Chapter 1: The Accountancy Profession
➢ Government Accounting
Accounting – art of recording, classifying, and summarizing in
a significant manner and in terms of money
- Process of identifying measuring, and
communicating economic information
American Accounting Association
-Accounting provides quantitative information that are useful
in making economic decisions.
Components:
 Analytical - identifying
 Technical - measuring
 Formal – communicating
Accountable events – has effect on ALE
External transactions – involving 1 entity & another entity
Internal transactions – involving 1 entity only
Production – resources are transferred into products
Casualty – sudden loss from fire, flood etc.
 Measuring – amounting of peso amounts
Historical Cost – original acquisition cost
Current value – fair value, value in use, fulfillment
 Communicating – preparing and distributing
accounting reports to potential users
 Recording – systematically maintaining record of all
economic business transactions
 Classifying – sorting or grouping of economic
transaction into their respective classes (posting to
the ledger)
Ledger – group of accounts
 Summarizing – preparation of financial statement
Republic Act 9288 - Law regulating the practice of
Accountancy in the Philippines. It is also known as Philippine
Accountancy Act of 2004.
Board of Accountancy
➢ Is the body authorized by law to promulgate rules
and regulations affecting the practice of accountancy
profession in the Philippines.
Limitation of the practice of Public Accountancy
➢ Single practitioners and partnership for the practice
of public accountancy shall be registered certified
public accountants in the Philippines.
Accreditation to practice public accountancy
Required to register with the Board of Accountancy and
Professional Regulation Commision for the practice of Public
Accountancy
The PRC upon favorable recommendation of BOA shall issue
the Certificate of registration to practice public accountancy
which shall be valid for 3 years and renewable every 3 years
upon payment of required fees.
➢ Public Accounting
➢ Private Accounting
Public Accounting
➢ The field of public accounting or public accountancy
is composed of individual practitioners, small
accounting firms and large multinational
organization that render independent and expert
financial services to the public.
Public Accountants usually offer 3 kinds of services :
➢ Auditing
➢ Taxation
➢ Management advisory services
Private Accounting
➢ The major objective of private accountant is to assist
management in planning and controlling the entity’s
operation
Government Accounting
➢ It encompassses the process of analyzing,
classifying , summarizing and communicating all
transactions involving the receipt and disposition of
government funds and property interpreting the
results thereof
Continuing Professional Development (CPD)
➢ refers to the inculcation and acquisition of advanced
knowledge, skills, proficiency and ethical and moral
values after the initial registration of the CPA for
assimilation into professional practice and lifelong
learning.
- Republic Act No. 10912
120 Units to renew license
65 yrs old exempted
The Philippine Institute of Certified Accountants or PICPA is
the accredited professional organization (APO) of CPAs by
the Professional Regulation Commission (PRC)
The group set forth the following objectives:
➢ To promote and maintain high professional and
ethical standards among accountants;
➢ To advance the science of accounting;
➢ To develop and improve accountancy education;
➢ To encourage cordial relations among accountants,
➢ To protect the Certificate of Certified Public
Accountant granted by the Republic of the
Philippines.
Professional Regulatory Commission (PRC)
➢ Conducts and administers licensure examinations to
aspiring Professionals,and
Regulates and supervises the practice of the professions
exercised in partnership with the forty-three (43) Professional
Regulatory Boards
Generally Accepted Accounting Principles
➢ accountants develop rules and procedures for
recording them.
➢ It is developed on the basis of experience, reason,
custom, usage and practical necessity.
Purpose of accounting standards
➢ To identify proper accounting practices for the
preparation and presentation of financial statements
➢ It creates a common understanding between
preparers and users of financial statements
particularly the measurement of assets and
liabilities
➢ Comparability and Uniformity
Financial Reporting Standards Council
➢ FRCS is the accounting setting body created by the
Professional Regulation Commission upon
recommendation of the Board Of Accountancy
Philippine Interpretations Committee
➢ To assist the FRSC in establishing and improving
financial reporting standards in the Philippines. It is a
mere committee of the FRSC. The role of the PIC is
principally to issue implementation guidance on
PFRS.
International Accounting Standards Committee (IASC)
➢ It was responsible for developing the International
Accounting Standards and promoting the use and
application of these standards.
International Financial Reporting Standards.
➢ IFRS is the international accounting framework
within which to properly organize and report
financial information.
Chapter 2: Conceptual Framework for Financial Reporting
- Basis of the International Financial and Reporting
Standards and PFRS
Hierarchy
- Generally Accepted Accounting Principle
- Conceptual Framework
- Accounting Standards
Purpose
 Assist the Board to develop IFRS based on consistent
concepts
 Assist preparers of financial reports to develop
consistent accounting policies
 Assist all parties to understand and interpret the
standards.
Effective Date
-Immediately
-Annual periods on or after January 1
Content
 Objective of financial reporting
- To provide financial information that is useful to
users in making decisions relating to providing
resources to the entity.
 Qualitative characteristics of useful financial info
 Fundamental Qualitative Characteristics
o Relevance
o Faithful Representation
 Enhancing Qualitative Characteristics
o Comparability
o Verifiability
o Timeliness
o Understandability
Financial Statement – form of financial reports that provide
information
Reporting entity – entity that is required to prepare financial
statements.
Elements of Financial Position
o Assets – present economic resource controlled by
the entity as a result of past events
o Liabilities – present obligations of an entity
o Equity – residual interest in the assets after
deducting liabilities
Elements of Financial Performance
o Income – increase in asset or decrease in liabilities
that result in increase in equity
o Expenses – decreases in assets, or increases in
liabilities that result in decrease in equity
Recognition Principles
- Probable that there is an inflow or outflow of
economic benefits
- The element has a cost or value that could be
reliably measured
Recognition – process of capturing for inclusion in the SFP
Derecognition – removal of all or part of a recognized asset
or liability
Measurement
Historical Cost – information derived from the price of the
transaction
Fair value – price received to sell an asset
- Reflects market participants’ current expectations
Value In use (assets) & fulfillment value (liabilities) – reflects
entity-specific current expectations
Current cost – reflects the current amount that would be paid
to acquire an equivalent asset or received to take on an
equivalent liability.
Presentation and Disclosure
- Info about ALEIE is communicated
- Effective communication makes information more
relevant
Concepts of Capital
o Physical Concept of Capital
o – capital is regarded as the productive
capacity of the entity based on units of
output per day.