to accounting principles and the

TRUE methods of applying these principles adopted by the organization
in the preparation of their financial statements.

Are individuals or financial institutions that normally lend money

Lenders
to businesses and earn interest income on it.