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impact/effect on the company’s Assets,
PART I: INTRODUCTION TO ACCOUNTANCY
PROFESSION
Definition of Accounting
 Accounting Standards Council (former
standard setting body in PH)
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.
Service Activity – being provided by an accountant.
Role of Accountant – provide information to the
users of its reports na gagamitin for making
decision.
*** Missing: What are the processes needed in
forming or providing information to its user?
 Committee on Accounting Terminology of
the American Institute of CPA (CAT of
AICPA)
Accounting is the ART of recording, classifying and
summarizing in a significant manner and in terms of
money, transactions and events which are in part at
least of a financial character and interpreting the
results thereof.
***primarily quantitative in nature are provided
so that the users can interpret it and make
decision out of it.
***no specific process mentioned.
 American Accounting Association
Accounting is a PROCESS of identifying,
measuring and communicating economic
information to permit informed judgment and
decision by user of information.
Accounting is a discipline wherein it follows a
certain procedure or process to come up with a
report to be provided to its user (users will use
the report in making economic decisions).
NOTE!!!
 User-based discipline.
Main Output: Financial Statements (basis
of decision)
 Quantitative in nature.
 Subject to interpretation.
3 Aspects of Accounting (accdg. to AAA)
A. Identifying – process of analyzing events
and transactions to determine whether or
not they will be recognized.
- Analytical component of accounting.
- Synonymous to recognition process.
*** ONLY accountable events are
recognized.
Accountable events are events that has
Liabilities, and Equity.
Non-accountable events are not
recognized but they are disclosed in the
Notes to FS if they are relevant.
***if irrelevant, completely ignored.
Types of Accountable Events:
1. External Events – involving the entity
and another entity.
 Exchange – reciprocal transfer
Example: Sale, purchase,
Payment of liabilities
 Non-reciprocal transfer – one-
way transaction
Example: donation or gifts,
payment of taxes and fines, theft
 External Events other than
transfer
Example: change in FV,
vandalism, obsolescence
2. Internal Events – does not involve
outside party or events.
Example: Production, Casualty
***if manmade casualty, EXTERNAL.
B. Measuring Process (Technical
Component) – process of determining the
monetary amounts at which the elements of
the FS are to be recognized and carried in
the B/S and I/S.
C. Communicating Process (Formal
Concept) – process of preparing and
distributing accounting reports to potential
users of accounting information.
*** must be formal to be reliable.

The Accountancy Law (R.A. 9298) – Philippine
Accountancy Act of 2004
PR-BOA is the body authorized by law to
promulgate the rules and regulations.
- One of the board under PRC.
The Accountancy Fields
 Public Accountancy – rendering accounting
and auditing services to one or more clients
on a fee basis.
Services Rendered:
Auditing (ATTEST FUNCTION) – External
Auditing. A practice wherein the auditor
examines the FS prepared and reported by
a certain company to use by another user.
 - Issues opinion as to the fairness of the Structure of PFRS
FS.
 Title
 Objective
Taxation – compliance (filing of tax returns)
 Scope (***Any limitation of the scope of
and tax planning (tax that the company will
PRFS is made clear in the standard.)
pay in the future – tax minimization).
 Paragraphs
MAS – no precise coverage. Bold type – main principles
Plain type – supporting principles
NOTE!!! Both paragraphs have EQUAL
***LIMITATIONS:
Certification of Accreditation – 3 years authority.
meaningful experience and certain CPD
units.
No Corporation Form. Only sole STANDARD SETTING BODIES
proprietorship and partnership are allowed.  FRSC (Financial Reporting Standards
Council)
 Commerce and Industry (Private - Local standard setting body.
Accounting) – employment in the private - Successor of ASC.
sector in a position which involves decision - Pronouncement: PFRS (Collectively
making requiring professional knowledge in
known as PFRS, PAS, Philippine
the science of accounting. Interpretations)
*** Highest accounting officer – Controller
** Interpretations – issued to give
authoritative guidance on issues that are
 Education or Academe – employment in an likely to receive divergent or unacceptable
education institution which involves teaching
treatment, in the absence of such guidance.
accounting (board subjects) Philippine Interpretations Committee is
created by FRSC.
 Government – employment or appointment - Creator: BOA (2006)
to a position in an accounting professional
group in the government or GOCC.  IASB (International Accounting Standards
Board)
- International standard setting body.
PART II: PREFACE OF PFRS IFRS is considered as global
phenomenon. Purpose? To promote
PFRS (Philippine Financial Reporting Standards) – uniform accounting all over the world or
laws in accounting, used as a guide in the across the globe.
preparation of FS. (GAAP – generally accepted - Successor of IASC.
accounting principle) - Pronouncement: IFRS
 Principle-based rather than rule-based. - Creator: IFRS Foundation (2001)
***Pwedeng hindi sundin if and only if it *** Japan (JGAAP) Canada and US (US GAAP)
will not provide a relevant or reliable
information.
FRSC (new) vs. ASC (old)
 PFRSs set out recognition, measurement,
presentation and disclosure requirements FRSC ASC
dealing with transactions and events that Creator BOA (2006) PICPA (1981)
are important in general purpose FS. Pronouncements PFRS PAS
Composition 14 members 8 members
***NOTE!! + Chairman incldg. Chairman
Standards over Conceptual Framework BOA 1 BOA 1
(general concepts). COA 1 SEC 1
SEC 1 BSP 1
BIR 1 FINEX 1
Example: Inventories
BSP 1 PICPA 4
PAS 2 over Conceptual Framework.
FINEX 1
*** use Conceptual Framework if there is no PICPA 8
specific standard governing the transaction 2 per sector 1 per sector in
or event. in PICPA PICPA
***NOTE!!!
Scope of PFRS
 PFRSs apply to all profit-oriented entities 1. The chairman and all the members of FRSC
preparing general purpose FS. are appointed by PRC upon
recommendation of BOA in coordination
 Directed towards the common information with APO (PICPA), with a term of 3 years
needs of a wide range of users. and are renewable for another term.
2. Any member of ASC is not disqualified from
being appointed to FRSC.
 3. FRSC members are required to render
service to the council on a part time basis
without compensation.
4. The chairman should be a senior
practitioner in any scope of accounting
practice

STANDARD SETTING PROCESS (SOCIAL

PROCESS)
PFRSs are developed through a due process that
involves accountants and various interested parties
and individuals.
Step 1: Consideration of pronouncements of the
IASB.
Step 2: Formation of a task force, when deemed
necessary, to give advice to FRSC.
Step 3: Issuing for comment an exposure draft (not
final - distributed to various interested parties to
have a glimpse of the standards to be approved)
approved by a majority of the FRSC members.
***Comment period will be at least 60 days
unless a shorter period (not less than 30 days)
is considered appropriate by the FRSC.
*** 30 to 60 days comment period.
Step 4: Consideration of all comments received
within the comment period and, when appropriate,
preparing a comment letter to the IASB.
Step5: Approval of a standard or an interpretation
by a majority (8 members) of the FRSC members.