Financial Accounting Theory and Practice Vol 1

Definition of Accounting
 Accounting is about quantitative information. Continuing Professional Development (CPD) – refers to the
 The information is likely to be financial in nature. inculcation, assimilation and acquisition of knowledge, skill
 The information should be useful in decision-making. proficiency and ethical and moral values after initial
registration of the CPA.
Components of Accounting
1. Identifying- recognition or non-recognition of Accounting versus…
business activities as “accountable” events.  Auditing- examination of FS by independent CPA for
2. Measuring- assigning of peso amounts to the the purpose of expressing an opinion as to the fairness
accountable economic transactions and events. with which the FS are prepared.
3. Communicating- preparing and distributing  Bookkeeping- procedural and largely concerned with
accounting reports to potential users of accounting development and maintenance of accounting records.
information.  Accountancy- refers to the profession of accounting
a. Recording practice.
b. Classifying
c. Summarizing
} Aspect of accounting
Financial Accounting versus Managerial Accounting
Financial accounting focuses on general purpose
Accounting as an Information System- Input- process- output reports known as financial statements intended for both
internal and external users while managerial accounting is the
Overall Objective of Accounting accumulation and preparation of financial reports for internal
To provide quantitative financial information about a users only.
business that is useful to statement users particularly owners
and creditors, in making economic decisions Generally Accepted Accounting Principles- represent the
“rules, procedures, practice and standards followed in the
The Accountancy Profession preparation and presentation of financial statements.
 RA 9298- law regulating the practice of
accountancy in the Philippines. Financial Reporting Standards Council (FRSC)- its main
 Board of Accountancy (BOA) - body authorized function is to establish and improve accounting standards that
by law to promulgate rules and regulations will be generally accepted in the Philippines. It is composed of
affecting the practice of accountancy profession 15 members- a Chairman and 14 representatives.
in the Philippines.
Philippine Interpretations Committee- its role is to provide
Fields of Accountancy Profession timely guidance on financial reporting issues not specifically
1. Public Practice- renders independent and expert addressed in current PFRS.
financial services to the public.
2. Private Practice- assists management in planning and International Accounting Standards Committee (IASC)- to
controlling the entity’s operations achieve uniformity in the accounting principles which are used
3. Government- focuses in the custody and by business and other organizations for financial reporting
administration of public funds around the world.
4. Academe
Components of Philippine Financial Reporting Standards
Limitations of the Practice of Public Accountancy- single (PFRS):
practitioners and partnerships only; a certificate of 1. Philippine Financial Reporting Standards
accreditation shall be issued to CPAs in public practice, which 2. Philippine Accounting Standards
shall be valid for three (3) years. 3. Philippine Interpretations
4. Concepts of Capital 4. Concepts of Capital
CONCEPTUAL CONCEPTUAL and Capital and Capital
FRAMEWORK (1989) FRAMEWORK (2010) Maintenance Maintenance
Official titles: Official titles: 5. The Reporting
1. Conceptual 1. Conceptual Entity
Framework of Framework for 1.
Accounting Financial
2. Framework for Reporting
Preparation and 2. The PFRS/ IFRS
Presentation of FS Framework
Scope: Scope:
1. Objective of 1. Objectives of
Financial Financial Reporting
Statements 2. Qualitative
2. Qualitative Characteristics of
Characteristics of FS
Financial 3. Elements of
Statements Financial
3. Elements of Statements
Financial
Statements

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