ACC 111 - Financial Accounting and Reporting

UNIVERSITY OF MINDANAO
Tagum College
Department of Accounting Education

Accountancy Program
Physically Distanced but Academically Engaged
Self-Instructional Manual (SIM) for Self-Directed Learning (SDL)
Course/Subject: ACC 111 – Financial Accounting and Reporting
Name of Teacher: Johnvir P. Torreon, CPA
THIS SIM/SDL MANUAL IS A DRAFT VERSION ONLY; NOT FOR

REPRODUCTION AND DISTRIBUTION OUTSIDE OF ITS INTENDED USE.
THIS IS INTENDED ONLY FOR THE USE OF THE STUDENTS WHO ARE
OFFICIALLY ENROLLED IN THE COURSE/SUBJECT.
EXPECT REVISIONS OF THE MANUAL.
Table of Contents
Page
Part 1. Course Outline and Policies ...................................................... 6

Part 2. Instruction Delivery
Course Information ……………………………………………………… 11
CC’s Voice .............................................................................…….. 11
Course Outcomes ........................................................................... 11
Big Picture Week 1-3: Unit Learning Outcomes ................................ 11
Big Picture in Focus:ULOa ..…………………………………….……… 12
Metalanguage .......................................................................... 12
Essential Knowledge ............................................................... 12
Self-Help .................................................................................... 31
Let’s Check .................................................................................... 31
Let’s Analyze ......................................................................... 32
In a Nutshell .................................................................................... 33
Q&A List .................................................................................... 34
Keywords Index ......................................................................... 34
Big Picture in Focus:ULOb ……………………………………………… 34
Metalanguage .......................................................................... 34
Self-Help .................................................................................... 40
Let’s Check .................................................................................... 40
Let’s Analyze ......................................................................... 42
In a Nutshell .................................................................................... 42
Q&A List .................................................................................... 43
Keywords Index ......................................................................... 43
Big Picture in Focus:ULOc ……………………………………………… 43
Metalanguage .......................................................................... 43
Self-Help .................................................................................... 45
Let’s Check .................................................................................... 46
Let’s Analyze ......................................................................... 47
In a Nutshell .................................................................................... 47
Q&A List .................................................................................... 48
Keywords Index ......................................................................... 48
Big Picture in Focus:ULOd …………………………………………… 49
Metalanguage .......................................................................... 49
Self-Help .................................................................................... 56
Let’s Check .................................................................................... 56
Let’s Analyze ......................................................................... 58
In a Nutshell .................................................................................... 59
Q&A List .................................................................................... 60
Keywords Index ......................................................................... 60
Big Picture in Focus:ULOe …………………………………………… 60
Metalanguage .......................................................................... 60
Self-Help .................................................................................... 62
Let’s Check .................................................................................... 62
Let’s Analyze ......................................................................... 63
In a Nutshell .................................................................................... 64
Q&A List .................................................................................... 65
Keywords Index ......................................................................... 65
Big Picture Week 4-5: Unit Learning Outcomes .............................. 65

Big Picture in Focus:ULOa ………………………………….…………… 65
Metalanguage ............................................................................ 65
Essential Knowledge ................................................................. 66
Self-Help ...................................................................................... 75
Let’s Check ...................................................................................... 75
Let’s Analyze ............................................................................ 77
In a Nutshell ...................................................................................... 79
Q&A List ...................................................................................... 80
Keywords Index ........................................................................... 80

Big Picture in Focus:ULOa ……………………………………………… 80
Metalanguage ........................................................................... 80
Essential Knowledge ................................................................ 80
Self-Help ...................................................................................... 89
Let’s Check ...................................................................................... 89
Let’s Analyze ........................................................................... 91
In a Nutshell ...................................................................................... 92
Q&A List ...................................................................................... 93
Keywords Index ........................................................................... 93

Metalanguage ............................................................................ 94
Self-Help ...................................................................................... 101
Let’s Check ...................................................................................... 101
Let’s Analyze ........................................................................... 103
In a Nutshell ...................................................................................... 104
Q&A List ...................................................................................... 105
Keywords Index ........................................................................... 105
Metalanguage ............................................................................ 105
Self-Help ...................................................................................... 109
Let’s Check ...................................................................................... 109
Let’s Analyze ........................................................................... 111
In a Nutshell ...................................................................................... 114
Q&A List ...................................................................................... 115
Keywords Index ........................................................................... 115
Big Picture Week 10-12: Unit Learning Outcomes .......................... 115
Metalanguage ............................................................................ 115
Self-Help ...................................................................................... 120
Let’s Check ...................................................................................... 121
Let’s Analyze ........................................................................... 122
In a Nutshell ...................................................................................... 123
Q&A List ...................................................................................... 124
Keywords Index ........................................................................... 124
Metalanguage ............................................................................ 124
Self-Help ...................................................................................... 132
Let’s Check ...................................................................................... 132
Let’s Analyze ........................................................................... 133
In a Nutshell ...................................................................................... 134
Q&A List ...................................................................................... 135
Keywords Index ........................................................................... 135

Metalanguage ........................................................................... 136
Self-Help ...................................................................................... 139
Let’s Check ...................................................................................... 139
Let’s Analyze ........................................................................... 140
In a Nutshell ...................................................................................... 142
Q&A List ...................................................................................... 143
Keywords Index ........................................................................... 143
Metalanguage ........................................................................... 143
Self-Help ..................................................................................... 146
Let’s Check ..................................................................................... 147
Let’s Analyze .......................................................................... 148
In a Nutshell ..................................................................................... 149
Q&A List ..................................................................................... 150
Keywords Index .......................................................................... 150
Big Picture in Focus:ULOc ..…………………………………… 150
Metalanguage .......................................................................... 150
Self-Help ..................................................................................... 153
Let’s Check ..................................................................................... 153
Let’s Analyze .......................................................................... 154
In a Nutshell ..................................................................................... 155
Q&A List ..................................................................................... 156
Keywords Index .......................................................................... 156

Metalanguage ........................................................................... 156
Self-Help ..................................................................................... 161
Let’s Check ..................................................................................... 162
Let’s Analyze .......................................................................... 164
In a Nutshell ..................................................................................... 165
Q&A List ..................................................................................... 166
Keywords Index .......................................................................... 166
Big Picture in Focus:ULOb …………………………………………….. 166
Metalanguage .......................................................................... 166
Self-Help ..................................................................................... 173
Let’s Check ..................................................................................... 173
Let’s Analyze .......................................................................... 175
In a Nutshell ..................................................................................... 176
Q&A List ..................................................................................... 177
Keywords Index .......................................................................... 177
Big Picture Week 17-18: Unit Learning Outcomes ......................... 177

Big Picture in Focus:ULOa …………………………………………….. 177
Metalanguage .......................................................................... 177
Self-Help ..................................................................................... 191
Let’s Check ..................................................................................... 192
Let’s Analyze .......................................................................... 193
In a Nutshell ..................................................................................... 195
Q&A List ..................................................................................... 196
Keywords Index .......................................................................... 196
Part 3. Course Schedule .......................................................................... 196

Online Code of Conduct ............................................................... 199
Monitoring of OBD and DED............................................................. 200
Course Outline: ACC 111 – Financial Accounting and
Reporting
Course Coordination: Johnvir P. Torreon, CPA

Email: torreonjohnvir@umindanao.edu.ph
Student Consultation: By appointment
Mobile: 0950-477-8703/ 0965-157-6421
Phone: None
Effectivity Date: June 2020
Mode of Delivery Distance Education Delivery (DED)
Time Frame: 54 Hours
Student Workload: Expected Self-Directed Learning
Requisites: None
Credit: 6
Attendance Requirements: For online sessions: minimum of 95% attendance
For 1-day on campus/onsite review: 100%attendance;
for 1-day on-campus/on-site final exam: 100%
attendance
Course Policy
Areas of Concern Details
Contact and Non-contact Hours This 6-unit course self-instructional manual is

designed for distant learning mode of instructional
delivery with scheduled face to face or virtual
sessions which can be done using LMS,
traditional contact (via cellphone/telephone and
SMS) and social media platforms (e.g. email,
private messenger, Facebook, Viber, WhatsApp,
Line, Zoom and other similar applications)
depending on what is available for both teachers
and students.
The expected number of hours will be 54 including

the face to face or virtual sessions. The face to
face sessions shall include the summative
assessment tasks (exams) since this course is
crucial in the licensure examination for Certified
Public Accountant.
Submission of assessment tasks shall be on the

3rd, 5th, 7th, 9th, 11th, 13th, 15th and 18th week of the
First Semester Class for School Year 2020-2021.
Moreover, specific dates of submission are
specified in the Course Schedules Section of this
manual. The assessment paper shall be attached
with cover page including the title of assessment
task (if the task is performance), the name of the
course coordinator, date of submission and name
of the student. The document shall be submitted
to the course coordinator thru LMS (Schoology),
email, FB messenger or thru any means
accessible to students. It is also expected that you
Assessment Task Submission already paid your tuition and other fees before the
submission of the assessment task.
If the assessment task is done in real time through

the features of LMS accessible to students, the
schedule shall be arranged ahead of time by the
course coordinator.
Since this course is included in the licensure

examination for CPAs, you will be required to take
the Multiple Choice Question Exam inside the
school. This should be scheduled ahead of time
by your course coordinator. This is non-negotiable
for all licensure-based programs.
To ensure honesty and authenticity, all
assessment tasks are required to be submitted
thru Turnitin with a maximum similarity index of
30% allowed. This means that if your paper goes
beyond 30%, the students will either opt to redo
her/his paper or explain in writing addressed to the
course coordinator the reasons for similarity. In
addition, if the paper has reached more than 30%
Turnitin Submission
similarity index, the student may be called for a
(if necessary)
disciplinary action in accordance with the
University’s OPM on Intellectual and Academic
Honesty.
Please note that academic dishonesty such as

cheating and commissioning other students or
people to complete the task for you have severe
punishments (reprimand, warning, expulsion).
The score for an assessment item submitted after

the designated time on the due date, without an
approved extension of time, will be reduced by 5%
of the possible maximum score for that
assessment item for each day or part day that the
Penalties for Late assessment item is late.
Assignments/Assessments
However, if the late submission of assessment
paper has a valid reason, a letter of explanation
should be submitted and approved by the course
coordinator. If necessary, you will also be required
to present/attach evidences.
Assessment tasks will be returned to you one (1)

week after the submission. This will be returned
by LMS, email, FB messenger or any other
communication platforms available for both
teacher and students.
Return of Assignments/
Assessments For some group assessment tasks, the course
coordinator will require some or few of the
students for online or virtual sessions to ask
clarificatory questions to validate the originality of
the assessment task submitted and to ensure that
all the group members are involved.
You should request in writing addressed to the
course coordinator his/her intention to resubmit an
assessment task. The resubmission is premised
Assignment Resubmission on the student’s failure to comply with the
similarity index and other standards or other
reasonable circumstances e.g. illness, accidents,
and financial constraints.
You should request in writing addressed to the

program head your intention to appeal or contest
the score given to an assessment task. The letter
should explicitly explain the reasons/points to
contest the grade. The program head shall
Re-marking of Assessment communicate with the students on the approval or
Papers and Appeal disapproval of the request.
If disapproved by the course coordinator, you can

elevate your case to the program head or the dean
with the original letter of request. The final
decision will come from the Dean of College.
You shall be evaluated based on the following:
Assessment methods Weights

EXAMINATIONS 60%
A. Exam – 1st to 7th exam 35%
B. Final Exam 25%
CLASS PARTICIPATIONS 40%
Grading System C. Quizzes 10%
D. Assignments 5%
E. Research/Requirement 15%
F. Oral recitation 10%
Total 100%
Submission of the final grades shall follow the

usual University system and procedures.
Preferred Referencing Style Use the general practice of APA 6th edition.
The course coordinator shall create Group Chat in

FB messenger for the class. Each student shall
Student Communication
create a Schoology account. The course
coordinator will then provide a Schoology access
code to the students for them to enroll to have
access to the materials and resources of the
course. All communication formats: chat,
submission of assessment tasks, request, etc.
may be done thru any platforms available for the
convenience of teacher and students.
You can also meet the course coordinator in

person through the scheduled face to face
sessions to raise your issues and concerns.
Dr. Gina Fe G. Israel, EdD

Contact Details of the Dean Email: deansofficetagum@umindanao.edu.ph
Mobile: 09099942314
For Accountancy:
Mary Cris L. Luzada, CPA, MSA

Email: luzadacris@umindanao.edu.ph
Mobile: 09228321794
Contact Details of the Program
Head
For Accounting Technology:
Maria Teresa A. Ozoa, CPA, MBA

Email: ozoamateresa@umindanao.edu.ph
Mobile: 09472657119
Students with special needs shall communicate

with the course coordinator about the nature of his
or her special needs. Depending on the nature of
the need, the course coordinator with the approval
of the program coordinator may provide
Student with Special Needs
alternative assessment tasks or extension of the
deadline of submission of assessment tasks.
However, the alternative assessment tasks
should still be in the service of achieving the
desired course learning outcomes.
Clarissa R. Donayre, MSLS

Library Contact Details
Chief Librarian
Email: lictagum@umindanao.edu.ph
Mobile: 0927-395-1639
Rochen D. Yntig, RGC

Head
Email: chenny.yntig@gmail.com
Number: 0932 7717 219
Mersun Faith A. Delco, RPm

Well Being Welfare Support
Psychometrician
Help Desk Contact Details
Email: mersunfaithdelco@gmail.com
Number: 0927 6086 037
Alfred Joshua M. Navarro

Facilitator
Email: is40fotb@gmail.com
Number: 0977 3416 064
Course Information – see/download course syllabus posted in

Schoology or other available platforms
CC’s Voice: Hello dear students! Welcome to this course ACC 111: Financial
Accounting and Reporting. This course is the part of the board exam
subject FAR (Financial Accounting and Reporting). As you geared
towards the completion of the degree, this course will enlighten you
to the task of an accountant employed in preparation and
presentation of financial statement of the business entities. This
course will discuss topics anchored in sole proprietorship type of
businesses, illustrating the concepts, ideas and definition of
accounting, preparing and presenting financial statements using the
accounting cycle in a services concern business, merchandising
concern business and manufacturing concern business, elaborate
the concepts, ideas, definition and accounting for partneship entities
and introduces the topics about the basic of corporation accounting.
So, prepare yourself for another fruitful learning experience!
Course outcome: The Accountancy profession covers four sectors namely: public
practice, government, academe and commerce and industry
(private sector). A CPA employed in the private usually holds a staff
position, who is responsible for providing relevant cost information
that is useful in making economic decisions. Thus, in this course
you will be immersed on the topics related to the manufacturing
concern businesses, Job Order Costing system, Process costing
system and other topics related to cost accounting.
Let us begin!
Big Picture
Week 1-3: Unit Learning Outcomes (ULO): At the end of the unit, you are expected to
a. Define accounting, summarize the evolution of accounting and the

salient portion of R.A. 9298 “The Accountancy Act of 2004” and the
Code of Ethics and explore its role in the business;
b. Describe and define the fundamental business model, different forms
and activities of business organization, the purpose, phases and
branches of accounting and the career opportunities of accountants in
the industry;
c. Identify the fundamental concepts and principles;
d. Define and describe the accounting information system, the elements
of financial statements, the account titles used in recording the
account(T-Account), the rules of debit and credit and the double-entry
system;
e. Describe, analyze and distinguish the effect of business transactions
on the financial transaction worksheet.
Big Picture in Focus: ULOa. Define accounting, summarize the evolution

of accounting and the salient portion of R.A. 9298 “The Accountancy Act of
2004” and the Code of Ethics and explore it’s role in the business;
Metalanguage
For you to demonstrate ULOa, you will need operational understanding of the terms
enumerated below.
Accounting is the bridge of communication between business and its owners.
Essential Knowledge
To perform the aforesaid big picture (unit learning outcomes), you need to fully
understand the following essential knowledge laid down in the succeeding pages. Please
note that you are not limited to exclusively refer to these resources. Thus, you are
expected to utilize other books, research articles and other resources that are available
in the university’s library e.g. ebrary, search.proquest.com etc., and even online tutorial
websites.
1. DEFINITION OF ACCOUNTING
Accounting a system that measures business activities, processes that information into
reports & communicates the results to decision-makers. This is needed by businesses
as the owners and management of the business needs to know about the business
earnings and spending thus, accounting will provide this to them. This is considered as
the language of business. It is given emphasis and definition by various organizations in
the past and today. Here are some of the definition given.
Accounting Standards Council (1983) define that 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 decisions.
Moreover, American Accounting Association (1966) defines that accounting is a process

of identifying, measuring and communicating economic information to permit informed
judgments and decisions by the users of the information.
Furthermore, Financial Accounting Standards Board (1978) defines that accounting is
an information system that measures, processes and communicates financial
information about an economic entity.
Finally, American Institute of Certified Public Accountants (1953) defines that accounting
is an 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.
2. EVOLUTION OF ACCOUNTING
Accounting History
This is important to accounting pedagogy, policy and practice and works on the effect of
the evolution to the environment. The learnings of this will make us understand better the
past, the present and the possible future of accounting. It is the study of how accounting
thoughts, practices and institutions evolves to respond the changes in the environment
and societal needs.
The Primitive Accounting

The origin of keeping accounts is evidenced by clay tokens, cones, disks, spheres and
pellets in 8500 B.C. in Mesopotamia(Iraq). Bullae is the tokens used to deliver products,
this are clay balls that are broken on delivery and this are called as the first known bill of
lading.
Wet clay tablets replaces the bullae as this is the origin of record keeping using the art of
writing. These re also used by Babylonia(3,600 B.C.) in recording payments of wages to
keep track of the costs of labor and materials in building structures (e.g. Great Pyramids
of Egypt)
Scribe on a small mound of clay is used by Babylonia(2286-2242 B.C.) where the

signatures of the parties affixed in the mound of clay and allow them to dry. It contains
the record about the agreed-price of the transaction, this is a sealed memorandum given
by the seller to the buyer as required by the law based on the Code of Hammurabi, before
the transaction become enforceable.
These evidenced that accounting is one of the humanities oldest skills. The tablets are
used in collections of writing about how many bushels of grain in the warehouse and who
brought them and how much taken to the king as his share. Thus, tax collecting activity
is linked to accounting in ancient times.
The presence of bookkeeping is attributed to various factors that includes the following
a. The invention of writing;
b. The introduction of Arabic numerals;
c. The decimal system;
d. The diffusion of knowledge of algebra;
e. The presence of inexpensive writing materials;
f. The rise of literacy; and
g. The existence of a standard medium of exchange.
The seven preconditions for emergence of systematic bookkeeping:
1. Art of Writing;
2. Arithmetic;
3. Private Property;
4. Money;
5. Credit;
6. Commerce; and
7. Capital.
Middle Ages
Arabic numerals are used that allow columns of numbers to be added and subtracted in
the trade of Near East to Northern Italy. The use of credit was prevalent and a semblance
of an international banking system was also functioning. These happen during 11th to 13th
centuries.
The use of knotted cords of different length and colors that are called quipu in keeping
accounting records in Inca Empire and west coast of South America in 11th to 14th
centuries.
In 13th to 15th centuries, the developments of more formal account-keeping methods are
discovered and attributed to the merchants and bankers of Florence, Venice and Genoa.
Double-entry bookkeeping is a result of continued efforts to meet the need of trade that
changing over times. It was a decisive event in European economic history.
The Florence Approach

The Renaissance Florentine markets were using a combination of formalization in the
forms of accounts books and double-entry bookkeeping and the informal social networks
was constructed out of the surrounding rules of Florentine sociality that living life and
doing business is an extension to each other. Business was conducted on logic of
friendship that turns instrumental and emotional. Accounts books were consistent with
social change and made it formalized and easier. The commercial credit exploded that
required a system of recordings.
Florence, France provides the earliest evidence of business bookkeeping by bank ledger
fragments in 1211(transcribed in 1887 by Pietro Santini). In Tuscany, Italy in 13th century
the development of accounting evidenced by account-books or extracts and there were
within thw framework of the narrative and paragraph type of accounting record (a sezioni
sovrapposte), and perhaps derive from charge and discharge format used in public
accounts. This system was still primitive the accounts were not related to special ways of
recording for equality of entries and balancing of the accounts was lacking.
Renieri or Rinieri was the first who use ledgers that evidenced as emergence of double-
entry bookkeeping. Followed by the use of Fini and Brothers (1296-1305) and Giovanni
Farolfi & Company (1299-1300) of the same system of record keeping.
Giovanno Farolfi and Company

A firm of Florentine merchants that had head office at Nimes in Languedoc, in the
Kingdom of France. The ledger they used provides information about branch of a salon.
The records are incomplete but they show details of double-entry bookkeeping that
includes debit and credit and duality o entries. This is known as the oldest existing
example of double-entry system.
Amatino Manucci
The inventor of double-entry bookkeeping. He manage to construct a comprehensive and
fully-articulated set of double-entry records with the regular balancing procedures on
closure of the General Ledger.
He used 5 ledger – 1. General ledgers, 2. Two merchandise ledgers, 3. Expenses ledger

and Cash book (with white ledger as a sixth) and there were at least two subsidiary books.
He gave importance to the financial control aspect as they subdivided the books logically
and segregate cash and goods accounts from the main ledgers. Provide a full records of
debtors, creditors, expenses, profits, interest and partner’s drawings as well as the
statement of account to the head office at Nimes and provides 15% expected rate of
return on capital employed.
The Method of Venice

Fra. Luca Pacioli
A Franciscan friar and a calebrated mathematician, is generally associated with the
introduction of double-entry bookkeeping. He published a book in 1494 titled “Summa de
Arithmetica, Geometria, Proportioni et Proportionalita” or “Everything about Arithmetic,
Geometry, Proportions and Proportionality”, which includes “Details of Calculations and
Recordings” or “Particularis de Computis et Scripturis”. The book describes the double-
entry bookkeeping. The treatise reflected the practices of Venice at the time that became
the Method of Venice or Italian method. Therefore, he describe what were prevalent
accounting practices of the day.
He did not claim in developing the art of bookkeeping. He has regarded as the father of
double-entry accounting. He stated the purpose or bookkeeping was to give the trader
without delay information as to his assets and liabilities. He also advised the computation
of periodic profit and the closing of the books. He also said that it is always good to close
the books each year, especially if you are in a partnership with others as frequent
accounting makes long friendships.
Geothe referred the double-entry bookkeeping as the one of the finest discoveries of
human intellect, a famous German poet and dramatist.
Werner Sombart believed that double-entry bookkeeping is born of the same spirit as the
system of Galileo and Newton. He is an eminent economist-sociologist.
Savary and Napoleonic Commercial Code

Starting 1673 in France, the development of earliest systematized form of accounting
regulation in continental Europe. The government now regulates the submission of annual
fair value statement of financial position to protect the economy and prevent bankruptcies.
The legal requirement for business to keep accounting records was first introduced in the
Ordonnace de Commerce of 1673 during the reign of Louis XIV which was put through
by Jean-Baptiste Colbert.
Napoleon Bonaparte
Establish the Napoleonic Code or the Code Napoleon is the French civil code in 1804
and was adopted in 1807 that influenced the bookkeeping provisions of commercial law
through continental Europe, Francophone Africa and beyond.
Jacques Savary (1622-1690)

The principal author of the French Commercial Code called the Savary Code. The elder
in an early accounting text known as the lower-of-cost-or-market principle and this is the
oldest formulation of this principle. The text stated that “If this merchandise is starting to
deteriorate, or go out of style, or that which one judges that he could find at the factory or
wholesaler at 5% less, it must be reduced to this price”. This become the inventory
valuation required by the Code of Commerce in France (1673), in Prussia (1794), the
German Commercial Code (1884).
Nicolas Petri
The first person that group similar transactions in a separate record and enter the monthly
totals in the journal, rather than recording all transaction seriatim or in series in 17th
century.
Benjamin Workman
The person publish the earliest known American Accounting textbook entitled The
American Accountant in 1769.
Industrial Revolution
During 18th century, the accounting profession was tied up to the rise of modern industrial
society in Britain. While during 19th century, the flurry of textbooks and handbooks on
accounting had slowly appeared, reflecting the impact of Industrial Revolution.
This occurred in England in mid of 18th to mid of 19th century the change in the method of
producing goods from handicraft method to factory system and the problem of costing of
large volume of products occurred. The emergence of the specialized field of cost
accounting to meet the need of analysing the various costs of the production.
Corporate Organization
The business expanded and need large amount of capital in building factories and
purchase of machinery. This develop to a new form of business organization the
corporation and then the accounting developed as the growth of corporations as the
managers of the business are not corporate owners and shareholders. The managers will
create a best accounting system to report to the owner the result of the business
operation. This leads to the need of independent report for reliability of the management’s
financial representations.
Accountancy in Britain as late as 1830s was still an indeterminate calling and person
engage in accounting not only made simple accounts but financially necessary to act as
auctioneers, appraisers, agents, debt collectors and others. As the accountancy
profession becomes legislated it reaches to the shore of United States of America as the
British businessmen investments into the land of opportunities.
Railroads
The heavy users of debt financing in late 1800s. The first American firms that issue
balance sheet to absentee creditors. The US railroad system has accumulated an
investment of $4.6 billion that is roughly equivalent 40% of the American economy’s
annual output.
Depreciation was formally given consideration as the railroads companies’ uses higher
value and longer-live equipment such as locomotives, rail cars and track, than the
previous established companies. The problem about the lost presented in the financial
reports for the wear and tear of the equipment as no clear cut how to recognize the lost
of productive capacity thus, needing to be replaced.
The concept of depreciation was largely ignored but when the 1909 US corporate income
tax law permitted this to be deducted from depreciation charges for the calculation of
taxable income. In 20th century this is used by management to smooth the earnings report
of the company in the sense that if the company is having high income the high
depreciation charges will be recognized and vice versa. In the Journal of Accountancy in
1912, this concept was complained as this will result to an abnormal fluctuations of profits
thus, creates the reports unreliable due to inadequacy and overcharging of depreciation.
United States Steel

The company that published a consolidated financial statements as of Dec 31, 1902 on
March 12, 1903, together with Price Waterhouse & Company’s (PW) assurance that they
were audited and found correct. It is the first billion-dollar corporation controlled 75% of
the US steel business. The amalgamation of various steel producers at this time.
The existing complex relationship of the US Steel and its many subsidiaries such as PW
managing partner Arthur Lowes Dickinson believe that to adequately inform the
stockholders about the financials and non-financials is through consolidation of accounts.
This became the landmark of the accounting theory. This also became the most complete
and circumstantial report ever issued by any great American corporation written by
Scientific American.
Eugen Schmalenbach and The Model Chart of Accounts

Schmalenbach 1873-1955 was a German academic and economist. A professor in
University of Cologne and a contributor to German language journals on economics,
business management and financial accounting subjects. He was born in Halver, a
graduate in Leipzig College of Commerce fin 1989.
He was prostrated and repeatedly failed in comparing meaningfully the financial data
available from different companies in early 1920s. This lead to the publication of a book
entitled “The Model Chart of Accounts”. This book was the foundation of all subsequent
developments in uniform accounting in Germany and basis for the efforts of other
European countries.
He claimed that the important information can be gained from the firms accounts. The
result of the company is more reliable, useful and important when it shows the through-
flows rather than balances. He termed “Dynamic Balances” to the account the promptly
and regularly prepared and presented to gauged the external changes and internal
efficiencies and facilitate Inter-firm comparison.
Imposition of Income Tax and Conflicts with Financial Accounting

Xin Dynasty’s Emperor Wang Mang instituted an unprecendented tax at a rate of 10% of
profits for professionals and skilled labor, during the year 10 CE.
December 1798 budget to pay for weapons and equipment in preparation of Napoleonic
wars of William Pitt the younger of the Britain levied an income tax. The 1862 Union
Government established the Bureau of Internal Revenue to assess the personal and
corporate income tax to help finance the civil war and in 1943 in America, to fund the civil
war the US congress passed the higher withholding tax rates to be collected.
In the Philippines, the Bureau of Internal Revenue was created through the passage of
Reorganization Act No. 1189 dated July 2, 1904 and the bureau was formally organized
and made operational under the secretary of finance.
The differences of perspective of the financial accounting and tax accounting produces
conflicts as the financial accounting is conservative and it's about matching efforts and
results while tax accounting is about improving the amount and timing of collections for
the government funding.
It is always noted that the Tax Code must be conformed in filing returns and in case of
conflicts with the Generally Accepted Accounting Principles (GAAP) and the tax code,
always the law shall prevail and the Tax Code shall followed accordingly.
Information Age
The first electronic spreadsheet was VisiCalc for Apple II written by Dan Brinklin and Bob
Frankston.
In recent years a tremendous advancement of information technology have further

revolutionized accounting practice. This advancements in the field of accounting will
surely bring disruptions as they say, information technology is it you either cope with it or
perish.
Those time consuming task that are done manually before can now be done with speed,
consistency, precision and reliability by the use of computers and software. The
abundance of accounting application will suite to the businesses’ various needs with the
proliferation of the netbooks and smartphones along with a mind-blogging array of
applications, surely, doing business will change and will become easier and produce a
reliable and useful information.
ASEAN 2015
This association was established in August 8, 1967 in Bangkok, Thailand. This

Association of Southeast Asian Nations (ASEAN) and founded by 5 Asian countries the
founding fathers of ASEAN are countries Indonesia, Malaysia, Philippines, Singapore and
Thailand. On January 7 1984 Brunei Darussalam join the association. On July 28, 1995
Lao PDR join association, while Myanmar joined on July 23, 1997 and on April 13, 1999
Cambodia joined the association thus making the association total member as of today
is 10 states.
The vision of ASEAN is “a stable, prosperous and highly competitive ASEAN Economic
Region in which there is a free flow of goods, services, investments and a freer flow of
capital, equitable economic development and reduced poverty and socio-economic
disparities.
The opportunities under the ASEAN is characterized by rising incomes. The three pillars
of ASEAN Community are the following: 1. ASEAN Political Security Community; 2.
ASEAN Economic Community; 3. ASEAN Socio-Cultural Community.
The ASEAN Economic Community is the blueprint and has four pillars and the following
are as follows: 1.) Single market and production base; 2.) Competitive economic region;
3.) Equitable economic development; and 4.) Integration into the global economy.
The priority integration sectors of ASEAN are the goods and services. Goods such as
agro-based, automotive, electronics and electrical, fisheries, rubber-based,
textile/clothing and wood-based. Services such as air transport, e-ASEAN, health care,
logistics and tourism.
ASEAN Framework Agreement on Services
ASEAN is a government to government operation. In realizing its dreams they

progressively entered into more legally binding and institutionalized agreement the
adoption of the ASEAN Trade in Goods Agreement (ATIGA), the ASEAN Comprehensive
Investment Agreement (ACIA) and the ASEAN Framework Agreement on
Services (AFAS).
This is will provide greater mobility to ASEAN professionals to provide other services in
the region. This will require rounds of negotiations to liberalize trade in services.
Mutual Recognition Arrangement and ASEAN Chartered Professional Accountants
This arrangement are contract between the National Accountancy Board (NAB) and/or
the Professional Regulatory Authority (PRA) from countries that have signed the General
Agreement on Trade in Services in 1995 allowing professional services providers
registered in signatory countries to be equally recognized in another signatory country.
This include the arrangement for engineering in 2005, nursing in 2006, architectural in
2007, medical, dental and surveying in 2009 and accountancy in 2014.
A professional accountant is eligible to apply through the Monitoring Committee of his

Country of Origin, to be registered as an ASEAN Chartered Professional Accountant
(ACPA) on the ASEAN Chartered Professional Accountant Register(ACPAR) subject to
certain qualification enumerated in the Article 4 of the ASEAN MRA on Accountancy
services signed last November 13, 2014.
The monitoring committee shall assess the accountants according to the Guidelines on
Criteria and Procedures in Appendix II of the MRA and guided by Appendix III in preparing
an Assessment Statement for the purpose of the application. It would then be submitted
the application to the ASEAN Chartered Professional Accountant Coordinating
Committee (ACPACC) and shall have the authority to confer and withdraw the title of
the ACPA.
ASEAN Qualifications Reference Framework (AQRF)
It is a common reference framework and functions as a device to enable comparison of

the qualifications of skilled labor across ASEAN Member States. This supports
recognition of qualification promote quality of education and learning and facilitate labor
mobility. It addresses all education and training, including formal, non-formal and informal
learning and considering that ASEAN Member States are at different stage of
development and each country is expected to voluntarily comply with the AQRF at their
own capacity and start the referencing process by 2016 and at the latest by 2018.
The development of this will specifically support the implementation all ASEAN Economic
Community Blueprint as it aims to facilitate the free flow of services through recognition
of professional qualification as well as the ASEAN Socio-Cultural Community Blueprint
that targets to establish national skills frameworks as an incremental approach towards
an ASEAN skill recognition framework.
The ASEAN Member States have agreed on 2018 as the target for the referencing of their
national qualifications frameworks with the AQRF (Former PRC Chair Teresita R.
Manzala).
3. REPUBLIC ACT NO. 9298 (THE PHILIPPINE ACCOUNTANCY ACT OF 2004)
Accountancy in the Philippines

On March 17, 1928, the accountancy profession is recognized profession in the
Philippines even though it is already practiced since the Spanish period as the Act No.
3105 was approved by the Legislature. Entitled “An Act Regulating the Practice of Public
Accounting; Creating the Board of Accountancy; Providing for Examination, for the
Granting of Certificates, and Registration of Certified Public Accountancy; for the
suspension or Revocation of Certificates; and for Other Purposes,”. This paved the way
for local accountants to do the work which, up to that time was performed by foreign
accountants in the country. In 1923, the first CPALE held in the Philippines and there
were 43 Certified Public Accountants and had rapidly grown to over 100,000 in 1999 and
as of today it doubled already.
Characteristics
Accountancy qualifies as a profession because it possesses the following attributes:
1. All members of the profession are CPAs that have earned an bachelor’s degree in
Accountancy and passed the CPA licensure examination.
2. CPAs have their own body language and uses terminology that are peculiar to the
profession.
3. CPAs adhere to a Code of Ethics
4. CPAs are member of a National Professional Organization (NPO) and that is
PICPA (Philippine Institute of Certified Public Accountants).
The roster of Philippine CPAs in the past and present:
William F. Larkins, the CPA in the Philippines that hold the first number in the registered
Certified Public Accountant.
Don Vicente Fabella, the first Filipino CPA in the United States in 1915, Founder of JRU
in 1919.
Dr. Nicanor Reyes, founder and first president of FEU (1928), registered the FEU on
Jan. 31, 1934. The FEU became the Institute of Accountancy, Business and Finance. he
died a hero during WW II.
Belen Enrile-Gutierrez, the first Filipina CPA and one of the original trustee of FEU in
1933.
Jaime Hernandez and Paciano Dizon, the first Filipino Auditor General of the
Commission on Audit.
Manuel Villar, Filipino tycoon, former Speaker of the House of Representatives, Senate
President and 2010 Presidential candidate of the Nacionalista Party.
Washington SyCip, the former president of the International Federation of Accountants

the only Asian held that position, founder and past Chairman of the leading accountancy
firm in the country the SGV & Co.,
Jose W. Diokno, former Senator of the Philippines and Secretary of Justice
Wenceslao Lagumbay, former Senator of the Philippines
Alberto Romulo, former Senator of the Philippines and Executive Secretary and
Secretary of Foreign Affairs.
Andres Soriano, founder of one of the country’s leading conglomerates
Manuel Morales, a full time member of the Monetary Board of the Bangko Sentral ng
Pilipinas during Ramos presidency, 41 years in private banking, 21 years were spent as
Board Chair of Manila Banking Corp. and Equitable Bank, Scholar at FEU under the Go
Kim Pah Scholarship of Equitable Bank (1988-1991) and at the same time a working
student at the same institution.
And many others who have been the cabinet members, heads of the government
agencies, chairmen and members of corporations and institutions, deans, heads and
professors in the academe and entrepreneurs.
The Big Five of the accounting world Arthur Andersen (defunct),

PricewaterhouseCoopers, Ernst & Young, KMPG, Deloitte Tohmatsu International. The
local accounting firms had tied-ups to them and the biggest local firm is the SGV and Co.,
the first that offers services outside the country and initiated the establishment of SGV
group composed of leading national firms in East and Southeast Asia.
The increasing complexity of the professional regulation and the developments of practice
has expand the Board of accountancy from Three members (a president and 2 members)
in Act 3105 in 1923 to six members (a chairman and 5 members) under Republic Act No.
5166 also known as “The Accountancy Act of 1967”, and another provision under
Presidential Decree No. 692 “The Revised Accountancy Law” in 1975, it became 7
members (a chairman and 6 members) and the recent amendments of the accountancy
profession is the passing the Republic Act No. 9298 known as “The Philippine
Accountancy Act of 2004” and still the same composition. This profession will be further
be having lot of provisions and amendments as to its regulations in the future and we will
see the result of this changes sooner.
The mandate to supervise, control and regulate the practice of accountancy with authority
and distinction was transferred to the stewardship of Professional Regulations
Commission (PRC).The Board of Accountancy has function to standardize and regulate
accounting education, conducting examination for registering CPAs and maintaining the
rules of the practice and has taken the lead in raising the standards of the profession to
a very high level of excellence and the following are evidenced to this developments:
1. Full computerized of the CPA Licensure Examination results and paving the way
for the current record on one-day release of examination results. The first among
the profession to achieve this.
2. Upgrading of the quality of accounting education. The board representation with
the DECS with the PRC adopt the standards for the organization and operation of
professional accounting programs leading to the prescription of a common
baccalaureate degree-Bachelor of Science n Accountancy. The board periodically
reviews the school curricula and syllabi to maintain their relevance, particularly in
the area of IT the board also initiated the continued monitoring of schools’
performance in the CPA examinations and recommendation of corrective
measures, as necessary.
3. Regulation of CPA firms and partnerships. The board moved to registration the
firms and partnerships of CPAs with both PRC and the board. They assure that
the staff and partners shall comply with standards and regulations.
4. Requirements of CPAs in civil service. The board made representation with the
Civil Service Commission to require that only CPAs be appointed as accountants
and auditors to hold allied positions in the government.
The Philippine Institute of Certified Public Accountants (PICPAs) is accredited PRC in

1975 as the bona fide professional organization representing CPAs in the country. The
board coordinated with PICPA to further strengthen the profession. PICPA worked for the
passage of The Accountancy Act of 1967; the issuance of the Code of Professional Ethics
in 1978; the issuance of guidelines in 1987 for the mandatory Continuing Professional
Education (CPE) programs for CPAs; the integration of the accounting profession
completed in 1987; the biennial oath-taking of new CPAs; standard setting for profession
through membership in the Accounting Standards Council or ASC (now Financial
Reporting Standards Council or FRSC) and Auditing Standard Practice Council or ASPC
(now Auditing and Assurance Standards Council); the declaration of the Accountancy
Week; the code of Ethics (effective June 30, 2008) and The Philippine Accountancy Act
of 2004 or the R.A No. 9298.
The R.A No. 9298 was signed into law by Presidential Gloria Macapagal-Arroyo on May
13, 2004. The law that repealed the Presidential decree No. 692, the Revised
Accountancy Law, which was enacted May 5, 1975. Some are sections are presented
below;
Section 4: Scope of Practice

The practice shall include, but not limited to, the following:
Practice in Public Accountancy
Persons that are partner or a staff member in an accounting and auditing firm, holding out
himself/herself as one skilled in the knowledge, science and practice of accounting, and
a qualified person to render professional service as a Certified Public Accountant (CPA);
or offering or rendering, or both, to more than one client on a fee basis.
Practice in Commerce and Industry

Person involved in decision making requiring professional knowledge in the science of
accounting, or when such employment or position requires a certificate holder of a
Certified Public Accountant.
Practice in Education/Academe
Person working in an educational institutions that are involved in teaching of accounting,
auditing, management advisory services, finance, business law, taxation and other
technically related subject. Provided, that law and taxation subject may be teach by the
members of the Integrated Bar of the Philippines.
Practice in Government
Person who holds or appointed to a position in an accounting professional group in
government, in government agencies, government owned and controlled corporations
including those performing proprietary functions, where decision making requires
knowledge in science of accounting in decision making requiring professional knowledge
in the science of accounting, or where the prerequisite of the eligibility from the civil
service is a certified public accountant.
Section 5: The Professional Regulatory Board of Accountancy and its Composition

Referred as Board, under the supervision and control of the Professional Regulation
Commission, referred as Commission, shall composed of a Chairman and Six (6)
members to be appointed by the President of the Philippines from the list of Three (3)
recommendees for each position and ranked by the Commission, from the list of Five (5)
nominees for each position submitted by the accredited national professional organization
of certified public accountants. The board shall elect a vice-chairman from among
themselves for a term of One (1) year.
The chairman shall preside in all meetings of the Board and in the event of a vacancy in
the office of the chairman, the vice chairman shall assume such duties and responsibilities
until such time as a chairman s appointed.
Section 6: Qualifications of Members of the Professional Regulatory Board

A member of the board shall possess the following qualifications at the time of his/her
appointment;
1. Must be a natural born citizen and a resident of the Philippines;
2. Must be a duly registered certified public accountant with at least 10 years of work
experience in any scope of practice of accountancy;
3. Must be of good moral character and must not have been convicted of crimes involving
moral turpitude;
4. Must not have any pecuniary interest, directly or indirectly, in any school, college,
university, or institution conferring an academic degree necessary for admission to
practice of accountancy or where review classes in the preparation for the licensure
examination or being offered or conducted, nor shall he/she be a member of the faculty
or administration therefore at the time of his/her appointment to the Board;
5. Must not be a director or officer of the Accredited National Professional Organization of
Certified Public Accountant (APO) at the time of his appointment.
Section 13: The Certified Public Accountant Examinations

The applicants must undergo a licensure examination to be given by the Board in a place
and dates designated by the Commission subject to the compliance with the requirements
prescribed by the Commission in accordance with Republic Act No. 8981.
Section 14: Qualifications of Applicants for Examinations

Any person applying for the examination shall establish the following requisites to the
satisfaction of the Board that he/she:
1. is a Filipino citizen
2. is of good moral character
3. is a holder of degree Bachelor of Science in Accountancy conferred by a school, college,
academy or institute duly recognized and or accredited by the Commission on Higher
Education or other authorized government offices.
4. has not been convicted of any criminal offense involving moral turpitude.
The following documents shall be submitted in support of the above requirements:

1. Certificate of live birth in the National Statistic Office (NSO) security paper;
2. Marriage contract in NSO security paper for married female applicants;
3. College diploma with indication there in of the date of graduation and Special Order
number unless it is not required;
4. Baccalaureate transcript of records and special order number unless it is not required;
5. National Bureau of Investigation (NBI) Clearance;
6. Other documents that the Board of Accountancy may require.
Section 15: Scope of Examination

The coverage for licensure examination for Certified Public Accountants shall cover but
not limited to the following:
1. Financial Accounting and Reporting

2. Taxation
3. Management Advisory Services
4. Advanced Financial Accounting and Reporting
5. Regulatory Framework for Business Transactions
6. Auditing
The Board, subject to the approval of the commission, may revise or exclude any of the
subjects and their subjects and their syllabi, and add new ones as the need arises and
this change shall not be more than every three years.
Section 16: Rating in the Licensure Examination
To be qualified as having passed the licensure examination for accountants, a candidate
must obtain a general average of seventy five percent (75%), with no grade lower than
sixty-five percent (65%) in any given subject. In the event a candidate obtains the rating
of seventy-five percent (75%) and above in at least a majority of subjects as provided for
in this Act, he/she shall receive a conditional credit for the subjects passed: Provided,
That a candidate shall take an examination in the remaining subjects within two (2) years
from preceding examination: Provided, further, That if the candidate fails to obtain at least
a general average of seventy-five percent (75%) and a rating of at least sixty-five percent
(65%) in each of the subjects reexamined, he/she shall be considered as failed in the
entire examination.
Section 17: Report of Ratings

The Board shall submit to the Commission the rating obtained by each candidate within
ten (10) calendar days after the examination, unless extended for just cause. Upon the
release of the results of the examination, the Commission shall send by mailing the rating
received by each examinee at his/her given address using the mailing envelop submitted
during the examination.
Section 18: Failing Candidates to take Refreshers Course

Any candidate who fails in two (2) complete Certified Public Accountant Board
Examinations shall be disqualified from taking another set of examinations unless he/she
submit evidence to the satisfaction of the Board that he/she enrolled in and completed at
least twenty-four (24) units of subject given in the licensure examination.
Philippine Institute of Certified Public Accountants (PICPA)

The national professional organization of CPAs in the Philippines accredited by BOA and
PRC per PRC Certificate of Accreditation No. 1-APO-015 dated May 19, 2008. It was
founded in 1929. It is registered as Non-stock Corporation. All registered CPAs shall be
united and integrated in this professional organization as they have to be a member of
this organization. This organization is guided by its objective to;
1. protect and enhance the credibility of the CPA Certificate in the service of the
public.
2. maintain high standards in accounting education.
3. instil ideals of professionalism, ethics and competence among accountants.
4. foster unity and harmony among members.
PICPA adheres to the highest ideals of professionalisms and commitment to service and
upholds integrity, professional excellence, innovation, discipline, teamwork, social
responsibility, commitment and other values.
As amended on Nov. 26, 2005, PICPA has Four (4) geographical areas covering the
entire Philippine archipelago namely: Luzon, Visayas, Mindanao and National Capital
Region (Metro Manila) represented by nine (9) regional sectors and Four (4) sectors of
accountancy practices.
The nine (9) regional sectors are Metro Manila, Northern Luzon, Central Luzon, Southern
Tagalog, Bicol (the new region as per amendments), Eastern Visayas, Western Visayas,
Northern Mindanao and Southern Mindanao.
This is governed by 25 National Board of Directors, these are elected of Four (4) from
geographical areas, Nine (9) regional sectors and Four (4) sector of the profession.
Composed of Twenty-One (21) from geographical areas and Four (4) from sectoral
directors of the profession. This amendments are applicable starting July 1, 2006.
Accounting Standards in the Philippines

PICPA created Accounting Standards Council on Nov. 18, 1981, that has function to
establish and improve accounting standards that will be generally accepted in the
Philippines.
This council is supported by SEC (Securities and Exchange Commission), CB (Central

Bank of the Philippines, PRC through BOA and FINEX (Financial Executives Institute of
the Philippines). Composed of Eight (8) members which is Four (4) coming from PICPA
including the designated Chairman and one each from SEC, CB, PRC and FINEX.
The standards would be generally based on the following:

1. existing practices in the Philippines.
2. research/studies by the Council.
3. local and international available literature on the topic or subject.
4. Statements, recommendations, studies and literature issued by the standard-
setting body such as IASB (International Accounting Standards Boards) and FASB
(Financial Accounting Standards Board).
The statements and interpretations of the council will represent as the GAAP (Generally
Accepted Accounting Principles) in the Philippines. This accounting principles become
generally accepted if they have substantial authoritative support from the relevant parties
interested in the FS (Financial Statements) – namely: the preparers, users, auditors and
regulatory agencies.
Financial Reporting Standards Council (FRSC)

Under the Section 9(A) of the Rules and Regulations Implementing R.A No. 9298, states
that the new accounting standard setting body in the Philippines is the FRSC.
This shall be composed of Fifteen (15) members with a chairman, who have been or
presently a senior accounting practitioners in any of the scope of accountancy practice
and Fourteen (14) representatives from BOA, SEC, BSP, BIR, COA, FINEX and 2
representatives from the four sectors of accountancy practice (Public Practice,
Academe/Education, Private/Commerce and Industry and Government).
4. THE CODE OF ETHICS
Core Competencies Framework for Accountants

This is to identify the knowledge, skills and professional values that the new CPAs need
to have in order to successfully face the challenges of today’s changing environment and
the future.
The minimum core competencies that a CPA should develop as a result of the higher
education structure that should be included in the curriculum and course syllabus are the
following;
KNOWLEDGE
The CPAs Knowledge must cover the following;
General Knowledge
This is gaining an understanding of the different cultures in the world and developing an
international perspective. The following are
1. Competency in English language
2. Adaptability to Western business practice
3. Level of trainability
4. Good capabilities in dealing with foreign partners.
Organizational and Business Knowledge

This includes the knowledge about the following
1. Economics
2. Quantitative methods
3. Business statistics
4. Organization behavior
5. Marketing
6. Operations management
7. How global business system works
8. Appreciate the importance of good governance and ethics in business.
9. Administrative capability and efficiency
10. Decision modelling
11. Risk analysis and management
12. Measurement
13. Industry and sector perspective.
Information Technology (IT) Knowledge

1. IT concept for business system
2. Internal control in computer-based systems
3. Development standards and practices for business system
4. Management and adoption
5. Implementation and use of IT
6. Evaluation of computer business systems
7. Managing the security of information
Accounting Knowledge
An accountant should possess proficiency of
1. International accounting and auditing standards
2. Cost management and Management accounting
3. Tax laws
4. Business and commercial laws
5. Corporate finance
6. Philippine capital markets
7. Professional ethics
8. Environmental accounting and reporting
An accountant should demonstrate competence in
1. Basic accounting
2. Preparation of Financial Statements
3. Accountancy profession
4. International accounting standards
5. Advance financial accounting practices
6. Advance financial reporting principles
7. Management accounting – POSDICON and Basic concepts
8. Taxation, business and commercial laws
9. Auditing fundamentals and advance concepts
10. Business finance and financial management.
SKILLS
Intellectual Skills
Ability to carry out abstract logical thinking and understand critical thinking, creative
thinking and generation of ideas visualization and reasoning skills or discovery of rules or
principle of the underlying relationship between two or more objects and apply it to the
problem solving.
Interpersonal Skills
Ability to works with groups and being a team player that includes participating as a
member of a team and contributing to the group effort.
Communication Skills
This refers to active listening skills and the ability to communicate effectively both orally
and in writing.
VALUES
Professional Ethics
A professional account should act and work in accordance with the highest standards of
professionalism to attain higher level of performance and meet the general public interest.
The CPA need to conform with the vital ethical standards of the profession that includes
integrity, objectivity, independence, professional competence and due care ,
confidentiality and professional behavior.
Moral Values
The CPAs must discern between what is morally right and wrong.
Ethics
These are relevant in all forms of human activity as this is concerned with right and wrong
and how conduct should be judged to be good or bad. In business, the right or wrong
business situation is known as business ethics.
Ethical Dilemma
A situation in which there is no obvious right or wrong answer decision but rather a right
or right answer.
This arises in many situation in business as this is the good source of this ethical dilemma.
Ethics will probably prescribed that child labor is wrong but in some countries children are
put to work at a young age and often in poor working condition.
Ethical reasoning is the process that we need to consider in attempting to solve an ethical
dilemma as there are no easy answers to this situation.
Example of Ethical Dilemma in business:

White collar crime
Whistle-blowing
Conflict of interest
Fiduciary responsibilities
Sexual Harassment
Discrimination
Ethical Financial Reporting

Ethics are important in preparing financial reports as the users of this reports will depend
on the good faith of the people involved in their preparation. The users of the information
is not sure about the accuracy and if the information is faithfully represented and disclose
all the relevant information. Information have no credibility if it is presented with
dishonesty.
Sarbanes-Oxley Act (SOX)

Signed into law by President George W. Bush on July 30, 2002 in United States of
America. This is the most far-reaching attempt to protect investor’s interest.
Corporate Governance
In the Philippines, to protect the interest of the investor the SEC issue Memorandum
Circular No. 2 otherwise known as “The Code of Corporate Governance” on April 5, 2002.
The IFAC (International Federation of Accountants) developed The Code of Ethics of

Professional Accountant to enhance the credibility of reports and relationship among
business, government, the investing public and other users of reports. This will be
effective starting June 30, 2008.
This is the international body representing all the major accountancy bodies across the
world with the mission to develop a high standards of professional accountants and
enhance the quality of service they provide.
The PICPA are obliged to support the IFAC and inform all its members in every
pronouncements.
Code of Ethics for Professional Accountant

The Code of Ethics for Professional Accountant was approved by the Board of Directors
of PICPA and adopted by BOA and approved also by the PRC as part of the rules and
regulation in the practice of accountancy profession in the Philippines.
The accountancy profession has distinguishing marks as they act for the public interest.
Therefore, every professional accountant should satisfy the needs of individual client and
observe the ethical requirements of the code and comply all of it.
The code has three parts:
Part A for establishing the fundamental principles of professional ethics for professional
accountants and provide a conceptual framework for applying those principles. Part B for
the conceptual framework that applies to the professional accountant in public practice
and will find guidance in Part C relevant to their particular circumstances. Part C is for the
conceptual framework applies to professional accountants in business.
Fundamental Principles
Integrity
This implies fair dealings and truthfulness. A professional accountant should
 be straightforward and honest in all professional and business relationships
 not be associated with reports, returns, communications or other information where
they believe that information is materially false or misleading, omits or obscures
information required that leads to misleading information and the information or
statements are furnished recklessly.
Objectivity
The professional accountant will be objective if he/she should not allow bias, conflict of
interest or undue influence of others to override professional or business judgements.
Professional Competence and Due Care

A professional accountant has duty to continue maintain professional knowledge and
skills at the level required to ensure that the client or employer receives competent
professional service based on current development in practice, legislation and
techniques. The professional accountant should act diligently and in accordance with
applicable technical and professional standards when providing professional services.
This standards are coming from BOA, PRC, SEC, FRSC, AASC and other relevant
legislation.
The professional competence may be divided into two separate phases.
1. Attainment of professional competence. The achievement of the CPA status.
2. Maintenance of professional competence. The achievement of the CPD
(Continuing Professional Development) that maintain our capabilities.
Confidentiality
The professional accountant should not disclose confidential information for his
advantage or advantage of others but an account can disclose the information if it is
proper to disclose such as approve by the owner of information, for legal or professional
or it is the duty to disclose such information.
Professional Behavior
The professional accountant must comply with the relevant laws and regulations and
should avoid actions that may discredit the profession.
Self-Help: You can also refer to the sources below to help you
further understand the lesson.
You can also refer to the sources below to help you further understand the
lesson:
Ballada, W. and Ballada, S. (2018). Basic finacial accounting and repoting (21st
ed.). Manila: DomDane Publishers.
Ballada, W .and Ballada, S. (2015). Basic accounting: made easy (2015 ed.).
Manila: DomDane Publishers.
Lopez, R. M. (2016). Basic accounting for non-accountants: simplified
approach.(2016 ed., Vol. 1). Ma-a, Davao City: MS Lopez Printing & Pub.
Note:
The content of this manual is based on the textbook for ACC 111 titled “Basic Financial
Accounting and Reporting” by Ballada, Win, CPA, CBE, MBA and Ballada, Susan, CPA.
Let’s Check!
I. Questions:
1. What is accounting?
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2. What is R.A. 9298?

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3. What is Code of Ethics and how this applied to professional accountants?

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II. True or False

1. Middle Ages are era that the manual time consuming tasks are now done with
speed, consistency, precision and reliability by computers.
2. Primitive accounting is the accounting evolution where the legal requirements
for businesses are to keep accounting records.
3. The time of industrial revolution is where people use bullae and clay tablets for
recording transactions.
4. Information age is the age that the double-entry bookkeeping was discovered.
5. Corporate organization starts the government to government cooperation.
6. Maintenance of professional competence is the normal pattern of development
starts on general education, followed by specific education, training, and
examination in professionally relevant subjects and period of work experience.
7. Professional Accountant is defined as “an individual who holds a valid
certificate issued by the Board of Accountants”.
8. ASEAN Framework Agreement has three pillars namely the ASEAN Political-
Security Community, ASEAN Economic Community and ASEAN Socio-
Cultural Community.
9. Buying and selling of products are called trader.
10. Fra Luca Pacioli is the first person to group similar transactions in a separate
record.
III. Multiple choice

1. The Filipino accountants should possess knowledge to enable them to compete
internationally, they are:
a. General Knowledge c. Accounting Knowledge
b. Information Technology Knowledge d. Dynamic Knowledge
2. Title of the law that governs Accountancy profession in the Philippines
a. Revised Accountancy Law of 2004 c. The Accountancy Law of 2004
b. New Accountancy Act of 2004 d. Philippine Accountancy Act of 2004
3. Recognized as the accredited professional organization of CPAs in the
Philippines
a. Board of Accountancy
b. Philippine Institute of CPAs
c. Accounting Standards Council
d. Financial Reporting Standards Council
4. The main function is to establish and improve accounting standards that will be
generally accepted in the Philippines.
a. Financial Reporting Standards Council
b. Philippine Institute of Certified Public Accountants
c. Professional Regulations Commission
d. Board of Accountancy
5. A situation in which there is no obvious right or wrong decision but rather a right
or right answer.
a. Ethics b. Morality c. Ethical Dilemma d. Code of Ethics
Let’s Analyze!
The company is preparing financial statements and indicated that it is fairly represented
and in compliance with all standards and it follows the procedures, conventions and
practices. You, as the internal auditor of the company discover that there is material
misstatement in the preparation of financial statement. As a professional certified public
accountants, how does the Code of Ethics affects your decision?
In the Nutshell!
Activity 1. Indeed, the definition of Accounting is in various ways but the same they are
providing information needed for decision making while, history of accounting really
evolve and change from time to time until now. It also observed that the Code of Ethics
really helps the professional accountant to protect its integrity and the confidence of the
clients are still at a high level and R.A 9298 is indeed the law that legislate and regulate
the the accountancy profession in the Philippines. Based from the discussion of the
definition and history of accounting, the R.A 9298 and Code of Ethics and the learning
exercises that you have done, please feel free to write your arguments or lessons learned
below. I have indicated my arguments or lessons learned.
1. ________________________________________________________________
________________________________________________________________
__________________________________________________________
2. ________________________________________________________________
________________________________________________________________
__________________________________________________________
3. ________________________________________________________________
________________________________________________________________
__________________________________________________________
4. _______________________________________________________________
________________________________________________________________
__________________________________________________________
5. ________________________________________________________________
________________________________________________________________
__________________________________________________________
6. ________________________________________________________________
________________________________________________________________
__________________________________________________________
7. ________________________________________________________________
________________________________________________________________
__________________________________________________________
8. ________________________________________________________________
________________________________________________________________
__________________________________________________________
9. ________________________________________________________________
________________________________________________________________
__________________________________________________________
10. ________________________________________________________________
________________________________________________________________
__________________________________________________________
Q&A List
Do you have any question for clarification?
Questions/Issues Answers
1.
2.
3.
4.
5.
Keywords index
Accounting History of Accounting

ACC 111 - Financial Accounting and Reporting

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ACC 111 - Financial Accounting and Reporting

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UNIVERSITY OF MINDANAO

Department of Accounting Education

Physically Distanced but Academically Engaged

Self-Instructional Manual (SIM) for Self-Directed Learning (SDL)

Course/Subject: ACC 111 – Financial Accounting and Reporting

Name of Teacher: Johnvir P. Torreon, CPA

THIS SIM/SDL MANUAL IS A DRAFT VERSION ONLY; NOT FOR

Part 1. Course Outline and Policies ...................................................... 6

Big Picture Week 4-5: Unit Learning Outcomes .............................. 65

Big Picture Week 6-7: Unit Learning Outcomes .............................. 80

Big Picture Week 8-9: Unit Learning Outcomes .............................. 94

Big Picture Week 13-14: Unit Learning Outcomes .......................... 136

Big Picture Week 15-16: Unit Learning Outcomes .......................... 156

Big Picture Week 17-18: Unit Learning Outcomes ......................... 177

Part 3. Course Schedule .......................................................................... 196

Course Coordination: Johnvir P. Torreon, CPA

Areas of Concern Details

Contact and Non-contact Hours This 6-unit course self-instructional manual is

The expected number of hours will be 54 including

Submission of assessment tasks shall be on the

If the assessment task is done in real time through

Since this course is included in the licensure

Please note that academic dishonesty such as

The score for an assessment item submitted after

Assessment tasks will be returned to you one (1)

You should request in writing addressed to the

If disapproved by the course coordinator, you can

You shall be evaluated based on the following:

Assessment methods Weights

Submission of the final grades shall follow the

The course coordinator shall create Group Chat in

You can also meet the course coordinator in

Dr. Gina Fe G. Israel, EdD

Mary Cris L. Luzada, CPA, MSA

Maria Teresa A. Ozoa, CPA, MBA

Students with special needs shall communicate

Clarissa R. Donayre, MSLS

Rochen D. Yntig, RGC

Mersun Faith A. Delco, RPm

Alfred Joshua M. Navarro

Course Information – see/download course syllabus posted in

a. Define accounting, summarize the evolution of accounting and the

Big Picture in Focus: ULOa. Define accounting, summarize the evolution

Accounting is the bridge of communication between business and its owners.

Moreover, American Accounting Association (1966) defines that accounting is a process

The Primitive Accounting

Scribe on a small mound of clay is used by Babylonia(2286-2242 B.C.) where the

The Florence Approach

Giovanno Farolfi and Company

He used 5 ledger – 1. General ledgers, 2. Two merchandise ledgers, 3. Expenses ledger

The Method of Venice

Savary and Napoleonic Commercial Code

Jacques Savary (1622-1690)

United States Steel

Eugen Schmalenbach and The Model Chart of Accounts

Imposition of Income Tax and Conflicts with Financial Accounting

In recent years a tremendous advancement of information technology have further

This association was established in August 8, 1967 in Bangkok, Thailand. This

ASEAN Framework Agreement on Services

ASEAN is a government to government operation. In realizing its dreams they

Mutual Recognition Arrangement and ASEAN Chartered Professional Accountants

A professional accountant is eligible to apply through the Monitoring Committee of his

ASEAN Qualifications Reference Framework (AQRF)