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Chapter 1

THE ACCOUNTANCY PROFESSION


DEFINITION:
Accounting Standards Council(ASC)
Accounting is a service activity
Function: to provide quantitative information,
primarily financial in nature, about economic
entities, that is intended to be useful in making
economic decision.
American Institute of Certified Pubic
Accountants(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
information to permit informed judgement and
decision by users of the information.
Key Points:
Accounting is about quantitative information
The information is likely to be financial in nature
The information should be useful in decision
making.
Components:
Analytical
Technical
Formal
Identifying
Recognition or nonrecognition of business activities as
accountable events.

Classification of transactions
External Transactions
E.g. Purchase from a supplier
Borrowing money from bank
Sale of goods to customer
Payment of taxes to government
Internal Transactions
E.g. Production
Casualty loss
Measuring
Process of assigning peso amounts to the accountable
economic transactions and events.
Measurement bases:
Historical cost
Current cost
Realizable value
Present value
Communicating
Process of preparing and distributing accounting
reports to potential users of accounting information.
Accounting as an Information System
A key product of this information system is a set of
financial statements that tell us how well an entity is
performing in terms of profit and loss and where it
stands in financial terms.
Overall objective of accounting
Provide quantitative financial information about a
business that is useful to statement users particularly
owners and creditors, in making economic decisions.
THE ACCOUNTANCY PROFESSION
Republic Act No. 9298 (Philippine Accountancy Act of
2004)
Law regulating the practice of accountancy in the Philippines
Board of Accountancy
Body authorized by the law to promulgate rules and
regulations affecting the practice of the accountancy
profession in the Philippines.
Limitation of the practice of public accountancy
A certificate of accreditation shall be issued to certified
public accountants in public practice upon showing in
accordance with rules and regulations promulgated by
Board of Accountancy and approved by Professional
Regulation Commission that such registrant has acquired a
minimum of three years meaningful experience in any
areas of public practice.
Accreditation to practice public accountancy
Certificate of Registration to practice public
accountancy shall be valid for three years and
renewable every three years upon of required fees.
3 Main Areas of Public Practice
1. Public Accounting
2. Private Accounting
3. Government Accounting
1. PUBLIC ACCOUNTING
Composed of individual practitioners, small accounting firms
and large multinational organizations that render
independent and expert financial services to the public.
Public accountants usually offer three kinds of services,
namely auditing, taxation and management advisory
services.
Auditing
Primary service offered by most pubic accounting
practitioners
examination of financial statements by independent
certified public accountant for the purpose of expressing
an opinion as to the fairness with which the financial
statements are prepared.
Taxation
Taxation service includes the preparations of annual
income tax returns and determination of tax
consequences of certain proposed business endeavors.
Management advisory services
Refers to services to clients on matters of accounting,
finance, business policies, organization procedures,
product costs, distribution and many other phases of
business conduct and operations.
2. PRIVATE ACCOUNTING
Includes maintaining the records, producing financial
reports, preparing budgets and controlling and allocating
the resources of the entity.
3. GOVERNMENT ACCOUNTING
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.
CONTINUING PROFESSIONAL DEVELOPMENT (CPD)
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.
Total CPD credit units shall be 60 credit units for three
years.
Exemptions from CPD
Permanently exempted: 65 years of age
Temporarily exempted:
a) The CPA is working or practicing the profession or
furthering studies abroad
b) The exemption is for the duration of stay abroad
c) The CPA has been out of the country for at least two
years immediately prior to date of renewal f license
and accreditation.
Exemptions from CPD
Permanently exempted: 65 years of age
Temporarily exempted:
a) The CPA is working or practicing the profession or
furthering studies abroad
b) The exemption is for the duration of stay abroad
c) The CPA has been out of the country for at least two
years immediately prior to date of renewal f license
and accreditation.
Accounting vs. Auditing
Embraces auditing One of areas of accounting
Constructive in nature specialization
Analytical in nature
Accounting vs. Bookkeeping
Conceptual Procedural
Concerned with the how of accounting
why, reason or Concerned with
justification for any development and
action adopted. maintenance of
accounting records.
Accounting vs. Accountancy
Field of accountancy Refers to the profession of
such as public accounting practice
accounting, private
accounting and
government
accounting
Financial vs. Managerial
Accounting Accounting

Focuses on general Accumulation ad


purpose reports preparation of financial
known as financial reports for internal users
statements intended only
for internal and
external users.
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
(GAAP)
Represents the rules, procedures, practice and
standards followed in the preparation and
presentation of financial statements.
FINANCIAL REPORTING STANDARDS COUNCIL
FRSC now replaces the Accounting Standards Council
Main function is to establish and improve accounting
standards that will be generally accepted in the
Philippines
Approved statements are known as Philippines Financial
Reporting Standards of PFRS
Composition of FRSC
Board of Accountancy (1)
Securities and Exchange Commission (1)
Bangko Sentral ng Pilipinas (1)
Bureau of Internal Revenue (1)
Commission on Audit (1)
Major organization of preparers and users of financial
statements- Financial ExecutivesIof the Phil. or FINEX (1)
Accredited national professional organization of CPAs:
Public Practice (2)
Commerce and Industry (2)
Academe/ education (2)
Government (2)
Total: 14
Philippine Interpretations Committee
Formed by the FRSC and replaced the Interpretations
Committee or IC
The role is to provide interpretations of PFRS for
approval by the FRSC and to provide timely guidance
on financial reporting issues not specifically addressed
in current PFRS
INTERNATIONAL ACCOUNTING STANDARDS
COMMITTEE
An independent private sector body, with the
objective of achieving uniformity in the accounting
principles which are used by the business and other
organizations for financial reporting around the
world.
INTERNATIONAL ACCOUNTING STANDARDS BOARD
IASB now replaces the International Accounting
Standards Committee or IASC.
IASB publishes standards in a series of
pronouncements called International Financial
Reporting Standards or IFRS
Philippine financial Reporting Standards
PFRS collectively include all of the following:
a) PFRS which correspond to International Financial
Reporting Standards
b)Philippine Accounting Standards which correspond
to International Accounting Standards.
c)Philippine Interpretations which correspond to
Interpretations of the IFRIC and the Standing
Interpretations Committee, and Interpretations
developed by the Philippine Interpretations
Committee.