Accounting Principles and IFRS Standards

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Questions and Answers

What is the main objective of the ACCO 20203 course?

To focus solely on auditing practices.

To provide advanced accounting techniques.

To introduce accounting concepts relevant to business decisions. (correct)

To explore international accounting standards.

What type of business is primarily emphasized in the ACCO 20203 course?

Non-profit organizations.

Large manufacturing firms.

Corporate entities.

Sole-proprietorships for service types. (correct)

What is the primary purpose of the IFRS Foundation?

To regulate capital market authorities

To develop a single set of high-quality, global accounting standards (correct)

To create specific financial products for markets

To govern the operations of financial institutions

What does the ACCO 20203 course require from students in terms of skills?

Basic understanding of accounting principles. Signup and view all the answers

Which organization is responsible for approving interpretations of IFRS?

The IASB Signup and view all the answers

Which of the following is NOT a focus of the ACCO 20203 course?

Investment banking techniques. Signup and view all the answers

What role does the Monitoring Board play in the IFRS Foundation?

It provides a formal link between the Trustees and public authorities Signup and view all the answers

Which aspect of accounting is highlighted in the course outcomes?

Production of financial records for service businesses. Signup and view all the answers

What is the course credit value for ACCO 20203?

3 Units Signup and view all the answers

Who is responsible for governance and oversight of the IASB?

The Trustees of the IFRS Foundation Signup and view all the answers

What type of understanding will students gain regarding financial statements?

Importance and applicability of various accounting information. Signup and view all the answers

Which committee specifically reviews implementation issues of IFRS?

The IFRS Interpretations Committee Signup and view all the answers

The Accounting Standards Advisory Forum (ASAF) is designed to do what?

Provide a forum for constructive contributions toward achieving IASB's goals Signup and view all the answers

What is included in the course outcomes for students upon completion?

Knowledge of accounting processes for service businesses. Signup and view all the answers

Which standards did the Philippines initially use before adopting IFRS-patterned standards?

Generally Accepted Accounting Principles of the US Signup and view all the answers

What are the Philippine Financial Reporting Standards (PFRS) modeled after?

International Financial Reporting Standards and International Accounting Standards Signup and view all the answers

What is the primary purpose of the IFRS?

To provide a framework for global financial reporting consistency Signup and view all the answers

What distinguishes sole proprietorships in terms of liability?

Owners have unlimited personal liability for business debts Signup and view all the answers

In the Philippines, which organization is responsible for issuing the PFRS?

PFRS Council Signup and view all the answers

What type of entities are included in the definition of business entities?

Sole proprietorships, partnerships, charities, and corporations Signup and view all the answers

What major change did the Bangko Sentral ng Pilipinas announce regarding the adoption of new standards?

Effective use of PFRS/PAS starting from 1 January 2005 Signup and view all the answers

Which of the following statements about the IFRS is incorrect?

IFRS compliance is mandatory for all companies globally Signup and view all the answers

What is a key characteristic of partnerships as a form of business organization?

Partners are jointly responsible for the business's debts Signup and view all the answers

What must a sole proprietorship accomplish before starting operations?

Obtain a business name and register with the DTI Signup and view all the answers

Which of the following is an example of a non-operating asset?

Vacant land Signup and view all the answers

What is the classification of liabilities due and payable within one year called?

Current liabilities Signup and view all the answers

How is the current ratio calculated?

Current assets divided by current liabilities Signup and view all the answers

Which of the following best describes contingent liabilities?

Obligations that may or may not arise depending on a future event Signup and view all the answers

What defines non-current liabilities?

Liabilities that are due after one year or more Signup and view all the answers

Which of the following is NOT a common example of current liabilities?

Long-term bonds payable Signup and view all the answers

Why should management closely monitor current liabilities?

To guarantee sufficient liquidity from current assets Signup and view all the answers

Which financial metric uses current liabilities in its calculation?

Cash ratio Signup and view all the answers

What was the total capital balance for both partners at the end of the year 2019?

$356,000 Signup and view all the answers

How much total additional capital was contributed by both partners in 2019?

$92,000 Signup and view all the answers

What would be the net income for each partner if the total net income for the year is $56,000?

$28,000 Signup and view all the answers

What do withdrawals or drawings represent in a partnership's financial statement?

Cash or non-cash items removed for personal use Signup and view all the answers

What is the definition of net income in the context of a business?

Amount remaining after all costs and expenses are subtracted from revenue Signup and view all the answers

Study Notes

General Information about the Course

Course Code and Title: ACCO 20203 - ACCOUNTING
Course Credit: 3 Units
Pre-Requisite: None
Course Description: Introduces accounting principles and concepts in the context of business decisions. Emphasizes understanding the reasons behind basic accounting concepts and its relevance in the national context. Covers recording, classifying, and summarizing functions of accounting for a sole-proprietorship serving as background for studying varied uses of accounting data.
Course Outcomes:
- Detailed knowledge and understanding of the accounting process of a Single Proprietorship for service business
- Produce the required entries and financial records of a Single Proprietorship

International Financial Reporting Standards (IFRS)

IFRS Foundation: A not-for-profit international organization responsible for developing IFRS Standards
International Accounting Standards Board (IASB): The independent standard-setting body responsible for developing and publishing IFRS Standards.
IFRS Standards: A single set of high-quality, global accounting standards
Monitoring Board: Provides formal link between the IFRS Foundation and public authorities, enhancing public accountability
IFRS Advisory Council: Offers advice and counsel to the IFRS Foundation and the Board

Philippine Financial Reporting Standards (PFRS)

Formerly based on Generally Accepted Accounting Principles of the US
PFRS is adopted to govern the preparation of financial statements in the Philippines.
Patterned after the revised International Financial Reporting Standards (IFRS) and International Accounting Standards (IAS) issued by the IASB
PFRS is recognized by at least 120 countries including the Philippines
Ensures consistency in recording, recognizing and measuring financial transactions, promoting stability and transparency in financial reporting

Forms of Business Organization

A business entity is a group of people organized for profitable or charitable purposes.
Source of capital of the business determines the form of business organization.
Business entities, subject to taxation, must file a tax return.
Common forms of businesses in the Philippines: Sole proprietorships, partnerships, and corporations.

Sole Proprietorship

Owned by an individual with full control and authority.
Owner personally owes answers to all liabilities and suffers all losses but enjoys all the profits.
Must apply for a business name and register with the Department of Trade and Industry (DTI) - National Capital Region (NCR).

Liabilities

Present obligation of the enterprise arising from past events, expected to result in an outflow of resources embodying economic benefits.

Classification of Liabilities

Current Liabilities: Liabilities due and payable within one year.
- Accounts payable
- Interest payable
- Income taxes payable
- Bills payable
- Bank account overdrafts
- Accrued expenses
- Short-term loans
Non-current Liabilities: Liabilities due after a year or more.
Contingent Liabilities: Liabilities that may or may not arise, depending on a certain event.

Current Liabilities

Used as a key component in short-term liquidity measures.
Examples of key ratios that use current liabilities:
- Current ratio: Current assets divided by current liabilities.
- Quick ratio: Current assets, minus inventory, divided by current liabilities.
- Cash ratio: Cash and cash equivalents divided by current liabilities.

Non-current Liabilities

Important part of a company's long-term financing.
Used to acquire immediate capital for funding the purchase of capital assets or investing in new capital projects.
Crucial in determining a company's long-term solvency.

Statement of Partners’ Equity

Illustrates the changes in the partners' equity over a specific period.
Includes beginning balances, additional capital contributions, net income, withdrawals or drawings, and ending balances.

Elements of Statement of Changes in Owner/Partners’ Equity/Capital

Capital or Investment: Sum of cash acquired by a business to pursue its objectives, such as continuing or growing operations.
Net Income: Amount remaining after subtracting all costs and expenses from revenue.
- If costs and expenses exceed revenue, it is called net loss.
Drawings or Withdrawals: Amount of cash or non-cash items removed by the owner or partners from the business for personal use or expenditure.

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Description

This quiz explores fundamental accounting principles and the International Financial Reporting Standards (IFRS). It addresses the accounting process for a sole-proprietorship and its relevance in business decisions. Test your understanding of both basic accounting concepts and their application within national contexts.