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    For With God, Nothing Shall Be Impossible. (Luke 1:37) : Accounting Reviewer

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    Debbie Grace Latiban Linaza
    The document discusses key concepts related to accounting and financial reporting standards. It provides details on the conceptual framework, purposes of the conceptual framework, users of financial information, general purpose financial statements, qualitative characteristics, elements of financial statements, and accounting adjustments and reversals.

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    For With God, Nothing Shall Be Impossible. (Luke 1:37) : Accounting Reviewer

    Uploaded by

    Debbie Grace Latiban Linaza
    35 views7 pages
    The document discusses key concepts related to accounting and financial reporting standards. It provides details on the conceptual framework, purposes of the conceptual framework, users of financial information, general purpose financial statements, qualitative characteristics, elements of financial statements, and accounting adjustments and reversals.

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    The document discusses key concepts related to accounting and financial reporting standards. It provides details on the conceptual framework, purposes of the conceptual framework, users of financial information, general purpose financial statements, qualitative characteristics, elements of financial statements, and accounting adjustments and reversals.

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    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    35 views7 pages

    For With God, Nothing Shall Be Impossible. (Luke 1:37) : Accounting Reviewer

    Uploaded by

    Debbie Grace Latiban Linaza
    The document discusses key concepts related to accounting and financial reporting standards. It provides details on the conceptual framework, purposes of the conceptual framework, users of financial information, general purpose financial statements, qualitative characteristics, elements of financial statements, and accounting adjustments and reversals.

    Copyright:

    © All Rights Reserved
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    For with God, nothing shall be impossible.

    (Luke 1:37)

    ACCOUNTING REVIEWER
    CONCEPTUAL FRAMEWORK

    1. Concepts used in PREPARATION and PSESENTATION of FS for EXTERNAL users.


    2. NOT a PFRS. PFRS prevails over Conceptual Framework.
    3. Concerned with GENERAL PURPOSE FS only.

    PURPOSES OF CONCEPTUAL FRAMEWORK

    1. Assist FRSC in developing PFRS and the review and adoption of IFRS.
    2. Assist preparers of FS in applying PFRS.
    3. Assist auditors in forming an opinion if FS comply with PFRS.
    4. Assist users in interpreting FS.
    5. Provide interested parties with information about PFRS by FRSC.

    OBJECTIVE OF CONCEPTUAL FRAMEWORK

     OVERALL: Provide financial information about reporting entity to existing and potential
    investors, lenders and other creditors.
     SPECIFIC: Provide information about entity resources, claims and changes in resources and
    claims and in assessing future net cash flows to the entity.

    USERS OF FINANCIAL INFORMATION

     PRIMARY: Existing and potential investors, lenders and other creditors.


     OTHER USERS: Employees, customers, government and their agencies, and public

    GENERAL PURPOSE FS

    1. Cannot provide ALL information


    2. NOT designed to show value of entity
    3. Large extent
    4. Based on estimates and judgment

    TWO CAPITAL CONCEPT INCOME

    1. FINANCIAL- most common


    2. PHYSICAL- uses current cost basis Revenue Gains

    OLD NEW

    KEYWORDS Accounting Financial Reporting, FRSC or PFRS

    SCOPE Concepts of Capital and Cap. Maint. Concepts of Capital and Cap. Maint.

    Objective of FS Reporting Entity

    Qualitative Characteristics of FS Objective of FS

    Elements of FS Qualitative Characteristics of FS

    Elements of FS

    QUALITATIVE CHARACTERISTICS

    Presentation. Comparability

    Understandability – Timeliness, Feedback Value, Predictive Value

    Content. Relevance

    Reliability- Faithful representation, substance over form, prudence, neutrality,


    completeness
    Enhancing. Verifiability

    Comparability

    Understandability

    Timeliness

    Relevance – Predictive, Confirmatory/ FB value

    Faithful Representation – Freedom from error, Completeness, Neutrality

    FOUR DIFFERENT BASES USED TO MEASURE ELEMENTS OF FS

    1. Historical Cost
    2. Current Cost
    3. Realizable Value
    4. Present Value

    INTERIM- quarterly

    -within 45 days after the end of each of the first 3 quarters

    -within 45 days after each year end

    BASIC ACCOUNTING PROCESS

    ANALYZING – A= L + E ; Source Documents


    RECORDING – Dr vs Cr ; Journals – General, Special = JOURNALIZING
    CLASSIFYING – T-accounts ; Ledgers – General, Special = POSTING
    SUMMARIZING – Trial Balance ; worksheet- FS
    INTERPRETING – FS Analysis

    ACCOUNTING CYCLE ACCOUNTING SYSTEM cont

    System

    Process

    Cycle

    ADJUSTING AND REVERSING ENTRIES

    ADJUSTING ENTRIES REVERSIBLE?

    ACCRUALS AI (creates receivables) Yes - IS methods are REVERSIBLE

    AE (creates payables) Yes

    DEFERRALS UI – liability method No

    Income method Yes

    PE – asset method No

    Expense method Yes

    OTHERS (Depreciation, Bad Debts, etc.) No

    NOMINAL (temporary) – can be closed, IS element


    REAL (permanent) – cannot be closed, SFP element
    Adjusting entries involve 1 real and 1 nominal account.
    PURCHASE ORDER- does not initiate entry to be made in accounts
    JOURNAL- book of ORIGINAL ENTRY (recording)
    LEDGER- book of FINAL ENTRY (classifying)
    TRIAL BALANCE- summarizing
    ST CASH PURCHASE TRANSACTION- cash disbursement journal
    POSTING- journal to general ledger
    SUBSIDIARY LEDGER- listing of components of account balances in the general ledger
    CHART OF ACCOUNTS- listing of all the general ledger accounts in a systematic form

    STATEMENT OF FINANCIAL POSITION AND NOTES TO FINANCIAL STATEMENTS

    BREACH OF CONTRACT

    General rule: CL (Payable on demand)

    Exception: NCL (if lender agreed NOT to demand payment ON/BEFORE BS DATE)

    REFINANCING

    1. CL- completed AFTER BS date


    2. NCL- ON/BEFORE BS Date
    - Discretion to defer payment

    NOTES TO FS

    1. Compliance
    2. Summary of Significant Acctg Policies
    3. Disaggregation
    4. Other disclosures

    RELATED PARTIES

    GENERAL RULE: No Transaction, No Disclosure

    EXCEPTION: Disclose P and S relationship

    1. CONTROL (more than 50%)- Parents/ Subsidiary


    2. SIGNIFICANT INFLUENCE (20%- 50%)- Associate
    3. VENTURES in a Joint Venture
    4. KEY MANAGEMENT PERSONNEL (Top management/ Executives)
    5. CLOSE FAMILY MEMEBERS ( Spouse, Children, Dependents)

    PAS 10

    1. Adjusting event- adjust/recognize the amounts at BS date


    2. Non adjusting event (Major)- disclosure

    ASSET - AI, DE DR- AWE

    LIABILITY -AE, DI CR- LCI

    STATEMNT OF COMPREHENSIVE INCOME AND ACCOUNTING CHANGES

    ACCOUNTING CHANGES

    1. Estimate- Currently and Prospectively

    -Receivable, Useful life, Residual Value, Warranty Obligation

    2. Policy – Retrospectively

    -STANDARD -required by the standard

    -VOLUNTARY

    -Inventory Costing Method, A from No SI to SI


    BASIS OF RECORDING/RECOGNIZING EXPENSE

    1. CAUSE AND EFFECT- recording of Revenue and Expense in 1 transaction


    - recording of Expense if there is revenue
    - SALES - COGS
    -SALES – WARRANTY EXPENSE
    2. SYTEMATIC AND RATIONAL- Depreciation expense
    “Allocation” - expired portion of PE
    3. IMMEDIATE RECOGNITION- Impairment loss
    -losses from casualties

    EXPENSE: FUNCTION vs NATURE

    COS Salaries Expense, Depreciation expense

    Selling and Gen. Admin. Net Purchases

    Under/Overstatement of Inventory
    CAPITAL MAINTENANANCE APPROACH (SCI) NET INCOME AFTER TAX COST OF SALES cont.
    End Capital (net asset) xx Net Sales xx RM, beg xx
    Beg Capital (net asset) (xx) COS (xx) Net Purchases xx
    Over/Understatement xx GROSS PROFIT xx RM, AFU xx
    Add’tl investment (xx) Other Income xx RM, end (xx)
    Withdrawals xx TOTAL Income xx RM, used xx
    NI/NL xx OPex (S/A) (xx) DL xx
    Operating Inc. xx FOH xx

    NONCURRENT ASSET HELD FOR SALE

    1. Initial:
    CV (at date of classification)
    L FV- CTS

    2. Impairment loss (P/L) = FV – CTS < CA

    3. Subsequent Depreciation after classification = no depreciation

    4. Subsequent increase in FV-CTS –Gain (P/L), but not to exceed I/L previously recognized

    The loss on disposal of an asset is reported in the period in which it is incurred and
    should not be allocated among interim periods.

    OPERATING SEGMENTS

     10% CRITERIA, if any 75% CRITERIA


    1. Revenue Test : Internal and External External Revenue of Reportable segments
    2. P/L Test : H –P Consolidated Revenue
    - L (absolute amount)

    3. Asset Test : Combined asset of all segments

    INTERIM FINANCIAL REPORTING

    -complete (PAS 1)
    -condensed (PAS 34) “minimum requirements”

    CASH AND CASH EQUIVALENTS

    COMPONENTS OF CASH

    1. Currency and coins


    2. Petty cash
    3. Demand deposit
    4. Negotiable checks
    5. Bank drafts- commitment of bank to advance funds
    6. Money orders- similar to bank drafts
    7. Other short term funds for current operations
    8. Traveler’s check
    9. Cashier’s check

    BANK OVERDRAFT- presented as LIABILITY- but if repayable on DEMAND, that forms part of entity’s
    cash management, it should be a component of CCE.

    OUTSTANDING CHECKS- checks already recorded by the depositor as cash disbursements but not yet
    reflected on the bank statement

    a. Checks drawn and already given to payees but not yet presented for payment
    b. CERTIFIED CHECKS is one where the bank has stamped on its face the word “accepted” or
    “certified” indicating sufficiency of fund. DEDUCTED to outstanding checks.

    COMPENSATING BALANCE- unrestricted –CASH

    - Restricted – ST – current assets but not CCE

    - LT - noncurrent assets

    UNDELIVERED/UNRELEASED CHECK- merely drawn and recorded but not given to the payee before end
    of reporting period. Must be ADDED back to cash.

    STALE CHECK – check not in cashed by the payee within a relatively long period of time. A check
    becomes stale if not in cashed within 6 months. Must be ADDED back to cash balance.

    POSTDATED CHECK DELIVERED- check drawn, recorded and already given to payees but it bears a date
    subsequent to end of reporting period. Must be ADDED back to cash.

    BANK RECONCILIATION cont


    CASH (SHORT) / OVER – nominal

    1. Debit – Shortage --- receivable from employee (with evidence)


    --- Miscellaneous expense (not fault of custodian/ immaterial)
    2. Credit – Overage --- payable
    --- Miscellaneous income

    ENTRY: CASH COUNT

     Establish PCF and Increase PCF 1. ACCOUNTABILITY


    PCF xx - PCF
    CIB xx -Collection not deposited
     Replenishment -Other collection –intact (ignore)
    Expense xx -not intact (include
    CIB xx
     Adjustment: Avoid expenses; Avoid cash 2. VALID SUPPORT
    Expense xx -Bills and coins
    PCF xx -Replenishment checks > NO AJE
    - Accom/ Cash check
    Expenses xx -PC Expense vouchers
    Receivables xx -IOUS/ Employee vales > WITH AJE
    PCF Short xx -Acc. Check ASF
    PCF xx

    ADDITIONS TO SCI

    CUSTOMER LOYALTY PROGRAM


    Total consideration received
    (Allocate)

    Revenue from sale of goods CLA/AC/PTS (L)

    1. FV
    2. Residual Approach
    If FV is not given, only equivalent
    good/service is given

    Estimated FV of point= Equiv. GIS x Redemption rate (exercise rate)

    NOTE: cont
    ACCOUNT RECEIVABLES

     Initially : FV or original invoice


    Subsequently: Net Realizable Value
     LT Interest bearing note – FV
    LT Noninterest bearing note – PV
     CUSTOMER’s CREDIT BALANCES (overpayment)- Current liabilities
     2 METHODS for ACCOUNTING BAD DEBTS
    1. Allowance method- doubtful only Dr: Doubtful acct expense Cr: ADA
    2. Direct Write-off method- worthless/ already uncollectible Dr: Bad debt exp. Cr: AR
    Cont

     CLASSIFICATION OF DOUBTFUL ACCOUNTS IN IS


    1. Distribution Cost – under the charge of sales manager
    2. Administrative expense – under the charge of an officer (silent)
     3 METHODS OF ESTIMATING DOUBTFUL ACCOUNTS
    1. Aging method – fairly presented at NRV (SFP)
    2. Percent of AR method – AR at NRV (SFP)
    3. Percent of sales method – proper matching (SCI)
    cont

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