CFAS CHAPTER 1-3

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1. ASC: Accounting is a service activity

2. CATAICPA: Accounting is the art of recording, classifying and summarizing in a
signigicant manner
3. AAA: Accounting is the process of identifying, measuring and communicating
economic information
4. Identifying: recognition or nonrecognition of business activities as accountable
events
5. External Transaction: involve economic events between the company and
some outside enterprise
6. Internal transaction: economic events that occur entirely within one company
7. Production: process by which resources are transformed into products
8. Casualty: any sudden and unanticipated loss from fire, flood, earthquake and
other event ordinarily termed as an act of God
9. Measuring: is the assigning of peso amounts to the accountable economic
transactions and events
10. Historical Cost: is the original acquisition cost and the most common measure
of financial transactions
11. current value: includes fair value, value in use, fulfillment value and current
cost
12. Communicating: is the process of preparing and distributing accounting re-
ports to potential users of accounting information
13. Recording: process of systematically maintaining a record of all economic
business transactions after they have been identified and measured
14. Classifying: is the sorting or grouping of similar and interrelated economic
transactions into their respective classes
15. Ledger: A group of accounts which are systematically categorized
16. Summarizing: is the preparation of financial statements
17. Accounting as an information system: measures business activities,
processes information into reportsa and communicates the reports to decision
makers
18. Overall Objective of accounting: is to provide quantitative financial informa-
tion about a business that is useful to statement users

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19. Board of Accountancy: Body authorized by law to promulgate rules and
regulations affecting the practice of the accountancy profession in the Philippines
20. Securities and Exchange Commission (SEC): shall not register any corpo-
ration organized for the practice of public accountancy
21. Auditing: has traditionally been the primary services offered by most public
accounting practitioners
22. Auditing: is the examination of fiancial statements by independent CPA for the
purpose of expressing an opinion as to the fairness with which the fs are prepared
23. Taxation: includes the preparation of annual income tax returns and determi-
nation of tax consequences of certain proposed business endeavors
24. Management Advisory Services: refers to the services to clients on matters
of accounting, finance, business policies, etc.
25. Controller: highest ranking accountant in a company
26. Government Accounting: encompasses the processes of analyzing, record-
ing, classifying, summarizing and communicating all transactions involving the
receipt and disposition of government funds and property and interpreting the
results thereof
27. Continuing Professional Development (CPD): The inculcation of advanced
knowldege, skills, and ethical values in a post licensure specialized or in an
inter or multidisciplinary field of study for assimilation into professional practice,
self-directed research and/or lifelong learning
28. CPD credit unit: refer to the CPD credit hours required for the renewal of CPA
license
29. 120 CPD credit Units: are required for accreditation of a CPA to practice the
accountancy profession
30. constructive: Accounting vs. Auditing: Accounting
31. analytical: Accounting vs. Auditing: Auditing
32. procedural: Accounting vs. Bookkeeping: Bookkeeping
33. conceptual: Accounting vs. Bookkeeping: Accounting
34. Bookkeeeping: how of accounting
35. Financial Accounting: The field of accounting that focuses on providing infor-
mation for internal external decision makers.

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36. Managerial Accounting: the area of accounting that focuses on reporting
information to internal users only
37. GAAP: political process
38. Financial Reporting Standards Council: accounting setting body created by
PRC. main function is to establish and improve accountjng standards
39. International Accounting Standards Committee: An accounting organiza-
tion whose purpose is to formulate and publish international accounting standards
and to promote their acceptance worldwide
40. International Accounting Standards Board (IASB): An organization that
issues International Financial Reporting Standards for many countries outside the
United States.
41. Philippine Financial Reporting Standards: issues standards in a series of
pronouncement
42. Conceptual framework for financial reporting: ia a complete, comprehen-
sive and single document promulgated by the IASB
43. Contribute Transparency: by enhancing international comparability and qual-
ity of financial information
44. strengthen accountability: by reducing information gap between the
providers of capital and the people to whom they have entrusted their money
45. Contribute to economic efficiency: by helping investors to identify opportu-
nities and risks across the world
46. Standard: If there is a conflict between standard and conceptual framework,
which will prevail?
47. not a standard: Conceptual is a standard or not?
48. Primary Users: include the existing and potential investors, lenders, and other
creditors
49. other users: include the employees, customers, governments and their agen-
cies, and the public
50. Existing and potential investors: are concerned with the risk inherent in and
return provided by their investments
51. Lenders and other creditors: are interested in information which enables
them to determine whether their loans, interest thereon and other amounts owing
to them will be paid when due

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52. other users: are users of financial information other than existing and potential
investors, lenders and other creditors
53. Employees: are interested in information about the stability and profitability of
the entity
54. Customers: have an interest in information about the continuance of an entity
especially when they have a long-term involvement with or are dependent on the
entity
55. Government and their agencies: are interested in the allocation of resources
and therefore the activities of the entity
56. Public: these users need information on trends and recent developments
where an entity makes a substantial contribution
57. overall objective of financial reporting: is to provide financial information
about the reporting entity that is useful to existing and potential investors, lenders
and other rcreditors
58. overall objective of financial reporting: is the why, purpose or goal of ac-
counting
59. to provide information: useful in making decisions about providing re-
sources to the entity; useful in assessing the cash flow prospects of the
entity and; about entity resources, claims, and changes in resources and
claims: specific objective of financial reporting
60. economic decisions: existing and potential investors and lenders and other
creditors need general purpose financial reports in order to enable them in making
decisions whether to buy,, sell, or hold equity investments and in making decisions
whether to provide or settle loans and other forms of credit, respectively
61. Assessing Cash Flow Prospects: for existing and potential investors, it de-
pends on the return while lenders and other creditors dpend on the principal and
interst payments
62. economic resources and claims: GPFR provide information about the FI-
NANCIAL POSITION of a reporting entity
63. Financial Position: is information about the entity's economic resources and
the claims against the reporting entity
64. economic resources: are the assets in financial position
65. claims: are the liabilities and equity of the entity in the financial position

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66. liquidity: availability of cash in the near future to cover currently maturing
obligations
67. solvency: availability of cash over a long term to meet financial commitments
when they fall due
68. financial performance/ results of operation: comprises revenue, expenses
and net income or loss for a period of time
69. accrual accounting: depicts the effects of transactions and other events are
recognized when they occur and not as cash is received or paid.
70. Accrual Accounting: means that income is recognized when earned regard-
less of when received and expense is recognized when incurred regardless of
when paid
71. Management Stewardship: information about how efficiently and effectively
management has discharged its responsibilities to use entity's economic resources
help users to assess this of those resources
72. Qualitative Characteristics: are the qualities or attributes that make financial
accounting information useful to the users
73. Fundamental Qualitative Characteristics: relate to the content or substance
of financial information
74. relevance and faithful representation: Two fundamental qualities that make
accounting information useful for decision-making purposes.
75. relevance: is the capacity of the information to influence a decision
76. predictive value and confirmatory value: ingredients of relevance
77. predictive value: if it can be used as an input to processes employed by users
to predict future outcome/ forecasting outcome of events
78. confirmatory value: if it provides feedback about previous evaluations/ when
it enable users confirm or correct earlier expectations
79. Materiality: also known as the doctrine of convenience
80. nature and materiality: the relevance of information is affected by its ___
81. materiality: subquality of relevance based on the nature or magnitude or both
of the items to which the information relates
82. materiality is relativity: depends on relative size or absolute size?
83. True: An item is material if knowledge of it could reasonably affect or influence
the economic decision of the primary users of the financial statements

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84. It should still be material: if a big company lost 10,000 due to fraud, what will
happen?
85. new definition of materiality: information is ______ if omitting, misstating or
obscuring it could reasonably be expected to influence the economic decisions
that primary users of GPFS make on the basis of those statements which provide
financial information about a specific reporting entity
86. could reasonably be expected to influence, obscuring information, and
primary users: three important aspects of revised definition of materiality
87. could reasonably be expected to influence: threshold adds an element of
reasonability of financial information on which economic decisions is used
88. could reasonably be expected to influence: shall be limited to the economic
decision of primary users rather than to all users which is to broad in scope
89. could reasonably be expected to influence: threshold insures that informa-
tion capable of influencing economic decision of primary users shall be included
in the financial statements
90. obscuring information: if presenting or communicating it would have similar
effect as omitting or misstating the information
91. obscuring information: means the presentation of financial information not
readily understood or not clearly expressed
92. primary users: these groups are users to whom GPFS are primaryily directed
93. magnitude and nature: factors of materiality
94. size of the item: in relation to the total of the group to which the item belongs
is taken into account
95. nature of the item: may be inherently material because by its very nature it
affects economic decision
96. faithful representation: means that financial reports represent economic phe-
nomena or transactions in words and numbers, the descriptions and figures must
match what really existed or happened
97. completeness, neutrality, free from error: ingredients of faithful representa-
tion
98. completeness: requires that relevant information should be presented in a
way that facilitates understanding and avoids erroneous implication
99. completeness: is the result of the adequate disclosure standard or the princi-
ple of full disclosure
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100. Standard of adequate disclosure: means that all significant and relevant
information leading to the preparation of financial statements shall be clearly
reported
101. Notes to the financial statements: is to provide the necessary disclosure
required by PFRS
102. Neutrality: is without bias in the preparation or presentation of financial
information
103. Prudence: is the exercise of care and caution when dealing with the uncer-
tainties in the measurement process such that assets or income are not overstated
and liabilities or expenses are not understated. Neutrality is supported by this
exercise
104. conservatism: means that when alternatives exist, the alternative which has
the least effect on equity should be chosen
105. contingency loss is recognized: contingency loss is ______ as a provision
if the loss is probable and the amount can be reliably measured
106. contingency gains is not recognized: contingency gains is _______ but
disclosed only
107. free from error: means that there are no errors or omissions in the description
of the phenomenon or transaction
108. measurement uncertainty: arises when monetary amounts in financial re-
ports cannot be observed directly and must instead be estimated
109. substance over form: If information is to represent transactions and events
faithfully it is necessary that they are accounted for and presented in accordance
with their substance and economic reality and not merely their legal form
110. enhancing fundamental characteristics: relates to the presentation or form
of the financial information
111. comparability, verifiability, timeliness, understandability: the enhancing
qualitative characteristics
112. comparability: means the ability to bring together for the purpose of noting
points of likeness and difference
113. Comparability within an entity/ horizontal comparability/ intracompara-
bility: is the quality of information that allows comparisons within a single entity
through time or from one accounting period to next

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114. comparability between and across an entity/ dimensional comparability/
intercomparability: is the quality of information that allows comparisons between
two or more entities engaged in the same industry
115. consistency: refers to the use of the same method for the same item, either
from period to period within an entity or in single period across entities
116. True: Comparability is the goal and consistency help to achieve the goal
117. consistency: is the uniform application of accounting method from period to
period within an entity
118. comparability: is the uniform application of accounting method between and
across entities in the same industry
119. Understandability: requires that financial information must be comprehen-
sive or intelligible if it is to be most useful
120. verifiability: implies consensus
121. Verifiability: different knowledgeable and independent observers can reach
consensus that a particular representation is faithful
122. direct verification: occurs from physically counting the inventory
123. Indirect Verification: Verification may occur by checking the inputs (quantity
and costs) and recalculating the outputs (ending inventory value) using the same
accounting convention or methodology
124. timeliness: means that financial information must be available or communi-
cated early enough when a decision is to be made
125. less useful: the older the information, ______
126. cost constraint: The pervasive constraint that ensures that the value of the
information provided in financial reporting is greater than the cost of providing it.

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