Accounting Standards Council ( ASC)

-Accounting is a service activity. Its function is

to provide quantitative information, primarily
financial in nature, about economic entities,
that is intended to be useful in making
economic decision.

Committee on Accounting Terminology of the
American Institute of Certified Public
Accountants
-Accounting is the art of recording, classifying
and summarizing in significant manner in terms
of money, transactions and events which are in
part at least of a financial character and
interpreting the results there of.

American Accounting Association (AAA)
-Accounting is the process of identifying,
measuring and communication economic
information to permit informed judgment and
decision by users of the information.
1. Quantitative information
2. Financial in nature
3. Useful in decision making

Accounting is an information system measures
business activities-reports
Reports-decision makers.

Personal Planning Car Payments
Education expense Income taxes
Loans

Key Product = Financial Statements
- Income Statement
- Statement of Cash Flow
- Statement of Financial Position
- Statement of Changes in Owners Equity
- Statement of Comprehensive Income

AAA definition- very purpose is to provide
quantitative information to be useful in making
economic decision

COMPONENT
Identifying- analytical component
Measuring- technical component
Communicating- formal component

Identifying- recognition or non recognition of
business activities

Not accountable- cannot be quantifies or
expressed in terms of a unit of measure ( death,
hiring, entering contract)

Accountable- affect assets , liabilities and
equity.

Economic activities- measure economic
resources and obligation reffered as
TRANSACTIONS

External Transactions- economic events
involving one entity to another entity

Internal Transaction- involving entity only
(production and casualty loss)

Production- which resources are transformed
into products
Casualty- sudden and unanticipated loss from
flood, fire, earthquake.. act of God

Measuring
- assigning of peso amounts
-Common financial denominator (Philippine
peso)
Based on Historical Cost, Current Cost,
Realizable Value and Present Value

Historical Cost most common measure of
financial transaction

Communicating- preparing and distributing
accounting reports to potential users (investors,
owners, managers, creditors and others)

UNIVESAL LANGUAGE OF BUSINESS

Recording- journalizing ( maintaining record of
trans after they have been identifies and
measured)

Classifying- sorting or group (posting to ledger)
Ledger- group of accounts
Assets, Liabilities, Equity, Revenue and Expenses

Summarizing- preparation of FS = 5

Basic Objective of Accounting
-Provide quantitative financial information
useful to users particularly owners and creditors
in making decision

2

Accountant Primary Task
-supply financial info to statement users so that
they could make informed judgment and better
decision

RA No. 9298- regulating the practice of
accountancy also known as Philippine
Accountancy Act of 2004

Status equivalent to law and med

Board of Accountancy- rules and regulation
affecting practice of accountancy profession
-Prepare and grading CPA examination
-Twice a year May and October

Public Accountancy
- registered CPA (accordance with rules of BOA
and approved by Professional Regulation
Commission- 3 yrs exp including taxation)

Securities and Exchange Commission- not
register any corporation organized for
practiced of public accountancy.

Public Accountancy- registered with BOA and
PRC
-BOA issue Certificate of Registration valid for 3
years renewable every 3 years upon payment
of required fees

Practice their profession in 4 main areas
- Public Accounting
- Private Accounting
- Government Accounting
- Academe

Public Accounting- render independent and
expert financial services to public.. collect
professional fees
3 services offered (Auditing, Taxation and
Management Advisory Services)

Auditing- primary service offered
-specifically external auditing (examination of FS
by independent CPA to express opinion of
fairness)

External Auditing is the attest function of CPA

Bureau of Internal Revenue- requires audited FS
to accompany filling of ANNUAL INCOME TAX
RETURN

Bank and lending institution- require audit by
CPA before granting loan

Taxation- preparation of annual income tax
returns and determination of tax
consequences.. must be familiar with tax law
and regulation and be updated

Management Advisory Service- increasingly
important in recent years
-Services to clients on matters of accounting
-Advice on installation of comp system, quality
control installation and modification of
accounting system, budgeting, forecasting

Private Accounting- employed in business
entities as accounting staff, chief accountant,
internal auditor and controller

Controller- highest accounting officer

MAJOR OBJECTIVE OF PRIVATE A
-assist management in planning and controlling
entitys operation

Include
Maintain reports
Producing FS
Preparing budget
Controlling and allocating resources
Determination of various taxes

Government Accounting- encompass
ANALYZING, CLASSIFYING, SUMMARIZING ,
COMMUNICATING all trans involving receipts
and disposition of government funds and
interpreting results.

Focus is the custody and administration of
public funds

BIR SEC Commission on Audit
Dept. of Budget and Management
National bureau of Investigation




3

Continuing professional education ( CPE)
-BOA and PRC in coordination of accredited
national professional org of CPA or any duly
accredited educational institutions.

Accounting versus Auditing
Accounting- constructs FS
Auditing examines FS if it follows the GAAP

Accounting versus Bookkeeping
Accounting- conceptual, making decision by
management. WHY
Bookkeeping- procedural, development and
maintaining records. HOW

Accounting versus Accountancy
Accountancy- work by accountant
Accounting- reference of field ex public acctng
-activity maintaining bus records doing of FS

Financial Accounting versus Managerial
Accounting
FA- recording of business transactions an
preparation of FS. Focus on general purpose
reports know as FINANCIAL STATEMENT
intended for internal and external users.
-develop report for the use of creditors and
investors

MA- needed by management for planning,
controlling and evaluating operation
-develop accounting info for the use within
entity.

Generally Accepted Accounting Principles (
GAAP)- rules, procedures, practice and
standards followed in the preparation and
presentation of FS.
-convention by agreement ( basis of exp,
reason, custom, usage and practical necessity)
-social process ( professional judgment, logic,
research)
-Like Law

Accounting Standards Council
-highest hierarchy

Approved statement are previously called
Statements of Financial Accounting Standards
or SFAS


Philippine Accounting Standards ( PAS)
Philippine Financial Reporting Standards (PFRS)
IFRS-PFRS
IAS-PAS

Purpose of Accounting Standards- to identify
proper accounting practices for the preparation
and presentation of Financial Statements

Financial Reporting Standards Council ( FRSC)-
created by PRC upon recommendation of BOA
to assists BOA in carrying out its powers and
functions provided under RA No. 9298

FRSC replace ASC
Main function is to establish and improved
accounting standards that will generally
accepted in the Philippines.

FRSC- 15 members = 1 chairman , 14 mem
-Board of Accountancy
-Securities and Exchange Commission
-Bangko Sentral ng Pilipinas
-Bureau of Internal Revenue
-Commission on Audit
-Major organization of prepares and users of FS
-Accredited national professional organization
of CPA
2 Public Accounting
2 Private Accounting
2 Government Accounting
2 Academe or education
TERM- 3 years renewable
Ung ASC pwde din sa FRSC

Philippine Interpretations Committee or PIC-
formed by FRSC in AUGUST 2006 replaced
Interpretations Committee or IC formed by ASc
on May 2000

Prepare interpretation of PFRS for approval of
FRSC
-interpretations are intended to give
authoritative guidance dun sa mga issuing wlng
clear rules and guidance

Counter part is IFRIC in United Kingdom that
replace the Standing Interpretations Committee
or SIC



4

International Accounting Standards Committee
(IASC)- an independent private sector .achieving
uniformity in accounting principles used by
business around the world

Formed june 1973- Canada Australian japan
germany france
IASC headquarter is in London, United Kingdom.

Approved statements of IASC are IAS

IASC- IASB

International Accounting Standard Board ung
approve nia tawag dun International Financial
Reposting Standards or IFRS howver continue to
designated as IAS

IFRS- global phenomenon.. bring about
transparency and higer degree of comparability
in financial reporting

One uniform and globally accepted FRS

Past based on American Accounting Statndards
Present IAS and IFRS

IFRS effective on January 2005
1997 moving USA GAAP to IFRS

IFRS-PFRS
AIS-PAS
IFRIC-PIC

Accounting assumptions are also known as
POSTULATES
-Serve as foundation to avoid misunderstanding
rather enhance the understanding and
usefulness of FS

Conceptual Framework mention only one
assumptions GOING CONCERN

BASIC ASSUMPTION od Accounting entity, time
period, monetary unit.

Going Concern- entity will continue in
operations
Cost principle- continuity assumption

Large and persistent losses or entitys
operations are to be terminated the going
concern assumption is abandoned

Accounting Entity- the entity is separate from
the owners, managers and employees who
constitute the entity. Transaction shall not be
merged

To have fair judgment

Pag may 3 siang business separate pa dn to
determined which one is profitable

Parent and subsidiary relationship
consolidated statements.
The consolidation does not eliminate the
boundary, accounting will still be done
separately

Time Period-the indefinite life of an entity is
subdivided into time periods which are usually
length for purpose of preparing financial repots
on Fin position, performance and cash flow

Calendar year ends DECEMBER 31
Fiscal or natural business year- any month

Monetary Unit- 2 aspect quantifiability and
stability of peso

Quantifiability aspect- should be stated in
terms of unit measure which is Philippine peso
Stability of the peso- purchasing power of peso
is stable or constant

Stable peso postulate- amplification of the
going concern assumption

PAS 16 entity shall choose either cost model or
revaluation model

Conceptual Framework for Financial Reporting-
promulgated by IASB
-provide over all theoretical foundation for
accounting which will guide preparers and user
of financial information in preparing and
presentation of statements

Include FS and consolidated financial
statements

5

Special Purpose Financial reports- computation
for taxation prospectuses are outside the
conceptual framework

Users of Financial Information
Primary users
Other users

Primary users- reports are primarily directed

Existing and potential investors- risk inherent in
and return provided by their investments
Shareholders- ability to pay dividends

Lenders and other creditors- whether their
loans , interest there on and other amounts
owing to them will be paid when due

Other Users- reports are not directed to them

Employees- stability and profitability of entity.
Customers- continuance of entity especially
when they have long term involvement
Government and their agencies- determine
taxation polices. Allocation of resources
Public- about the trend and range of its
activities. Number of people they employ

Financial Reporting- provide info to external
users

Fs and also include financial highlights, financial
figures, significant ratios

Objective of Financial Reporting- provide
financial information about the reporting entity
that is useful to existing and potential investors,
lenders and other creditors in making decision
about providing resources to the entity.

It is directed to primary users- provide
resources to entity.

Info that meets the needs of primary user also
meet the needs of other users

Financial position- compromises its a, l and e at
a particular moment in time

Economic resources- assets
Claims- liabilities
Liquidity- availability of cash in near future
Solvency- availability of cash over long term

Changes in economic resources and claims
results from financial performance

Financial performance- level of income earned
by entity through efficient and effective use of
its resources

-also known as RESULTS of OPERATIONS
portrayed in INCOME STATEMENT and
STATEMENT OF COMPREHENSIVE INCOME

Depict