THE ACCOUNTING PROFESSION

Objective of Accounting

Definition

To provide quantitative information

in order to make economic decisions.

1. 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 decision.
----- Accounting Standards
Council.
2. 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.
------ Committee on Accounting
Terminology of the AICPA.
3. Accounting is the process of
identifying, measuring and
communicating economic
information to permit informed
judgment and decision by users of
the information.
------ American Accounting
Association in its Statement of
Basic Accounting Theory.

The Accountancy Profession

RA No. 9298 law regulating practice of
Accountancy in the Phil.
Board of Accountancy (BOA)
-

Body authorized by law to

promulgate rules and regulations
affecting the practice of the
accountancy profession.
Preparing and grading the CPA
Board Exam.

Professional Regulation Commission (PRC)

-

Shall issue with recommendation of

the BOA the Certificate of
Registration to the practice of
public accountancy valid for 3
years and renewable every 3 years
upon payment of required fees.

3 Main Areas of CPAs

Public
- Offer an independent and
expert financial services to
the public. Ex. External
Auditors.
Limitations:

Important points (Definition)

st

1 . Accounting is:
a service activity
quantitative and financial in nature
use for making economic decision

nd

2 . Accounting is an art.
Four Aspects:
1.
2.
3.
4.

Recording journalizing
Classifying posting
Summarizing making FS
Interpreting Decision-making

3rd. Accounting processes:

1. Identifying
Accountable events are
included
Non-accountable events are
ignored
2. Measuring
Assigning peso amounts
Can be historical cost,
current cost, realizable value
and present value.
3. Communicating
Preparing and distribution of
reports

Single practitioners and

partnerships must have a
meaningful 3-year
experience before engaging
to public accounting.
Certificate of Accreditation
shall be issued to the CPAs in
public practice if it is in
accordance with the
provisions of the BOA and
with the approval of the PRC.
Corporations are not allowed
to engage in public practice
as promulgated by the SEC.

Private
- An accountant in the private
entities.
- They are named as
accounting staff, chief
accountant, internal auditor
and controller.
Government
- Accountants who are
working in the government
like in the BIR and COA.
Financial Accounting

Primarily concerned with the

recording of business transactions
and the eventual preparation of FS.
Focuses on general purpose reports
known as FS intended for internal
and external users.

Generally Accepted Accounting

Principles (GAAP)

are conventional and are legally

accepted by agreement often tacit
agreement rather than a formal
derivation from a set of postulates
and basic concepts
Based on experience, reason,
custom, usage and practical
necessity.
Laws that must be followed in
financial reporting

Accounting Standards

For identifying the proper

accounting practice.
Give common understanding
between the preparers and the
users.

The Origin of Accounting Standards

and Governing Bodies
PHILIPPINES:
1. Accounting Standards Council
(ASC)
Developed and formalized
initially the GAAP.
Made the Interpretations
Committee (IC) in May 2000.
2. Financial Reporting Standards
Council (FRSC)
Replaced the ASC.
Accounting standard setting
body created by PRC upon
recommendation of BOA to
assist BOA in carrying out its
powers and functions
provided in RA No. 9298
To establish and improve
accounting standards that
will be generally acceptable
in the Philippines.
Composed of 15 members
with a Chairman that is a
Senior Accountant and has
the term of 3 years and
renewable. ASC members
are not disqualified to be
part of the body.

Philippine Accounting Standards

(PAS) and Philippine Financial
Reporting Standards (PFRS)
- The two approved
statements of FRSC.
3. Philippine Interpretations
Committee (PIC)
Formed by the FRSC in
August 2006 in replaced of
IC.
The purpose is to give an
authoritative guidance since
standards do not provide
specific rules and guidelines.
INTERNATIONAL:
1. International Accounting Standards
Committee (IASC)
an independent private
sector body with the
objective of achieving
uniformity in the accounting
principles which are used by
business and other
organizations around the
world.
Pronounced the International
Accounting Standards (IAS)
2. International Accounting Standards
Board
Replaced the IASC.
Pronounced the
International Financial
Reporting Standards (IFRS)

International Financial Reporting

Standards (IFRS)

a global phenomenon intended to

bring about greater transparency
and a higher of comparability in
financial reporting.

Philippine Financial Reporting

Standards PFRS
These include:
a. PFRS which correspond to IFRS
b. PAS which correspond to IAS
c. Philippine Interpretations
correspond to the Interpretations of
IFRIC and the Standing Committee,
and Interpretations developed by
the PIC.