Early Accounting

Accountancy has its roots in the earliest history of civilization. With the rise of agriculture and trade, people needed a way to keep track
of their goods and of transactions. This helped owners keep track of their property. Instead of counting heads of cattle or bushels of
grain every time one was consumed or traded, people could simply add or subtract tokens. Around 4000 B.C., the Sumerians began
placing these tokens in sealed clay envelopes. Each token would be stamped into the clay of the outside of the envelope, so the owner
would know how many tokens were inside, but the tokens themselves would be kept safe from tampering or loss. This practice of
pressing the tokens into the clay may have been the earliest genesis of writing. A few hundred years later, more complex tokens began
to be used. These tokens had special markings to denote different units or types of goods.

Ancient Mesopotamia
The earliest accounting records were found over 7,000 years ago among the ruins of Ancient Mesopotamia. At the time, people relied
on accounting to keep a record of crop and herd growth. Around 7500 B.C., Mesopotamians began using clay tokens to represent
goods, such as animals, tools, food items or units of grain. Different shapes were used for different goods.They used accounting
techniques to determine if there was a surplus or shortage after crops were harvested each season.

SUMERIAN
Around 4000 B.C., the Sumerians began placing these tokens in sealed clay envelopes. Each token would be stamped into the clay of
the outside of the envelope, so the owner would know how many tokens were inside, but the tokens themselves would be kept safe from
tampering or loss. This practice of pressing the tokens into the clay may have been the earliest genesis of writing.

ABACUS
The abacus first appeared about 5,000 years ago in Sumeria, and was eventually used by several ancient societies. Prior to the advent of a modern
numerical system, ancient users of the early form of the abacus were able to slide beads across a frame, which aided in both counting and simple
calculations such as addition and subtraction.

Starting around 3000 B.C., the Chinese developed the abacus, a tool for counting and calculating. The exact origin of the abacus is still
unknown.

Reign of the Roman Empire, 509 BC

Roman historians also recorded public revenues, the amount of money in the state treasury, taxes, slaves, freedmen, and more. This
accounting information is made available to the emperor, which he then probably used for planning and decision-making purposes.

60 AD
Accounting basics are also mentioned in the New Testament of the Bible in the Book of Matthew as well as in other religious texts such
as the Qur’an.

Accounting During the Middle Ages

During the Middle Ages, bartering was the primary form of money-changing, but when Europe changed to a monetary economy is the
13th Century, merchants began relying on bookkeeping to keep a record of multiple transactions. This is when double-entry bookkeeping
got its start, which is when a debit and credit value is entered for each transaction by the accountant. Merchants at the time used
accounting as an ad-hoc ordering system. It provided them with constant information about their businesses that they could use in
decision-making to grow their business as they saw fit. This laid the foundation of how we use and understand accounting today.

Luca Pacioli’s Contribution to the Accounting Profession

In 1494, Pacioli wrote Summa de Arithmetica, Geometria, Proportioni et Proportionalita, which included a twenty-seven-page treatise
on bookkeeping titled, Particularis de Computis et Scripturis (Details of Calculation and Recording) on the subjects of record keeping
and double-entry accounting. Pacioli’s book became the reference text and teaching tool on the subjects of bookkeeping and accounting
for the next several hundred years. This was the first time that symbols for plus and minus appeared in a printed book. This book was
the first known published work on the topic of double-entry bookkeeping. Summa Arithmetica was also the first known book printed in
Italy to contain algebra.
There would be little modification to Pacioli's system for the next 500 years.
 The present day balance sheet did not get its form until 1868 and
 the income statement was developed before WWII.
 In the 1980s, statements of financial position and cash flows were developed with the purpose to provide relevant "information about the
operating, financing, and investing activities of an enterprise and the effects of those activities on cash resources".

ACCOUNTING PROFESSION
The first accounting firms were established by the British in the 1700s.
The modern profession of the chartered accountant originated in Scotland in the nineteenth century. Accountants often belonged to the same associations
as solicitors, who often offered accounting services to their clients. Early modern accounting had similarities to today's forensic accounting. Accounting
began to transition into an organized profession in the nineteenth century,[9] with local professional bodies in England merging to form the Institute of
Chartered Accountants in England and Wales in 1880.
Accounting Methods Today
Nowadays, there are accounting standards, auditing regulations, and ethical standards for accountants to follow. Each business,
company, corporation, government, and an individual must use at least basic accounting principles during their life, and often during
their daily activities. It’s an important element of business and over thousands of years has evolved into what we know as in modern
accounting today.

ACCOUNTING IN THE PHILIPPINES

Philippine accounting practices date back to the pre-Spanish period, when Filipinos conducted business with Chinese, Indians and Malays from
neighboring countries. These trading activities forced Filipinos to prepare crude accounting records that were based mainly on cash receipts and
However, the comparatively short American colonial period was the most significant in influencing the Philippines’ major institutions—including the
educational system and the formalization of the professions.

ACCOUNTANCY ACT OF 1923

The passage of the Accountancy Act 1923 created the Board of Accountancy (BOA) and gave it the authority to issue Certified Public Accountant
(CPA) certificates.

A number of American businesses established themselves in the Philippines during the 1920s and 1930s. Their activities and requirements influenced
the establishment and initial growth period of the public accounting profession. During this time, Six years later (in November 1929), the Philippine
Institute of Certified Public Accountants (PICPA) was established within the private sector to represent professional interests. Many of the larger
Philippine companies were subsidiaries or branches of American companies—their accounting reflected US practices.

Admirable Filipin Accountant

Vicente F. Fabella (1891 - 1959)
In 1912, Vicente received his bachelor’s degree in Philosophy at the University of the Philippines. He then migrated to the United States to earn
bachelor’s degree in Philosophy and Bachelor’s Degree in Commerce in the University of Chicago and Northwestern University, respectively. In 1915,
he became a Certified Public Accountant at the state of Wisconsin, USA.

Vicente was credited for his contribution in elevating the status of profession and training of CPAs. In 1916, he taught accountancy and auditing at
University of the Philippines and founded his own accounting firm. He was instrumental in founding the Far Eastern College (now Jose Rizal
University) of Accountants, Commerce and Finance, and his office became the basis for the ACT 3105 the CPA Law of the Philippines. In 1955, he
was asked by President Ramon Magsaysay to be part of the Central Bank Survey Commission, which he accepted.

Jose Diokno (1922 - 1987)

Jose Diokno wasn’t just an accountant. He was a CPA, attorney, senator, and pro-human rights, advocate.

Jose was only 17 when graduated as summa cum laude of commerce in De La Salle University. Later on, he took the CPA board exam and Philippine
Bar Examination, which he both passed as the top examiner.

Jose Diokno was known for his passion as a nationalist and human-rights advocate. He became famous for pursuing American citizen Harry S. Stonehill
for charges of tax evasion and bribery with government officials and forming the Free Legal Assistance Group (FLAG) to help the victims of Martial
Law. As a senator, he passed pro-Filipino laws such as providing incentives for Filipino businessmen and investors, and a more humane process of
taxation.
Don Vicente Fabella, the first Filipino CPA and founder of Jose Rizal University in 1919
Educator, economist, civic leader and first Filipino certified public accountant”

Nicanor Icasiano y Reyes Sr. (est. 1857 - during World War 2)

Nicanor Reyes may not be an accountant, but he was a pioneer of its education.
Nicanor graduated with a bachelor’s degree at the University of the Philippines Diliman in 1915. He migrated to the United States to receive his
bachelor’s degree in Commercial Science at New York University and Ph.D. in Accountancy at the University of Colombia. Despite his achievements,
he never became a Certified Public Accountant.

At that time, Certified Public Accountancy was a profession only available to foreigners. But, this did not deter Nicanor to pursue his dreams. He
envisioned a school that would promote the teaching of accountancy to Filipinos as he believed that his countrymen are capable of professional
positions. His vision became a reality when he became the founder and first President of Far Eastern University (FEU) in Manila.

Washington Z. SyCip (30 June 1921 – 7 October 2017) was a Filipino accountant. He was the founder of the accounting firm EY SGV & Company
and the Asian Institute of Management.
SyCip earned a commerce degree at the University of Santo Tomas (UST) with summa cum laude honors at age 17. He taught in UST while pursuing a master's degree.
He passed the board examinations for Certified Public Accountants at age 18

ACCOUNTING

DEFINITION OF ACCOUNTING
1. American Institute of Certified Public 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 financial character, and interpreting the results thereof.” –
2. American Accounting Association (AAA)
“Accounting is the process of identifying, measuring and communicating economic information to permit informed judgment and decision by users of
the information.” –

3. Accounting Standards Council (ASC), succeeded by Financial Reporting Standards Council (FRSC).
“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.” –

NATURE OF ACCOUNTING
 Primarily, Accounting is by nature a service activity. Accounting is a service of providing information required by different interested groups
through the preparation of the financial statements.

 Accounting is an art and science of tracking monetary events.

Accounting is considered an art because it requires the use of skills and creative judgment.
Accounting is also considered a science because it is a body of knowledge and a discipline.

 Accounting is a continuous process for giving the interested users information.

Accounting is identified as a process as it performs the specific task of collecting, processing and communicating financial information.

Accounting process
From the definitions above, we can have the following processes and phases of accounting:
1. Identifying – this is the process of recognition or nonrecognition of business activities as accountable (or recordable) events. To recognize is
synonymous to ‘to record’ or ‘to journalize’.
2. Measuring – this is the process of assigning amounts or value to the accountable economic transactions and events. It answers the question of ‘how
much’.

3. Communicating – this is the process of preparing and distributing accounting reports to potential users of accounting information. This process
includes the following phases:
a. Recording – also called journalizing, involves the preparation of entries of transactions and events on the books of accounts ( General Journal Book,
also called the book of original entry) in a chronological order in accordance with established accounting rules and procedures.
b. Classifying – this involves sorting or grouping of similar and interrelated transactions and events into their respective classes or account. This is
performed by posting accounts to ledger, otherwise known as the book of final entry.
c. Summarizing – this involves the preparation of financial statements, which includes the statement of financial position (balance sheet), Profit or
Loss (income statement), statement of equity, statement of cash flows and accompanying notes to the financial statements.

4. Interpretation involves analyzing the liquidity, solvency, stability and profitability of an entity. This aspect is thoroughly discussed in Managerial
Finance.

BRANCHES OF ACCOUNTING

Different fields of accounting

Accounting can be divided into several areas of activity. These often overlap and they are often closely intertwined. This is a result of development in
business processes and information needs of different users. The common branches of accounting are
 Financial Accounting
 Management Accounting
 Cost Accounting
 Government Accounting
 Auditing
 Tax Accounting
 Accounting Education
 Accounting Research
Financial accounting
Financial accounting is a branch of accounting that involves classifying and recording business transactions as well as presenting and preparing
financial statements to be used by both external and internal users. It focuses mainly on the preparation of the five basic financial statements including
the statement of changes in equity, statement of financial position (balance sheet), statement of cash flows, statement of comprehensive income and
notes to financial statements which are used by banks, creditors, tax authorities and financial institutions to assess the company’s financial status and
calculate the amount of taxes owed.

The end product of financial accounting is called ‘general-purpose financial statements’ because it caters to the common need of the different users
(internal and external) of financial information. These financial statements are prepared in accordance with the Generally Accepted Accounting
Principles (GAAP), which are the Philippine Financial Reporting Standards (PFRS) and Philippine Accounting Standards (PAS).
Financial accounting processes historical transactions and events using the accrual method of accounting. Financial statements are subjected to
examination through external audit prior to distribution. Although these financial statements are general purpose, the main focus is to provide
information to external users.

Management accounting
Managerial or management accounting focuses on providing information for use by internal users, the management. This branch deals with the needs
of the management and does not comply with generally accepted accounting principles (GAAP). Management accounting information is primarily
forward-looking (like budgets), unlike financial accounting which is basically reporting historical information.

Managerial accounting involves financial analysis, budgeting and forecasting, cost analysis, evaluation of business decisions, and similar areas.

Cost accounting
Cost accounting refers to the recording, presentation, and analysis of manufacturing costs. Cost accounting is very useful in manufacturing businesses
since they have the most complicated costing process. It also analyze actual and standard costs to help managers determine future courses of action
regarding the company's operations. Cost Accounting is also evaluates costs for servicing businesses.

Like Managerial Accounting, Cost accounting is not subject to accounting standards and rules, as the primary users of this financial information are
internal users, or the management. In fact, Cost accounting is a sub component of Managerial Accounting.

The following manufacturing costs are recorded and analyzed under Cost accounting:
Direct materials are those major components that can be easily traced to the finished good and are accounted for carefully due to their significance to
the product. In the case of manufacturing a lawn mower, for example, these types of materials would include the engine, housing, wheels, and handle.

Direct labor refers to the efforts of factory workers that can be directly associated with transforming the materials into the finished product, such as
laborers who assemble the product.

Factory overhead includes all factory costs that can only be indirectly associated with the finished inventory, that is, all factory costs incurred in
making a product other than the costs of direct materials and direct labor. Examples are the indirect labor (like the salary of the factory supervisor),
indirect materials, Electricity and depreciation at the production plant, etc.

Government accounting
Section 109, of the Presidential Decree (PD) no. 1445, defines Government Accounting as one that encompasses the process of analyzing, classifying,
summarizing and communicating all transactions that are involved in the receipt and disbursement of all government funds and properties, and
interpreting the results thereof. In pursuant to this definition, objectives were set to cover several areas in government operations.

The need for timely preparation of financial reports in government is necessary to evaluate the performance of the different agencies of government.
The result of the reports would indicate the areas that may still need improvement, as well as come up with the budgetary requirements for these
agencies if needed.

The Constitution of the Philippines calls for the keeping of the general accounts, as well as the promulgation and submission of financial reports that
would cover the operations of government. The whole process of recording summarizing and reporting the several financial activities of the government
units is referred to as government accounting.

Auditing
Auditing in general refers to External auditing that involves the examination of financial statements by an independent party (called the External
Auditor) with the purpose of expressing an opinion as to fairness of presentation and compliance with GAAP. The Auditor’s report or opinion lends
credibility to the financial statements prepared by management that will be distributed to external users. External Audit is also known as Independent
Audit.

Internal auditing focuses on evaluating the adequacy of a company's internal control structure by testing segregation of duties, policies and procedures,
degrees of authorization, and other controls implemented by management. This is normally a separate department within an organization, but can
sometimes be outsourced from an independent Accounting and Auditing firm.

Tax accounting
Tax accounting helps clients follow rules set by tax authorities. It includes tax planning and preparation of tax returns. It also involves determination
of income tax and other taxes like business tax (Value Added Tax or Percentage Tax), tax advisory services such as ways to minimize taxes legally (or
Tax Avoidance), evaluation of the consequences of tax decisions, and other tax-related matters.

Tax advisory services may also be provided to individuals not engaged in business like in the case of beneficiaries (heirs) filing estate tax returns for
properties inherited (inheritance) from a deceased relative (called decedent).

Accounting Education
Accounting education or academe includes accountants who pursue careers as instructors, reviewers, researchers, and authors.

A college Accounting and Taxation instructor must at least be a passer of the Certified Public Accountant licensure examination and having a related
Master’s degree. A meaningful experience must be obtained by an accountant prior to embarking on the teaching profession to enrich his or her
instruction.
Accounting Research
Accounting research is research on the effects of economic events on the process of accounting, and the effects of reported information on economic
events. It encompasses a broad range of research areas including financial accounting, management accounting, auditing and taxation.

Academic accounting research "addresses all aspects of the accounting profession" using the scientific method, while research by practicing accountants
focuses on solving problems for a client or group of clients. Academic accounting research can make significant contribution to accounting practice.

Accounting research is carried out both by academic researchers and by practicing accountants. Academic accounting research addresses all areas of
the accounting profession, and examines issues using the scientific method; it uses evidence from a variety of sources including financial information,
experiments, and computer simulations.

Research by practicing accountants "focuses on solving immediate problems for a single client or small group of clients" and involve, for example,
decision-making on the implementation of new accounting or auditing standards, the presentation of unusual transactions in the financial statements,
and the impact of new tax laws on clients.

Accounting research is also carried out by accounting organizations such as standard-setting bodies. For example, the International Accounting
Standards Board (IASB) may initiate research projects for certain issues, the results of these may inform its decision whether to move the issues to its
active agenda.

USERS OF ACCOUNTING INFORMATION

As discussed in the earlier chapter, the purpose of accounting is to provide financial information about an economic entity so that the users of these
information will have basis in making economic decision.

Accounting is also called as the language of business. It is the means of communication between the business entity and the stakeholders of the business,
or parties interested in the financial activities of the business.

User groups have different information needs and make different decisions. But all this information needs come from the same set of financial
statements. Users of financial statements can be grouped as internal users and external users:

INTERNAL USERS

They are classified as internal users because they have direct access to the financial statements and other reports and records. Internal users use
accounting information in making decisions related to the company's operations. The internal users of accounting information are the owners and
management:

Owners - Owners are the persons who contribute capital in the business and ultimately responsible to bear all risk associated with the business. They
are interested in the profitability and solvency of the business concern.
For small business enterprises like sole proprietorship and partnership, owners control the affairs of the business directly, hence they have direct
access to the financial statements. But in corporations, the owners who are called stockholders do not directly participate in the operation of the
business. Hence, stockholders who are not elected as members of the BOD are not internal users. The stockholders elected as members of the Board
of Directors (BOD) are responsible in making operating and financial policies. They are part of the top management and therefor are internal users of
financial information.

Management

Management may consist of the Board of Directors (BOD), Executives, Managers and other officers of the business enterprise. They need accounting
information on cost of sales, profitability and solvency of the business enterprise for planning, controlling and decision making. Management is
interested in assessing the capacity of the business to earn profits in the future.

Management is responsible for judging the solvency of the enterprise and to meet its debt obligations on time. Solvency is the ability of the entity to
pay its long term obligations, while liquidity is the ability of the entity to pay its currently maturing obligations.

EXTERNAL USERS
External users have limited authority, ability and means to access the required information. They have to rely on the financial statements issued by the
management. The external users are the employees, investors, lenders, creditors, government, and the public.

Employees are interested in the company’s profitability and viability to ensure their job security. Employee unions or representatives negotiate with
management for additional benefits and salary increase based on the profitability and financial capacity of the business as shown in the financial
statements.

Investors/ Owners - They want to know the earning capacity or profitability of the entity to determine the return (earnings) of their invested capital.
Current stockholders need to know whether to maintain, increase, or sell their ownership shares. Prospective Investors need Financial Statements to
assess the viability and the risk involved of investing in a company.
Lenders - Lenders of funds such as banks and other financial institutions are interested in the company’s ability to pay liabilities as they become due
(solvency).

Trade creditors or suppliers - Like lenders, trade creditors or suppliers are interested in the company’s ability to pay the credit purchase as it becomes
due. They are nonetheless especially interested in the company's liquidity – its ability to pay short-term obligations.

The creditors determine whether they will extend credit to customers, or to what extent (credit limit) a customer can purchase goods on credit.

Government – It requires the financial statements as basis for paying taxes particularly by the tax collecting agency of the government Bureau of
Internal Revenue (BIR). Other agencies like the Securities and Exchange Commission (SEC) require the financial statements of partnerships and
corporations for monitoring and regulatory purposes.

Customers: for assessing the financial position of its suppliers which is necessary for them to maintain a stable source of supply in the long term.

The financial statement of the supplier could be used as basis to assess the capability of a prospective supplier to supply the needs of the business on a
regular and continuous basis.

Public

The public may be interested in the financial information of entities within the locality for researcher purposes or other valid reasons. Accounting
information also helps the society to know the contribution made by the business enterprise for the benefit of society as a whole.

Classification of Users under the Conceptual Framework for Financial Reporting

Primary Users – The primary users need information about the resources of the entity not only to assess an entity's prospects for future net cash inflows
but also how effectively and efficiently management has discharged their responsibilities to use the entity's existing resources (IASB).

The primary users of financial statements are the Investors, Lenders and Creditors. These users are called primary users because they have claims
against the company resources or assets. Investors are interested in their claim in the form of capital investment (equity) while the lenders and trade
creditors are interested in their claim in the form of loans or credit to the company (liabilities).

Financial information users that are not classified as primary users because these have no direct claims against company resources are classified as
other users.

TYPES OF BUSINESS ACCORDING TO ACTIVITIES

As discussed in the previous chapter, businesses can be classified according to owners, or how it is registered. This is called the legal form of business
organization. On the other hand, business organizations can be classified according to the nature of the business activity. This involves the type of
product being sold, or how it is made.
There are three major types of businesses:
 Service Business
 Trading or Merchandising business
 Manufacturing business
Service Businesses
A service business sells intangible products, or product without physical form. The services may be an exercise of a profession or the provision of skills
and expertise.
Services provided as an exercise of a profession requires a license or certification from the government or from a professional organization. The
practitioner is required to pass an examination and meet some requirements by the regulatory agency of the government like the Professional Regulation
Commission (PRC) for most professions and the Supreme Court of the Philippines for Lawyers. Examples of professional services regulated by the
PRC are Accountants, Engineers, Architects, Nurses, Teachers, etc.
Services provided to clients as an exercise of skills and expertise are not normally regulated by a particular professional organization or government
agency. This type of service business has a vast line of possible products. Some examples are repair shop of motor vehicles, barber shops, computer
shops, telephone companies, designers of clothes, and the like.

Merchandising Businesses
A Merchandising Business which is also known as Trading Business sells products in the form of tangible goods that were bought or purchased. The
goods are purchased at a cost normally at wholesale, then resold at selling price (cost plus mark-up or margin). That is why this type of business is also
known as “buy and sell” business.
The products purchased and resold are not processed and are sold at their original form. The packaging or quantity may be altered to suit the need of
the customers as in the case of a rice retailer that sells on a per kilo basis.
Examples of trading or merchandising business are grocery stores, departments stores, distributors, convenience stores, and other resellers and retailers.
Manufacturing Business
A manufacturing business combines the manufacturing costs into finished products. These finished products are sold to distributors, merchandising
companies, direct users, or to other manufacturing companies. Some manufacturers may sell their products to direct users or customers.
The manufacturing costs are direct materials, direct labor and other inputs called manufacturing or factory overhead. These are also known as
productions costs. The aim of managing production is to lower the cost by being efficient in the production process.
Manufacturing businesses may be as simple as a shoe or garment factory, to a manufacturer of motor vehicles or airplanes. Some manufacturers produce
components to other manufacturing companies, like the production of microchips that is supplied to an electronic product manufacturer.

E-commerce or Online Shopping

An e-commerce company sells products online or through the internet. Some e-commerce companies are retailers selling their own products, while
other e-commerce companies like Alibaba of China acts as intermediary or “middleman” between buyers and sellers online and facilitates the sale of
goods between the two parties through its extensive network of websites. Some companies are combination of both retailer and intermediary between
buyers and sellers. An example of this is Amazon, which is considered the largest online retailer in the world.
Customers can choose and place the order of products by visiting the website of the e-commerce companies. Purchases maybe made online through
credit/ debit cards or paid by the customer upon delivery (Cash on delivery or COD). Examples of local e-commerce or online shopping companies are
Lazada and Shopee.

Other Online Businesses

Online businesses may be service businesses like the BPOs or Business Process Outsourcing companies. Services provided may be customer service
for product after sales inquiry or complaints, marketing of products, hotel inquiry or bookings, or Online Language Tutorials. These companies maybe
owned by foreign or local owners. These online service businesses or BPOs are established in the Philippines to save on labor costs.

Summary of Advantages and Disadvantages of each Type of Business

Type of Business as to Advantages Disadvantages
Activity

Service Low Capital investment Some services are Seasonal

Lower operating cost Legal liability for Professional services
Easier to manage and more simple organizational Higher cost due to Certification renewal requirement
structure like Continuing Professional Development (CPD)

Merchandising Less investment in production facility and equipment High investment in inventory

Higher profit due to faster turnover, sales Possible losses due to theft or spoilage
Limited mark-up due to competition
Manufacturing Higher mark-up/ profit due to control on cost and prices High Capital Investment

Management can control product quality and Higher risk of losses due to economic downturn or
innovation. increase in operating costs.

FORMS OF BUSINESS ORGANIZATION

Business entities are organized with the purpose of using resources and inputs to provide goods and services to customers and clients in exchange of
money or other forms of resources. This is in view to earn profits.

Before the owner or owners start a business, this must be registered with the government. The legal form of a new business depends on the number of
owner or owners, and by various factors such as:
 Size & nature of the business to be started.
 Technical difficulties.
 Market condition (competition & scope of the article in the market).
 Capital required to start the business & the means to collect the funds.
 Limitation & restriction put forth by the government (grant of loan, license, foreign exchange etc.

The following are the common forms, otherwise known as Legal Forms, of business organizations:
1. Sole Proprietorship
2. Partnership
3. Corporation
4. Cooperative

Sole Proprietorship
A sole proprietorship also known as Single Proprietorship is a business owned by only one person. The business and the owner are viewed as one and
the same. If other parties sue the business, it is in fact the sole proprietor that is being sued.
This form of business is easy to organize and is the least costly among all forms of ownership. This is normally adopted by start-ups and small business
entities.

The proprietor or owner normally manages the day to day operations of the business and gets all the business profits, but suffers all the losses if business
operations did not go well.

The owner faces unlimited liability; meaning, the creditors of the business may go after the personal assets of the owner if the business assets are not
sufficient to pay them.

Partnership
A partnership is a business owned by two or more persons who contribute resources or industry into the entity. The partners divide the profits of the
business among themselves. The profits may be divided equally among the partners, or based on their agreement.

Partnerships classification as to exposure to liabilities by the partners are: General partnership and Limited partnership.

 In a General partnership, all the partners have unlimited liability. This means that their personal assets may be used to pay in case the
partnership assets are not sufficient to pay the partnership liabilities.

 A Limited partnership has at least one general partner and the others are limited partners. The general partner(s) normally manages the
partnership but has unlimited liability. This partner’s personal assets may be used to pay in case the partnership assets are not sufficient to
pay the liabilities.

The limited partners normally serve as partnership investors only, but have limited liability. The limited partner’s personal assets cannot be used to pay
partnership liabilities in case the partnership assets are not enough to cover the said liabilities.

For taxation purposes, the partnership can be classified as General Professional partnership (GPP) and General Commercial partnership (GCP).

The General Professional Partnership is not taxed, but the individual partners are taxed from their distributive share from the partnership income.

The General Commercial Partnership is subject to tax in the same manner as a corporation is taxed.

Corporation
A corporation is a business organization that has separate legal personality from its owners. It is considered as an artificial being, created upon being
registered with the Securities and Exchange Commission (SEC). It has the legal capacity to enter into contracts, and can sue and be sued upon for any
legal claims.

A minimum of five individuals are needed to form and register a Corporation. These individuals who are the first registered owners, referred as
shareholders or stockholders, are called Incorporators. Ownership in a stock corporation is represented by shares of stock. Since the number of
shareholders of a corporation has no limit, funding for capital requirement is easier due to more sources of capital. Shares of stocks representing
ownership can be sold to another person.

The owners (stockholders) enjoy limited liability but have limited involvement in the company's operations. The board of directors (minimum of five
individuals), an elected group from the stockholders, control the activities of the corporation through policy making. The Board of directors oversee
how the management carry out the policies and direction set by the BOD.

Corporations are more complicated because of tax, accounting, record keeping and paperwork requirements.

Cooperative
A cooperative is a duly registered association of persons, with a common bond of interest, who have voluntarily joined together to achieve a lawful
common social or economic end. The owners who are called members, or cooperators, make equitable contributions to the capital required.
The primary objective of every cooperative is to provide access to goods and services to its members. At the same time, members attain increased
income through dividends and savings in the form of their contributed capital.

Cooperatives are exempt from income and business taxation provided a tax exemption certificate is secured from the Bureau of Internal Revenue.

Summary of Advantages and Disadvantages of each form of organization:

Form of Business Advantages Disadvantages

Sole Proprietorship
Ease of Formation Limited Resources
Centralized decision making Multiple Task to owner
Ease of dissolution Unlimited liability to owner
Lower tax Limited skills
Profits is not shared with others
 Partnership More resources Higher tax rate
More talents, skills Profit is shared
Risk is spread among partners Limited life, dissolved if one partner is gone
Minimal government regulation Disagreements may arise among partners
Corporation Limited liability to owners Higher tax rate
More sources of capital More complex to register
Structured & Systematic organization and Stricter government regulation
operation
Cooperative Exemption from tax Slower decision making due to needed consent
Members are involved through voting of BOD of general membership on major policies
Attainment of mutual objective Limited talent for small Coops due to cost
Limited Liability of members constraint
Savings and Dividend earnings to members Market or Customers may only be limited to
members.
Plenty of documentary requirements for
compliance

CONCEPTUAL FRAMEWORK
Status and purpose and status of the Framework
The Framework's purpose is to assist the IASB in developing and revising IFRSs that are based on consistent concepts, to help preparers to develop
consistent accounting policies for areas that are not covered by a standard or where there is choice of accounting policy, and to assist all parties to
understand and interpret.
Scope
The Framework addresses:
 the objective of general purpose financial reporting
 qualitative characteristics of useful financial information
 financial statements and the reporting entity
 the elements of financial statements
 recognition and derecognition
 measurement
 presentation and disclosure
 concepts of capital and capital maintenance.

The Objective of general purpose financial reporting

To provide information about the resources of the entity not only to assess an entity's prospects for future net cash inflows but also how effectively
and efficiently management has discharged their responsibilities to use the entity's existing resources.
The primary users of general purpose financial reporting are present and potential investors, lenders and other creditors, who use that information to
make decisions about buying, selling or holding equity or debt instruments, providing or settling loans or other forms of credit, or exercising rights to
vote on, or otherwise influence, management’s actions that affect the use of the entity’s economic resources. [

Qualitative characteristics of useful financial information

Financial information is useful when it is relevant and represents faithfully what it purports to represent. The usefulness of financial information is
enhanced if it is comparable, verifiable, timely and understandable.

Fundamental (explicit) qualitative characteristics

 Relevance
 faithful representation

Relevance
Relevant financial information is capable of making a difference in the decisions made by users.
Financial information is capable of making a difference in decisions if it has
 predictive value,
 confirmatory value, or both.
 Materiality is an entity-specific aspect of relevance based on the nature or magnitude (or both) of the items to which the information relates
in the context of an individual entity's financial report.

Faithful representation
Faithful representation means representation of the substance of an economic phenomenon instead of representation of its legal form only.

A faithful representation seeks to maximise the underlying characteristics of

 completeness,
 neutrality and
 freedom from error

Enhancing qualitative characteristics

 Comparability,
 verifiability,
  timeliness and
 understandability

Comparability
Information about a reporting entity is more useful if it can be compared with a similar information about other entities and with similar information
about the same entity for another period or another date.

Verifiability
Verifiability means that different knowledgeable and independent observers could reach consensus, although not necessarily complete agreement, that
a particular depiction is a faithful representation.

Timeliness
Timeliness means that information is available to decision-makers in time to be capable of influencing their decisions.

Understandability
Classifying, characterising and presenting information clearly and concisely makes it understandable.

Pervasive constraints
Cost is a pervasive constraint
Reporting such information imposes costs and those costs should be justified by the benefits of reporting that information.

Assumptions
 Going concern assumption is an underlying assumption. Thus, the financial statements presume that an entity will continue in operation
indefinitely or, if that presumption is not valid, disclosure and a different basis of reporting are required
 economic entity assumption . An accounting principle/guideline that allows the accountant to keep the sole proprietor's business transactions
separate from the owner's personal transactions even though a sole proprietorship is not legally separate from the owner.
 periodicity assumption. The accounting guideline that allows the accountant to divide up the complex, ongoing activities of a business
into periods of a year, quarter, month, week, etc
 monetary unit assumption is that in the long run, the functional currency is stable—it does not lose its purchasing power.

The elements of financial statements

 The elements directly related to financial position (balance sheet) are:
Assets Liabilities Equity
 The elements directly related to performance (income statement) are:
Income and Expenses

The cash flow statement reflects both income statement elements and some changes in balance sheet elements.

Recognition of the elements of financial statements

Criteria for recognition:
 if it results in both relevant information about the element being recognised, and faithful representation of that element.

Derecognition - is ‘the removal of all or part of a recognised asset of liability

from an entity’s statement of financial position’.
Derecognition normally occurs:
• For an asset, when the entity loses control of all or part of the recognised asset
• For a liability, when the entity no longer has a present obligation for all or part of the recognised
liability

Measurement of the elements of financial statements

Measurement involves assigning monetary amounts at which the elements of the financial statements are to be recognised and reported.
 Historical cost measures provide information about elements that is derived from the historical price of the transaction or event that gave rise
to the item being considered for measurement; so, for an asset, this would be the cost incurred in acquiring/creating the asset. For a liability,
this would be the value of the consideration received to incur/take on the liability. The historical cost of both an asset and a liability will be
updated over time to depict, for example, any consumption of the asset or fulfilment of the liability, or the impact of any events that cause
the asset to become impaired or the liability onerous.
 Current value measures provide monetary information about elements, using information updated to reflect conditions at the measurement
date. Measurement bases may include fair value, value in use, fulfilment value and current cost.

 Selection of a measurement basis –the factors to be considered in selecting a measurement basis are in line with the qualitative characteristics
of useful information - relevance and faithful representation.

Concepts of capital and capital maintenance.

 A financial concept of capital is whereby the capital of the entity is linked t the net assets, which is the equity of the entity.
When a financial concept of capital is used, a profit is earned only if the financial amount of the net assets at the and of the period is greater than the
net assets at the beginning of the period, adjusted of course for any distributions paid to the owners during the period, or any equity capital raised.

 Physical capital maintenance

A physical concept of capital is one where the capital of an entity is regarded as its production capacity, which could be based on its units of output.
This requires the use of current cost.
When a physical concept of capital is used, a profit is earned only if the physical production capacity (or operating capability) of the entity at the end
of the period is greater than the production capacity at the beginning of the period, adjusted for any distributions paid to the owners during the period,
or any equity capital raised.

Career opportunities for BSA graduates

A. Jobs for licensed CPAs (board exam passers)

o Entry Level jobs
Public Accounting:
 Audit/Tax staff – perform internal audits and they are also hired by the IRS and other governmental agencies to ensure
that the company is abiding by financial laws and regulations.

Commerce:
 Financial Accounting and Reporting Staff – manage or give advice on finances for clients or companies. Accounting
staffs handle duties such as making bills are paid on time and taxes are deducted, and suggest methods of cutting costs.

Government:
 State Accounting Examiner/ State Accountant/ LGU accountant – government accountants help the government units
record and prepare financial reports in accordance with government accounting principles and professional standards.

 Budget analyst – aids government units evaluating budget data, estimating revenue and expense levels, and adjusting
social programs.

Academe :
 Junior Accounting Instructor – a CPA who teaches at a university or college
B.
 Mid-Level Positions
C. Public Accounting:
 Audit Manager – supervise the activities of an audit department. This department ensures that financial reports comply
with policies, laws and regulations.
 Comptroller – comptroller supervises income and expenditures, keeping track of all ingoing and outgoing money

 Senior Auditor – responsible for analyzing and communicating financial information; reviews the operations of a
company making sure that they comply with corporate and government policies.

 Senior Fraud Examiner – an expert in fraud investigation as well as in its prevention and deterrence.

 Financial Services Manager – supervises financial services sales representatives or associates and ensures they meet
business performance requirements (sales quotas). A financial services manager may work for an insurance company, an
investment bank or a mutual fund.

 Advanced Positions
 Senior Consultant – evaluates a company's internal processes and procedures, detects performance (productivity) levels
and provides recommendations for improvement.

 Financial Advisor – gain and retain clients with excess money to invest.

 Chief Financial Officer – responsible for overseeing the financial activities of an entire company.

 Vice President For Finance – highest level finance expert within a business.

D. Jobs for Non Board Passers

o Bank Teller – handles basic money deposits, withdrawals and check-cashing transactions.

o Accounting Associate – support senior level accountants and auditors with administrative, bookkeeping, clerical, accounts payable
and accounts receivable duties.

o Accounting Clerk – keeping financial records and making computations throughout the course of a typical workday

o Assistant Product Manager – works under the leadership of a product manager, assisting in the development of corporate brand
strategies in the short term and long term.

o Data Entry Operator/Clerk – responsible for supplying accurate documentation that may be part of a billing, patient, inventory
or customer service capacity

E. Jobs not related to the BSA program

 o Call center agent – answers phone calls and inquiries of clients and provides customer support, usually to people from other
countries

o Freelancer working online – doing online jobs for clients abroad, such as data entry, article writing, SEO, customer support,
administrative support etc., which mainly depends on your skills

o Administrative Staff – personnel responsible for the organization and management of office duties and tasks; positions that include
office secretary, personal assistant and office clerk

F. Career Opportunities Abroad

Most countries require their own licensure examination to work as a licensed accountant, so oppurtunities abroad are mostly for jobs which do not
require licensure. Another option would be to take and pass the licensure exam at the country which you intend to work in.

SALARY RATE ( GOVT UNITS)

P12,674/Month
ACCOUNTING CLERK 1
BUDGET AIDE
STOREKEEPER 1
SUPLIES CHECKER
TAX MAPPING AIDE

P14,340/Month
ACCOUNTING CLERK 1I
STOREKEEPER 1I
WAREHOUSEMAN 1

P16,282/Month
ACCOUNTING CLERK 1II
ACCOUNTS LIQUIDATION ASSISTANT
BUDGET ASSISTANT
INTERNAL AUDITING ASSISTANT
MANAGEMENT AND AUDIT ASSISTANT
WAREHOUSEMAN 1I

P17,473/Month
BUDGET AND MANAGEMENT ASSISTANT
STOREKEEPER 1II

P18,718/Month
ACCOUNTING MACHINE OPERATOR 1II
CASHIER I
SUPPLY OFFICER I

P20,179/Month
ACCOUNTING ANALYST
ACCOUNTS LIQUIDATION OFFICER I
AUDITING SYSTEMS ANALYST
BUDGET ANALYST
BUDGET OFFICER 1
FINANCIAL ANALYST 1
INTELLIGENCE OFFICER I
INTERNAL AUDITOR 1
MANAGEMENT AND AUDIT ANALYST 1
STOREKEEPER 1V
 TAX MAPPER I
TAX MAPPING EXAMINER
TAX SPECIALIST I
WAREHOUSEMAN 1II

P24,224/Month
AUDITING SYSTEMS SPECIALIST 1
BUDGET AND MANAGEMENT SPECIALIST I
BUDGET SPECIALIST 1
WAREHOUSEMAN 1V

P26,494/Month
CASHIER II
SUPPLY OFFICER II

P29,010/Month
ACCOUNTANT 1I
ACCOUNTS LIQUIDATION OFFICER II
BUDGET OFFICER 1I
FINANCIAL ANALYST 11
INTELLIGENCE OFFICER II
INTERNAL AUDITOR 1I
MANAGEMENT AND AUDIT ANALYST 1I
TAX MAPPER II
TAX SPECIALIST II

P31,765/Month
AUDITING SYSTEMS SPECIALIST 1I
BUDGET AND MANAGEMENT SPECIALIST II
BUDGET SPECIALIST 1I

P38,085/Month
ACCOUNTANT 1II
ACCOUNTS LIQUIDATION OFFICER III
BUDGET OFFICER 1II
CASHIER III
FINANCIAL ANALYST 1II
INTELLIGENCE OFFICER III
INTERNAL AUDITOR 1II
MANAGEMENT AND AUDIT ANALYST 1II
SUPPLY OFFICER III
TAX MAPPER III

P47,037/Month
CASHIER IV
CHIEF REVENUE OFFICER 1

P52,554/Month
CHIEF REVENUE OFFICER 1I

P58,717/Month
ACCOUNTS LIQUIDATION OFFICER IV
 BUDGET OFFICER 1V
CASHIER V
CHIEF REVENUE OFFICER 1II
CHIEF TREASURY OPERATIONS OFFICER I
FINANCIAL ANALYST 1V
FINANCIAL MANAGEMENT OFFICER 1
INTELLIGENCE OFFICER IV
INTERNAL AUDITOR 1V
SUPPLY OFFICER IV
TAX MAPPER IV

P73,299/Month
ACCOUNTS LIQUIDATION OFFICER V
BUDGET OFFICER V
CHIEF ACCOUNTANT
CHIEF ADUSITING SYSTEMS SPECIALIST
CHIEF BUDGET AND MANAGEMENT SPCIALIST
CHIEF FINANCIAL MANAGEMENT SPECIALIST
CHIEF LOCAL TREASURY EXAMINER
CHIEF REVENUE OFFICER 1V
CHIEF TAX SPECIALIST
CHIEF TECHNICAL AUDIT SPECIALIST
CHIEF TREASURY OPERATIONS OFFICER II
FINANCIAL ANALYST V
FINANCIAL MANAGEMENT OFFICER 11
INTELLIGENCE OFFICER V
INTERNAL AUDITOR V
MANAGEMENT AND AUDIT ANALYST 1V
SUPPLY OFFICER V
TAX MAPPER V