Professional Documents
Culture Documents
-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.
The Committee on Accounting terminology of the american institute of certified public accountants
-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.
-Accounting is the process of identifying, measuring and communicating economic information to permit
informed judgement and decision by users of the information.
🖤 IDENTIFYING
-the recognition and nonrecognition of accountable events. Not all business activities are accountable.
*Accountable or quantifiable events - it has an effect on assest, liabilities and equity. (The subject matter
in accounting is economic activity) Economic resources and economic obligations.
*Only economic activities are emphasized and recognized in financial accounting. Sociological and
psychological matters are beyond the province of accounting.
*Economic activities of entity are referred as transactions which may be classified as external and
internal .
✅ External transactions / exchange transactions -economic events involving one entity and another
entity.
✅ Internal transactions -economic events involving the entity only. Economic activities that take place
entirely within the entity.
✔️Production -process by which resources are transformed into products.
✔️Casualty -any sudden and unanticipated loss from fire, flood, earthquake and other event ordinarily
termed as an act of God or act of nature.
🖤 MEASURING/MEASUREMENT
-process of determining the monetary amounts which the elements of financial statements are to be
recognized and carried in the balance sheet and income statement.
*Measurement bases are historical cost, current cost, realizable value and present value. Historical cost
is the most common.
🖤 COMMUNICATING
-process of preparing and distributing accounting reports to potential users of accounting information.
*Identifying and measuring are pointless if the information contained in accounting records cannot be
communicated.
*Actually, it is for this reason that accounting has been called the "language of business".
✅ Classifying -sorting or grouping of similar and interrelated economic transactions into their respective
class.
✅ Summarizing -preparation of financial statements which include the statement of financial position,
income statement, statement of comprehensive income, statement of cash flows and statement of
changes in equity.
-to provide quantitative financial information about a business that is useful to statement users
particularly owners and creditors, in making economic decisions
*Accounts primary task therefore is to supply information to help users make informed judgement and
better decision.
Accountancy profession
-Republic Act No. 9298 is the law regulating the practice of accountancy inthe 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.
🖤 Public accounting -individual practitioners, small accounting firms and large multinational
organizations render independent and expert financial services to the public such as:
*Auditing has traditionally been the primary service offered by most Public accountants
✅ Taxation service -preparation of annual income tax returns and determination of tax consequences of
certain proposed business endeavours.
✅ Management advisory service -has no precise coverage but used generally to refer to services to
clients on matters of accounting and phases of business conduct and operations.
* Become increasingly important in recent years, although audit and tax services are undoubtedly the
mainstay of public accountants.
🖤 Private accounting
-major objective is to assist management in planning and controlling the entity's operations. Includes
maintining the records, producing the financial repots, preparing the budgets and controlling and
allocating the cost of the business.
*Private accountant has also responsibility for the determination of the various taxes the business is
obliged to pay.
-CPA are employed in business entities in various capacity as accounting staff, chief accountant, internal
auditor and controller.
🖤 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".
*The focus of government accounting is the custody and administration of public funds.
Financial Accounting
-Primarily concerned with recording of business transactions and eventual preparation of financial
statements.
-Focus on general purpose reports known as financial accounting which are intended for internal and
external users.
Managerial Accounting
*Area of accounting that emphasizes developing accounting information for use within an entity.
-encompass the conventions, rules, and procedures necessary to define what is accepted accounting
practice.
*Represent the rules, procedure, practice, and standards followed in the preparation and presentation
of financial statements.
-to identify proper accounting practices for the preparation and presentation of financial statements.
-Accounting standards create a common understanding between preparers and users of financial
statements particularly on how items (valuation of assets) are treated.
*Financial statements shall therefore comply with all applicable Accounting standards.