HOLY CROSS COLLEGE

Sta. Ana, Pampanga

INSTITUTE OF ACCOUNTANCY
COURSE GUIDE in Conceptual Framework & Accounting Standards

Chapter 1: THE ACCOUNTING PROFESSION

Accounting as define by different organizations
Accounting standards council
Accounting is a service activity. Its function 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 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 decisions to permit informed judgment and decision by users of the
information.

3 important points
1. It is about QUANTITATIVE INFORMATION
2. The information is likely to be FINANCIAL IN NATURE
3. The information should be USEFUL IN DECISION MAKING.

IDENTIFICATION
Is the recognition or nonrecognition of business activities as
ACCOUNTABLE events.
Accountable/quantifiable - Has an effect on A = L + OE
Subject matter of accounting – Economic activity or the measurement of
economic resources and economic obligations
Transactions - economic activities of an entity.
External Transactions – Economic events involving one entity and another.
Internal Transactions – Economic events involving the entity only.
Production – the process by which resources are transformed into products.
Casualty – is any sudden or unanticipated events termed as Acts of God.
MEASURING
Is the assigning of peso amounts to the accountable economic
transactions and events.

COMMUNICATING
Is the process of preparing and distributing accounting reports to potential
users of accounting information.
Recording/Journalizing - the process of systematically maintaining a record of all
economic business transactions after they have been identified and measured.
Classifying - the sorting or grouping of similar and interrelated economic
transactions into their respective classes.
Ledger – group of accounts.
Summarizing – the preparation of FINANCIAL STATEMENTS.
Financial statements – the documents that report financial information about an
entity to decision makers.

OBJECTIVE of accounting
To provide quantitative financial information about a business that is
useful to statement users particularly owners and creditors, in making economic
decisions.
Accountant’s objective
To supply financial information so that the statement users could make
informed judgment and better decisions.

REPUBLIC ACT 9298 or PHILIPPINE ACCOUNTANCY ACT OF 2004 is the law

regulating the practice of accountancy in the Philippines.
BOARD OF ACCOUNTANCY is the body authorized by law to promulgate rules
and regulations affecting the practice of the accountancy profession in the
Philippines.
Single practitioners and partnerships for the practice of public accountancy
shall be registered CPA in the Philippines
CERTIFICATE OF ACCREDITATION – shall be issued to CPAs in public practice only
upon showing in accordance with rules and regulations promulgated by the
BOARD OF ACCOUNTANCY and approved by the PROFESSIONAL REGULATION
COMISSION that such registrant has acquired a MINIMUM OF 3 YEARS of
meaningful experience in any of the areas of public practice.

1. PUBLIC ACCOUNTING
Composed of individual practitioners, small accounting firms and large
multinational organizations that render independent and expert financial
services to the public.
External Auditing / Auditing
Primary service.
Examination of financial statements by independent CPAs for the purpose of
expressing an opinion as to the fairness with which the financial statements are
prepared
Taxation Service
Includes the preparation of annual income tax returns and determination of tax
consequences of certain proposed business endeavors.
Management Advisory Services
Include advice on installation of computer system, quality control, installation
and modification of accounting system, budgeting, forecasting, design or
modification of retirement plans and even entity mergers and takeovers.

2. PRIVATE ACCOUNTING
OBJECTIVE: to assist management in planning and controlling the entity’s
operation.
Includes maintaining the records, producing the financial reports, preparing the
budgets and controlling and allocating the resources of the entity.
Controller - Highest accounting officer.

3. GOVERNMENT ACCOUNTING
FOCUS: the study and administration of public funds.
Encompasses the process of analyzing, classifying, summarizing and
communicating ball transaction involving the receipt and disposition of
government funds and property and interpreting the results thereof.

4. CONTINUING PROFESSIONAL DEVELOPMENT (CPD)

Refers to the inculcation, assimilation and acquisition of knowledge, skill,
proficiency, and ethical and moral values after the initial registration of the CPA.
CPD credit units shall be 60 credit units for three years.
EXEMPTIONS:
1. 65 years old
TEMPORARY EXEMPTIONS:
The CPA is practicing the profession or furthering studies abroad.
The exemption is for the duration of stay abroad.
The CPA has been out of the country for at least 2 years immediately prior to the
date of renewal of license and accreditation.
ACCOUNTING VS AUDITING
ACCOUNTING AUDITING
Broad Embraces One of the
sense auditing. areas of
Accounting
specialization.
Limited CONSTRUCTIVE ANALYTICAL
Sense Ceases when Work starts
financial when the work
statements of the
are prepared. accountant
ends.

AUDITOR – examines the financial statements to ascertain whether they are in

conformity with the GAAP.

ACCOUNTING VS BOOKKEEPING
ACCOUNTING BOOKKEPING
CONCEPTUAL PROCEDURAL
Concerned with Concerned with
reason or development and
justification or any maintenance of
action adapted. accounting record.
‘HOW’

ACCOUNTING VS ACCOUNTANCY
ACCOUNTANCY ACCOUNTING
Refers to the Used in reference
profession of only to a particular
accounting practice. field of accountancy

FINANCIAL ACCOUNTING VS MANAGERIAL ACCOUNTING

FINANCIAL ACCOUNTING
Primarily concerned with the recording of business transactions and the
eventual preparation of financial statements.
Intended for EXTERNAL AND INTERNAL USERS.
Emphasizes reporting to CREDITORS AND INVESTORS.

MANAGERIAL ACCOUNTING
The accumulation and preparation of financial reports for INTERNAL USERS
ONLY.
Emphasizes developing accounting information for use WITHIN AN ENTITY.
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
Represent the rules, procedures, practice and standards followed in the
preparation and presentation of financial statements.

PURPOSE OF ACCOUNTING STANDARDS

To identify proper accounting practices for the preparation and
presentation of financial statements.

FINANCIAL REPORTING STANDARDS COUNCIL

The accounting standard setting body created by the PROFESSIONAL
REGULATION COMMISSION upon recommendation of the BOA to assist the BOA
in carrying out it’s powers and functions provided under RA act 9298.
MAIN FUNCTION – establish and improve ACCOUNTING STANDARS THAT WILL be
generally accepted in the Philippines.

PAS and FRSC – approved statements of the FRSC.

1 CHAIRMAN – had been or is presently a senior accounting practitioner.
BOA 1
SEC 1
BSP 1
BIR 1
COA 1
FINEX 1
PUBLIC PRACTICE 2
COMMERCE AND 2
INDUSTRY
ACADEME 2
GOVERNMENT 2

*3 years term renewable for another term

*any member of the ASC shall not be disqualified from being appointed to the
FRSC

PHILIPPINE INTERPRETATIONS COMMITTEE

Formed by the FRSC (AUG 2006) and replaced the Interpretations committee
(formed by the ASC in MAY 2000)
Role: to prepare interpretations of PFRS for approval by the FRSC and in the
context of the conceptual framework, to provide timely guidance on financial
reporting issues not specifically addressed in the PFRS.

INTERNATIONAL ACCOUNTING STANDARDS COMMITTEE (June 1973)

An independent private sector body, with the objective o achieving
uniformity in the accounting principles which are used by business and other
organizations for financial reporting around the world.
(INTERNATIONAL ACCOUNTING STANDARDS)

OBJECTIVES:
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.

INTERNATIONAL ACCOUNTING STANDARDS BOARD

Replaced the IASC.
Intended to bring about greater TRANSPARENCY and a higher degree of
COMPARABILITY in financial reporting.

1. IFRS=PFRS
2. IAS = PAS
3. IC = PI

Answer Problems 1-1 to 1-6 on pages 22-30