ACCOUNTING

 “process of identifying, measuring, recording, and communicating , economic

information about an organization in order to permit informed judgements by users of the
information.

FINANCIAL INFORMATION
 is contained and comuunicated through the financial statements.

SETS OF FINANCIAL STATEMENTS:

o -STATEMENT OF FINANCIAL POSITION (BALANCE SHEET)
o -STATEMENT OF COMPREHENSIVE INCOME (INCOME STATEMENT)
o STATEMENT OF CHANGES IN EQUITY
o STATEMENT OF CASH FLOW
o NOTES, COMPRISING A SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES AND OTHER EXPLANATORY INFORMATION

STATEMENT OF FINANCIAL POSITION

o It presents the company’s position when it comes it owns (assets, liabilities, owner’s
equity)
o The date of this statement is always “as at” or “as of” the end of the period
o Ex. “Statement of financial position as of february 2019
o “Statement of finanacial position as at feb 2019”

STATEMENT OF COMPREHENSIVE INCOME

o This statement states the “performance” and activities of the company for the certain
period.
o It presents the revenues and expenses incurred by the company.
o The date of the income statement is always written by “for the period ended”
o “Statement of comprehensive income for the period ended December 14

STATEMENT OF CHANGES IN EQUITY

o This shows the beginning stake of the owner (beginning capital), any additional
investments, withdrawal of resources, and share in net income or net loss.
o The date of this statement is similar to income statement.

STATEMENT OF CASH FLOWS

o It shows the cash transactions of the company.
o CASH
 Very vital resource owned and controlled by the business.
 Most susceptible to theft and mismanagement
 Can be used derived from operation, investing and financing activities.
EXPLANATORY NOTES
o Notes that provide additional information that are not included by the first 4 statements.
This include:

COMPANY INFORMATION (Operations, legal form, regulatory registrations)

ACCOUNTING POLICIES USED
ADMINISTRATIVE REQUIREMENTS BY REGULATORS (BIR& SECURITIES AND
EXCHANGE COMMISSION)
OTHER RELEVANT INFORMATION

FUNDAMENTAL QUALITATIVE CHARACTERISTICS:

Without these 2 characteristics, financial information can’t be said useful

o RELEVANCE
o An information is said to be relevant if it can assist a user in predicting a financial
situation or scenario (predictive value) and confirming predictions and forecasts
previously made (confirmatory value)

o FAITHFUL REPRESENTATION
o To be considered as faithfully representative, accounting information must be
complete, unbiased, and free from error.

ENHANCING QUALITATIVE CHARACTERISTICS:

The role of these characteristics is to augment the usefulness provided by the former

 COMPARABILITY
o An entity’s information can be said to be comparable if such information can be
compared to another entity. Ex. A company’s cash account can be compared to its
competitor company’s cash account.

 VERIFIABILITY
o Means that different users can reach an agreement about the financial information.
It is all about consensus (agreement)

 TIMELINESS
o It ensures that such information is available to the users when they need it.
Otherwise, the decisions might be misinformed.

 UNDERSTANDIBILITY
o The information must be clearly and concisely scaled down in order to be
understandable. Complex yet relevant information.