Financial Accounting

Report No. 01:

The Accountancy Profession

Reported by:
Cruz, Nadia Kristine
June 17, 2023
Learning Objectives:
1. To understand the definition and concepts of accounting.
2. To know how accounting serves as an information system.
3. To identify the overall objective of accounting.
4. To describe the practice of the accountancy profession in the
Philippines.
5. To understand the Continuing Professional Development in the field of
accounting.
6. To know the meaning of generally accepted accounting principles.
7. To explain the need for accounting standards.
8. To identify the standard-setting body in the Philippines.
9. To describe the creating of the International Accounting Standards
Board.
10. To know the meaning of IFRS.
At the end of the presentation, we should be able to
define and answer the ff questions:
1. Define accounting.
2. What are the important points made in the definition of accounting?
3. Explain “identifying” as a component of accounting.
4. What are transactions?
5. Distinguish external transactions and internal transactions.
6. When is a transaction accountable or quantifiable?
7. Explain “measuring” as a component of accounting?
8. What are the measurement bases used in accounting?
9. Explain “communicating” as component of accounting.
10. Explain recording, classifying and summarizing in relation to the communicating component
of accounting.
11. Explain why accounting has been called the “universal language of business”.
12. Explain accounting as an information system.
13. What is the overall objective of accounting?
14. Describe the accountancy profession.
15. What is R.A. No. 9298?
16. Explain the limitation of the practice of public accountancy.
The Committee of Accounting Terminology of the
American Institute of Certified Public Accountants
defines accounting as follows:

• 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 has several components, namely:
• Identifying as the analytical component (to analyze, interpret, and create reports
based on your company's chart of accounts).
• Measuring as the technical component (based on a standardized analysis of the
historical financial performance of an organization).
• Communicating as the formal component (Communicating as the formal
component).
Identifying is an accounting process for the recognition
or non recognition of business activities as “accountable”
events.
• Accountable events- Events which have an effect on assets, liabilities, and
owner’s equity.
• Not all business activities are accountable. Example, hiring of emlpoyees, death
of the entity president.
• The subject matter of accounting is economic activity or the measurement of
economic resources and economic obligations. Only economic activities are
recognized in accounting.
• External event- Economic events involving one entity and another entity.
Measuring. This accounting process is the assigning of
peso amounts to the accountable economic transactions
and events.
• If accounting information is to be useful, if must be expressed in terms of a
common financial denominator.
• The Philippine peso is the unit of measuring accountable economic transactions.
• The measurement bases are historical cost, current cost, realizable value and present
value.
• Historical cost is the most common measure of financial transactions.
Communicating. The process of preparing and distributing
accounting reports to potential users of accounting
information.
• The communicating process is the reason why accounting has been called the “universal
language of business”.
• Implicit in the communication process are the recording, classifying and summarizing
aspects of accounting.
• Recording or journalizing is the process of systematically maintain a record of all
economic business transactions after then have been identified and measured.
• Classifying is the sorting or grouping of similar and interrelated economic transactions
into their respective classes. This is accomplished by posting to the ledger.
• Ledger- Group of accounts which are systematically categorized into assets, liabilities,
equity, income and expenses.
• Summarizing is the preparation of financial statements which include the statement of
financial position, income statement, statement of comprehensive income, statement of changes
in equity and statement of cash flows.
Accounting as an information system.
• Accounting is an information system that measures business activities, processes
information into reports and communicates the reports to decision makers.
• A key product of this information system is a set of financial statements – the
documents that report financial information about an entity to decision makers.
• Financial reports tell us how well an entity is performing in terms of profit and loss and
where it stands in financial terms.
Overall objective of accounting.
• The overall objective of accounting is to “provide quantitative financial
information about a business that is useful to statement users particularly
owners and creditors, in making economic decisions”.
• An accountant’s primary task is to supply financial information so that the
statement users could make informed judgement and better decision.
• The essence of accounting is decision-usefulness.
The Accountancy Profession
• R.A. 9298 a.k.a Philippine Accountancy Act of 2004- The law regulating the
practice of accountancy in the Philippines.
• The Board of Accountancy is the body authorized by law to promulgate rules
and regulations affecting the practice of the accountancy profession in the
Philippines.
• CPA examination is held twice a year, one in May and one in October.
Limitation of the practice of public accountancy
• Single practitioners and partnerships for the practice of public accountancy shall be
registered certified publica accountants in the Philippines.
• A certificate of accreditation shall be issued to certified public accountants in public
practice only upon showing in accordance with rules and regulations promulgated
by the Board of Accountancy and approved by the Professional Regulation
Commission that such registrant has acquired a minimum of three years of
meaningful experience in the any of the areas of public practice including taxation.
• The Securities and Exchange Commission shall not register any corporation
organized for the practice of public accountancy.
• CONTINUING PROFESSIONAL DEVLOPMENT (CPD)
• Republic Act No. 10912 is the law mandating and strengthening the
continuing professional development program for all regulated
professions, including the accountancy profession.
• CPD credit Units. Refers to the CPD credit hours required for the
renewal of CPA license and accreditation of a CPA to practice the
accountancy profession every three years. CPA shall be required to
comply with 120 CPD credit units in a compliance period of three
years. Excess credit units earned shall not be carried over to the next
three-year period, except credit units earned for masteral and doctorate
degrees.
• Exemption from CPD. A CPA shall be permanently exempted from
CPD requirements upon reaching the age of 65 years.
• GAAP represent the rules, procedures, practice and standards followed in the preparation and
presentation of financial statements. GAAP are like laws that must be followed in financial reporting.
• IASC is now replaced by
IFRS in 2001
• What is IFRS? • The goal of one uniform and globally
accepted financial reporting standards.
• The Philippines is fully compliant with
IFRS effective January 2005, a process
which was started back in 1997. The ff
factors influences the decision to
implement IFRS:
• A. Improvement of international
accounting standards or removal of
free choices of accounting treatments.
• B. Increasing recognition of
international accounting standards by
the World Bank, Asian Development
Bank and the World Trade
Organization.
• PFRS refer to a common set of accounting principles,
standards, and procedures issued by the International
Financial Reporting Standards (IFRS).
• It corresponds to International Financial Reporting Standards.
• Philippine Accounting Standards (PAS) corresponds to
International Accounting Standards (IAS).
The Accountancy
Profession.