CHAPTER 1
transformed into products.
The Accountancy Profession
Accounting Standards Council
Accounting is a service activity. Its function to
provide quantitative information, primarily
financial in nature, about economic entities, that
is intended to be useful in making economic
decisions.
AICPA
Accounting is the art of recording, classifying,
and summarizing in a significant manner and in
terms of money, transactions and events which
are in part at least of a financial character and
interpreting the results thereof.
American Accounting Association
Accounting is the process of identifying,
measuring and communicating economic
decisions to permit informed judgment and
decision by users of the information.
3 important points;
1. It is about QUANTITATIVE INFORMATION
2. The information is likely to be FINANCIAL IN
NATURE
3. The information should be USEFUL IN
DECISION MAKING.
IDENTIFICATION is the recognition or
nonrecognition of business activities as
ACCOUNTABLE events.
Accountable/quantifiable - Has an effect on A =
L + OE
Subject matter of accounting – Economic
activity or the measurement of economic
resources and economic obligations
Transactions - economic activities of an entity.
External Transactions – Economic events
involving one entity and another.
Internal Transactions – Economic events
involving the entity only.
Production – the process by which resources are
Casualty - is any sudden or unanticipated events
termed as ‘Acts of God’.
MEASURING - is the assigning of peso amounts
to the accountable economic transactions and
events.
COMMUNICATING - is the process of preparing
and distributing accounting reports to potential
users of accounting information.
1. Recording/Journalizing - the process of
systematically maintaining a record of all
economic business transactions after
they have been identified and
measured.
2. Classifying - the sorting or grouping of
similar and interrelated economic
transactions into their respective
classes.
Ledger – group of accounts.
3. Summarizing – the preparation of
financial statements.
Financial statements – the documents that
report financial information about an entity to
decision makers.
The objective of accounting is to provide
quantitative financial information about a
business that is useful to statement users
particularly owners and creditors, in making
economic decisions.
The accountant’s objective is to supply financial
information so that the statement users could
make informed judgment and better decisions.
REPUBLIC ACT 9298 or PHILIPPINE
ACCOUNTANCY ACT OF 2004 is the law
regulating the practice of accountancy in the
Philippines.
BOARD OF ACCOUNTANCY is the body controlling and allocating the resources of the
authorized by law to promulgate rules and entity.
regulations affecting the practice of the Controller - Highest accounting officer.
accountancy profession in the Philippines.
Single practitioners and partnerships for the 3. GOVERNMENT ACCOUNTING
practice of public accountancy shall be FOCUS: the study and administration of public
registered CPA in the Philippines funds.
This encompasses the process of analyzing,
CERTIFICATE OF ACCREDITATION – shall be classifying, summarizing and communicating ball
issued to CPAs in public practice only upon transaction involving the receipt and disposition
showing in accordance with rules and of government funds and property and
regulations promulgated by the BOARD OF interpreting the results thereof.
ACCOUNTANCY and approved by the
PROFESSIONAL REGULATION COMISSION that CONTINUING PROFESSIONAL DEVELOPMENT
such registrant has acquired a MINIMUM OF 3 (CPD) refers to the inculcation, assimilation and
YEARS of meaningful experience in any of the acquisition of knowledge, skill, proficiency, and
areas of public practice. ethical and moral values after the initial
registration of the CPA.
1. PUBLIC ACCOUNTING CPD credit units shall be 60 credit units for three
Composed of individual practitioners, years.
small accounting firms and large multinational EXEMPTIONS:
organizations that render independent and 1. 65 years old
expert financial services to the public.
TEMPORARY EXEMPTIONS:
External Auditing / Auditing The CPA is practicing the profession or furthering
Examination of financial statements by studies abroad. The exemption is for the
independent CPAs for the purpose of expressing duration of stay abroad.
an opinion as to the fairness with which the
financial statements are prepared The CPA has been out of the country for at least
2 years immediately prior to the date of renewal
Taxation Service of license and accreditation.
Includes the preparation of annual income tax
returns and determination of tax consequences ACCOUNTING VS AUDITING
of certain proposed business endeavors.
ACCOUNTING AUDITING
Management Advisory Services
Broad Embraces One of the
Include advice on installation of computer
sense auditing. areas of
system, quality control, installation and
Accounting
modification of accounting system, budgeting,
forecasting, design or modification of retirement specialization.
plans and even entity mergers and takeovers.
Limited CONSTRUCTIVE ANALYTICAL
2. PRIVATE ACCOUNTING Sense Ceases when
Work starts
OBJECTIVE: to assist management in planning financial
when the work
and controlling the entity’s operation. statements are
of the
Includes maintaining the records, producing the prepared.
financial reports, preparing the budgets and
 accountant developing accounting information for use
ends. WITHIN AN ENTITY.

GENERALLY ACCEPTED ACCOUNTING

PRINCIPLES
Represent the rules, procedures, practice and
standards followed in the preparation and
presentation of financial statements.
AUDITOR – examines the financial
statements to ascertain whether they
are in conformity with the GAAP.
PURPOSE OF ACCOUNTING STANDARDS
ACCOUNTING VS BOOKKEEPING To identify proper accounting practices for the
preparation and presentation of financial
ACCOUNTING BOOKKEPING
statements.
CONCEPTUAL PROCEDURAL
FINANCIAL REPORTING STANDARDS COUNCIL
Concerned with Concerned with The accounting standard setting body created
reason or development and by the PROFESSIONAL REGULATION
justification or any maintenance of COMMISSION upon recommendation of the BOA
action adapted. accounting record. to assist the BOA in carrying out it’s powers and
functions provided under RA act 9298.
‘HOW’ MAIN FUNCTION – establish and improve
ACCOUNTING STANDARS THAT WILL be
generally accepted in the Philippines.
ACCOUNTING VS ACCOUNTANCY PAS and FRSC – approved statements of the
FRSC.
ACCOUNTANCY ACCOUNTING 1 CHAIRMAN – had been or is presently a senior
accounting practitioner.
Refers to the Used in reference
BOA 1
profession of only to a particular
accounting practice. field of accountancy SEC 1

BSP 1

FINANCIAL ACCOUNTING VS MANAGERIAL BIR 1

ACCOUNTING
COA 1
FINANCIAL ACCOUNTING
FINEX 1
Primarily concerned with the recording of
business transactions and the eventual PUBLIC PRACTICE 2
preparation of financial statements. It is
intended for EXTERNAL AND INTERNAL USERS. It COMMERCE AND 2
emphasizes reporting to CREDITORS AND INDUSTRY
INVESTORS.
ACADEME 2
MANAGERIAL ACCOUNTING GOVERNMENT 2
The accumulation and preparation of financial
reports for INTERNAL USERS ONLY. It emphasizes
*3 years term renewable for another term
*any member of the ASC shall not be
disqualified from being appointed to the FRSC

PHILIPPINE INTERPRETATIONS COMMITTEE

Formed by the FRSC (AUG 2006) and replaced

the Interpretations committee (formed by the
ASC in MAY 2000)
Role: to prepare interpretations of PFRS for
approval by the FRSC and in the context of the
conceptual framework, to provide timely
guidance on financial reporting issues not
specifically addressed in the PFRS.

INTERNATIONAL ACCOUNTING STANDARDS

COMMITTEE (June 1973)
An independent private sector body, with the
objective on achieving uniformity in the
accounting principles which are used by business
and other organizations for financial reporting
around the world.
OBJECTIVES:
To formulate and publish in the public interest
accounting standards to be observed in the
presentation of financial statements and to
promote their worldwide acceptance and
observance.
To work generally for the improvement and
harmonization of regulations, accounting
standards, and procedures relating to the
presentation of financial statements.

INTERNATIONAL ACCOUNTING STANDARDS

BOARD
Replaced the IASC.
Intended to bring about greater TRANSPARENCY
and a higher degree of COMPARABILITY in
financial reporting.

1. IFRS=PFRS
2. IAS = PAS
3. IC = PIC