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Definition 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 decisions. AICPA Accounting is the art of recording, classifying and summarizing in significant matter and in terms of money, transactions and events which are in part at least of a financial character and interpreting the results thereof. AAA Accounting is the process of identifying, measuring and communicating economic information to permit informed judgment and decisions by the users of the information. Three important functions of accounting 1. Identifying 2. Measuring 3. Communicating Identifying It is the recognition and non-recognition of accountable events. Not all business activities are accountable. Only economic activities are recognized. Two classifications of economic transactions External transactions or exchange transactions are those economic transactions involving one entity and another entity.

Internal transactions are economic transactions involving the entity only. Production is the process by which resources are transformed into products Casualty is any sudden and unanticipated loss due to the acts of nature. Measurement Measuring or measurement is the process of determining the monetary amounts at which the elements of the financial statements are to be recognized and carried in the balance sheet and income statement. Measurement bases - Historical cost - Current cost - Realizable value - Present value Communicating It is the process of preparing and distributing accounting reports to potential users of accounting information. Implicit to the communication process are: -Recording or journalizing is the process of systematically maintaining a record of all economic business transactions after they have been identified and measured -classifying is the sorting or grouping of similar and interrelated economic transactions into their perspective class. It is accomplished by posting to the ledger -summarizing is the preparation of financial statements which include the financial position, income statement, statement of comprehensive income, statement of cash flows and statement of changes in equity. The accountants primary task is to supply financial information to statement users so that

they could make informed judgment and better decision. Republic act No. 9298 is the law regulating the practice of accountancy in the Philippines. This law is known as the Philippine Accountancy Act of 2004 Board of Accountancy is the body authorized by law to promulgate rules and regulations affecting the practice of the accountancy profession in the Philippines. Three main areas of Accountancy profession -Public Accounting -Private Accounting -Government Accounting Limitation of the practice of accountancy -Single practitioners and partnerships for the practice of public accountancy shall be registered CPAs in the Philippines -SEC shall not register any corporation organized for the practice of public accountancy. Public Accounting Individual practitioners, small accounting firms and large multinational organizations render independent and expert financial services to the public. Services Rendered -auditing -Taxation services -management Advisory Services Private Accounting CPAs are employed in business entities in various capacity as accounting staff, chief accountant, internal auditor and controller. The highest accounting officer in a business entity is the controller. Government Accounting It is the process of analyzing, classifying, summarizing and communicating all transactions involving the receipt and

disposition of government funds and property and interpreting the results the results thereof. Financial Accounting is primarily concerned with the recording of business transactions and the eventual preparation of financial statements. Managerial Accounting is the accumulation and preparation of financial reports for internal users only. GAAP Generally Accepted Accounting Principles represent the rules, procedure practice and standards followed in the preparation and presentation of financial statements Standards Accounting standards create a common understanding between preparers and users of financial statements particularly on how items. FRSC FRSC is composed of 15 members with a chairman who had been or is presently a senior accounting practitioner and 14 representatives from BOA SEC BSP BIR COA Major preparer and users of FS ACPAPP ACPACI ACPAE APAG Total 1 1 1 1 1 1 2 2 2 2 14

PHILIPPINE INTERPRETATION COMMITTEE The role of PIC is to prepare interpretations of PFRS for approval of SEC by the FRSC and in context of the conceptual framework, to provide timely guidance on financial reporting issues not specifically addressed in current PFRS IASC

It is an independent private sector body, with the objective of achieving uniformity in the accounting principles which are used by business and other organizations for financial reporting around the world. Objectives of IASC - 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. IFRS IFRS is a global phenomenon intended to bring about greater transparency and a higher degree of comparability in financial reporting, both of which will benefit the investors and are essential to achieve the goal of one uniform and globally accepted financial reporting standards. PFRS The FRSC issues its standards in a series of pronouncements called Philippine Financial Reporting Standards or PFRS. The PFRS collectively include the following: a. PFRS which corresponds IFRS. b. PAS which corresponds to IAS. c. PI which corresponds to IFRIC and the SIC, and interpretations developed by PIC. Accounting Assumptions are the basic notions or fundamental promises on which the accounting process is based. Accounting assumptions are the givens that exist without saying. Accounting assumptions are also known as postulates. UNDERLYING ACCOUNTING ASSUMPTIONS a. Going Concern b. Accounting Entity

c. Time period d. Monetary Unit The new conceptual framework for financial reporting mentions only one assumption, namely going concern. Accrual is no longer carried forward as an underlying assumption in the new conceptual framework. However, implicit in accounting are the basic assumptions of accounting entity, time period, and monetary unit. GOING CONCERN It means that the accounting entity is viewed as continuing in operation indefinitely in the absence of evidence to the contrary. This principle is the very foundation of cost principle. ACCOUNTING ENTITY In financial accounting, the accounting entity is the specific business entity, which may be a proprietorship, partnership or corporation. Under this assumption, the entity is separate from the owners, managers, and employees who constitute the entity. However, where parent and subsidiary relationships exists, consolidated statements for the affiliates are usually prepared because for practical and economic purpose the parent and subsidiary are viewed as a single economic entity TIME PERIOD It requires that the indefinite life of an entity is subdivided into the periods or accounting periods which are usually of equal length for the purpose of preparing financial reports on financial performance and cash flows. MONETARY UNIT Monetary unit has 2 aspects 1. Quantifiablity 2. Stability of the peso

Quantifiability means that assets, liabilities, equity, income and expenses should be stated

in terms of a unit of measure which is the Philippine peso. Stability of the peso assumption means that the purchasing power of the peso is stable or constant and that its instability is insignificant and therefore may be ignored. PURPOSE OF CONCEPTUAL FRAMEWORK a. To assist the FRSX in developing accounting standards that represent Philippine GAAP b. To assist preparers of FS in applying accounting standards and in dealing with issues not yet covered by GAAP c. To assist FRSC in its review and adoption of IAS. d. To assist users of FS in interpreting the information contained in the FS e. To assist auditors in forming an opinion as to whether FS conform with the Philippine GAAP f. To provide information to those interested in the work of FRSC in the formulation of PFRS.. SCOPE OF CONCEPTUAL FRAMEWORK a. Objective of Financial Reporting b. Qualitative characteristics c. Definition, recognition and measurement of the elements from which the financial statements are constructed d. Concepts of capital and capital maintenance

Solvency is the availability of cash over a long term to meet financial commitments when they fall due. LIMITATIONS OF FINANCIAL REPORTING a. General purpose financial reports do not and cannot provide all of the information that potential and existing investors, lenders, and other creditors need. b. General purpose financial reports are not designed to show the values of an entity but they provide information to help the primary information to help the primary users estimate the value of the entity. c. General purpose financial reports are intended to provide common information to users and cannot accommodate every request for information. d. To large extent, general purpose financial reports are based on estimate and judgment rather than expect depiction.

ENTITY THEORY The accounting objective is geared toward proper income determination. Proper matching of cost against revenue is the ultimate end. Asset = Liabilities + Capital PROPRIETARY THEORY The accounting objective is directed toward proper valuation of asset. Asset - Liabilities = Capital RESIDUAL EQUITY THEORY The accounting objective is also the proper valuation of assets. Applicable when there is 2 classes of shareholders. Asset - Liabilities Preference Shareholders equity = Ordinary Shareholders equity

Objective of Financial Reporting The overall objective of financial reporting is to provide financial information about reporting entity that is useful to existing and potential investors, lenders, and other creditors in making decisions about providing resources to the entity. Liability is the availability of cash in near future to cover current maturing obligations

FUND THEORY The Accounting objective is neither proper income determination nor proper valuation of asset but the custody and administration of funds. Cash Inflows Cash Outflows = Fund

Qualitative characteristics are the qualities or attributes that make financial accounting information useful to the users.