CONCEPTUAL FRAMEWORK AND ACCOUNTING STANDARDS

What is Accounting?
 Service activity
 Provide quantitative information (financial in nature) about economic entities to be used in making decisions.
 Art of recording, classifying & summarizing money transactions and events
 Process of identifying, measuring & communicating economic information

Accounting is about:
1. Quantitative information
2. Financial in nature
3. Useful in decision making

Components of accounting:
a. Identifying as the analytical component Recognition or nonrecognition of business activities as
“accountable” events
Recognize activities if it affects:
 Assets
 Liabilities
 Equity

External and Internal Transactions

b. Measuring as the technical component
c. Communicating as the formal component
External (exchange transaction) – one entity and another entity
Example:
a. Purchase of goods from supplier
b. Borrowed money from bank
c. Sold goods to customer
d. Payment of salaries to employees
e. Payment of taxes to gov’t
Internal transactions – entity only (within itself)
Example:
a. Production – raw materials to products
Casualty – unanticipated loss from fire, flood, earthquake
Assigning of peso amounts
Philippines peso – unit of measurement
Historical cost (Original cost)
Current Value (fair value, value in use, Measurement bases
fulfillment value & current cost)
Process of preparing & distributing reports to users
Recording (Journalizing) – systematically maintaining
records of all transactions
Classifying (Posting to ledger) – sorting or grouping similar
transactions
Summarizing – preparation of financial statements

Financial Reports / Statements

 Documents that report financial information about the entity
 How well the entity performs

Objective of accounting
 Provide financial information that is useful to owners and creditors
 Supply financial information
 Decision-usefulness

Republic Act No. 9298

 Philippine Accountancy Act of 2004
 Law regulating the practice of accountancy
 Must finish Bachelor of Science in Accountancy
Board of Accountancy
 Promulgates laws and regulations affecting practice of accountancy profession
 Responsible for preparing & grading CPALE
 Twice a year examination: May & October