CFAS-1 - UST AMV PDF

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GAN, Alexsandra Noelle T.

1A16

Graded Learning Activities – Asynchronous Mode, January 21, 2021 Read Chapter 1 of the reference textbook and answer the following: 1. What is the purpose of accounting in society?  The purpose of accounting in society is to provide quantitative information about economic entities that is to be used as basis for the formulation of economic decisions. Information such as financial records which will help a business enterprise ascertain the operational profit or loss, the financial position of the business, and facilitate rational economic decisions which will help them to survive and compete. 2. Distinguish external users from internal users of financial information.  Internal users are those who have ready access to specific types of accounting information. They use the financial information for the evaluation of the entity’s performance, to make financial and operational plans, and implement business decisions. These users of financial information are those who are involved in the operations of the business such as the active owners and managers, basically the company’s management. On the other hand, external users are those who do not have ready access to financial reports and rely heavily on negotiations and regulations to obtain information about the business enterprise. They use the financial information to know the enterprise’s financial condition and financial performance to make decisions regarding their needs. They are people outside the company’s management such as inactive owners, present and potential creditors, suppliers of goods and services, employees, and customers. 3. Identify four users with direct interest and four users with indirect interest.  People who use financial information as a tool to protect their own interest in the enterprise are users with direct interest. Some of these are the owners, managers, creditors, and suppliers. However, those use accounting information to provide advice to or protect the interest of a direct user are users with indirect interest. They include regulatory agencies, stock exchanges and brokers, financial and legal consultants, and labor unions. 4. Describe each of the following branches of accounting: a. Financial Accounting  It is the broadest branch of accounting, focusing on the needs of external users. It is concerned with the recognition, measurement, and communication of economic resources, economic obligations, and changes in economic resources and obligations. The information is communicated through the enterprise’s financial statements. It conforms to the accounting standards as developed by standard setting bodies. b. Management Accounting

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It serves the information needs of the internal users. They use accounting information in making routine and major economic decisions. The information does not conform to the accounting standards since the information of required by the management may vary based on the specific needs at a particular time.

c. Cost Accounting  It is concerned with the measurement and recognition of cost of services provided or products manufactured. It provides analysis & classification of expenditure and also helps to understand the true cost of raw material that constitute total cost of product so as to control and reduce its cost. d. Government Accounting  It encompasses the process of analyzing, classifying, summarizing, and communicating all transactions involving the receipt and disposition of government funds and property and interpreting the results thereof. It assures that the financial position and the public sector institution’s performance are set in the budgetary context. e. Tax Accounting  It is concerned with the computation of taxes and preparation of tax returns submitted to a taxing authority. Its purpose is to track the cash inflows and outflows associated with an individual or an enterprise. 5. Distinguish auditing from accounting  Accounting is the art of summarizing, recording, analyzing and reporting of financial information pertaining to business entities. It uses a prospective or present approach. On the other hand, auditing is the backtrack review of summarizing, recording, analyzing and reporting of financial information pertaining to business entities. It refers to an independent examination of the financial statements conducted by a certified public accountant for the purpose of rendering an opinion as to the fairness of the presentation of the financial statements. It uses a retrospective or past approach. 6. Discuss the function of each of the following organizations: a. International Financial Reporting Standards (IFRS) Foundation

b. International Accounting Standards Board (IASB)

c. Financial Reporting Standards Council (FRSC)

d. International Financial Reporting Interpretations Committee (IFRIC)

e. Board of Accountancy

7. Why is there a need to adopt the IFRS? REFERENCES: https://www.accountingnotes.net/accounting-information/users-of-accountinginformation/5261 https://www.investopedia.com/terms/t/tax-accounting.asp#:~:text=Tax%20accounting %20is%20the%20subsector,any%20investment%20gains%20or%20losses....