Karize Thea C. Rivera
Employees – persons in the company who
Integrated Accounting
DEFINITION OF ACCOUNTING
ACCOUNTING STANDARDS COUNCIL
-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
AMERICAN INSTITUTE OF CPA
-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 financial character, and
interpreting the results thereof
AMERICAN ACCOUNTING ASSOCIATION
-Accounting refers to the process of identifying,
measuring and communicating economic
information to permit informed judgments and
decisions by users of the information.
ESSENTIAL ELEMENTS OF ACCOUNTING
Assets, Liabilities, Equity
OBJECTIVE OF ACCOUNTING
Objectives of accounting in any business are;
systematically record transactions, sort and
analyzing them, prepare financial statements,
assessing the financial position, and aid in
decision making with financial data and
information about the business.
USERS OF ACCOUNTING INFORMATION
INTERNAL USER
1. Management – employees that can make
decisions for the company
2.
do not have the authority to implement
decisions
3. Owners / Stockholders – existing investors
of the company
EXTERNAL USSER
1. Customer – the main source of income of
businesses
2. Creditors – possible sources of additional
funds
3. Potential Investors – invest resources in
the business hoping to earn decent returns,
they may win or lose in the investment
4. Government – regulates the business in the
economy
5. Academe – utilizes financial statement for
academic purposes
6. General Public – residents of a country
ACCOUNTANCY AS PROFESSION
CAREER FIELDS IN ACCOUNTING
1. Public Practice – Accountants who render
services on a fee basis and staff accountants
employed by them are engaged in public
practice.
2. Commerce and Industry – Accountants
employed in this area vary widely in their scope
of activities and responsibilities
3. Government Service – Accountants may
be hired by the ff: Congress of the Philippines,
Commission on Audit, Bureau of Internal
Revenue, Department of Finance, Department
of Budget and Management, Bangko Sentral
ng Pilipinas and the LGU
4. Education / Academe – This are
guarantees the continued development of the
profession by endeavoring to clarify and
address emerging issues through research and
sharing the results obtained with their
colleagues
PROFESSIONAL ORGANIZATIONS OF CPA
1. ACPAPP – Association of Certified Public
Accountant in Public Practice
2. ACPACI – Association of CPAs in
Commerce and Industry
3. GACPA – Government Association of
Certified Public Accountants
4. NACPAE – National Association of CPAs in
Education
PROFESSIONAL REGULATORY BODIES
1. Professional Regulation Commission (PRC)
– operates under the offices of the President of
the Philippines and its mandate is to regulate
and supervise the practice of all professionals.
2. Professional Regulatory Board of
Accountancy (BOA) – under the Republic Act
(RA) 9298, Philippine Accountancy Act, is
responsible for: (i) supervising the registration,
licensing, and practice of accountancy in the
Philippines; (ii) maintaining a registry of
registered and accredited CPAs; (iii) issuing
and renewing Certificates of Registration and
Accreditation; (iv) adopting ethical and auditing
standards, taking into consideration
international standards and generally accepted
best practices;
3. Philippine Institute of CPA (PICPA) – is
responsible for: (i) promoting and maintaining
high professional and ethical standards among
accountants by adopting a Code of Ethics for
its members as a task delegated by the BOA;
(ii) developing and improving the accountancy
education; (iii) protecting the CPA designation;
and (iv) carrying out the fact-finding component
of investigations upon the delegation and
approval of the BOA and the PRC.
REPUBLIC ACT 9298 – ACCOUNTANCY ACT
OF 2004
An act regulating the practice of accountancy in
the Philippines, repealing for the purpose
presidential decree no 692, otherwise known as
the revised accountancy law, appropriating
funds therefor and for other purposes
COMMON BRANCHES OF ACCOUNTING
1. Basic Accounting
2. Financial Accounting – Recording of
business transactions and the periodic
preparation of reports on financial positions
and results of operations
3. Managerial Accounting – incorporates cost
accounting data and adapts them for specific
decisions which management may be called
upon to make.
4. Cost Accounting – the recording of all the
costs incurred in a business in a way that can
be used to improve its management.
5. Auditing – Examination that ensures the
fairness and reliability of the reports that
management submitted
6. Government Accounting – concerned with
the identification of the sources and uses of
resources consistent with the provisions of city,
municipal, provincial or national laws.
7. Tax Accounting – preparation of tax returns
and the consideration of the tax consequences
of proposed business transactions or
alternative courses of action.
8. Forensic Accounting - the use of
accounting skills to investigate fraud or
embezzlement and to analyze financial
information for use in legal proceedings.
ETHICS
INTREGRITY
- Professional accountant should be
straightforward and honest in all
professional and business relationships
- Integrity also implies fair dealing and
truthfulness
OBJECTIVITY
- Professional accountant should not
allow bias, conflict of interest or undue
influence of others to override
professional or business judgments
COMPETENCE
- Professional accountant has a
continuing duty to maintain professional
knowledge and skill at the level required
to ensure that a client receives
competent professional service based
on current developments in practice,
legislation and techniques.
INDEPENDENCE
- Independence from the parties that may
have a financial interest in the business.
Professional accountant’s decision
should not be influenced by others.
CONFIDENTIALITY
- Professional accountant should respect
the confidentiality of information
acquired as a result of professional and
business relationships and should not
disclose any such information to third
parties without proper and specific
authority.
BUSINESS
An organization or economic system where
goods and services are exchanged for one
another or for money.
PHILIPPINE REGULATORY AGENCIES
1. DTI – Department of Trade and Industry
2. SEC – Securities and Exchange
Commission
3. BIR – Bureau of Internal Revenue
4. LGUs – Local Government Units
5. BSP – Bangko Sentral ng Pilipinas
BUSINESS ORGANIZATIONS
SINGLE PROPRIETORSHIP
A sole proprietorship is a business owned by
only one person. It is easy to set-up and is the
least costly among all forms of ownership.
The owner faces unlimited liability; meaning,
the creditors of the business may go after the
personal assets of the owner if the business
cannot pay them.
The sole proprietorship form is usually adopted
by small business entities.
PARTNERSHIP
A partnership is a business owned by two or
more persons bind themselves to contribute
money, property, or industry to a common
fund, with the intention of dividing profits into
themselves.
In general partnerships, all partners have
unlimited liability. In limited
partnerships, creditors cannot go after the
personal assets of the limited partners.
CORPORATION
A corporation is a business owned by
stockholders. It is an artificial being created by
operation of law, having the rights of
succession and the properties expressly
authorized by law or incident to its existence.
The stockholders are not personally liable for
the corporation’s debts. The corporation is a
separate legal entity.
BUSINESS OPERATIONS
SERVICE BUSINESS
A service type of business provides intangible
products (products with no physical form).
Service type firms offer professional skills,
expertise, advice, and other similar products.
Examples of service businesses are: salons,
repair shops, schools, banks, accounting firms,
and law firms.
MERCHANDISING BUSINESS
This type of business buys products at
wholesale price and sells the same at retail
price. They are known as "buy and sell"
businesses. They make profit by selling the
products at prices higher than their purchase
costs.
A merchandising business sells a product
without changing its form. Examples are:
grocery stores, convenience stores,
distributors, and other resellers.
MANUFACTURING BUSINESS
Unlike a merchandising business, a
manufacturing business buys products with the
intention of using them as materials in making
a new product. Thus, there is a transformation
of the products purchased.
A manufacturing business combines raw
materials, labor, and factory overhead in its
production process. The manufactured goods
will then be sold to customers.
BUSINESS ACTIVITIES
FINANCING ACTIVITIES
Organizations require financial resources to
obtain other resources used to produce goods
and services.
INVESTING ACTIVITIES
Managers use capital from financing activities
to acquire other resources used in the
transformation process – that is, to transform
resources from one form to a different form,
which is more valuable, to meet the needs of
the people.
OPERATING ACTIVITIES
Involve the use of resources to design,
produce, distribute, and market goods and
services.
BUSINESS RISKS
Business risk is the exposure a company or
organization to factors that will lower its profits
or lead it to fail.
Anything that threatens a company's ability to
meet its target or achieve its financial goals is
called business risk.
THE FINANCIAL STRUCTURE OF A BUSINESS
FINANCIAL POSITION - Assets, Liabilities and
Equity
1. Assets – Present economic resource
controlled by the entity as a result of past
events. An economic resource is a right that
has the potential to produce economic beliefs
2. Liabilities – Present obligation of the entity
to transfer an economic resource as a result of
past events.
3. Equity – Residual interest in the assets of
the entity after deducting all its liabilities
FINANCIAL PERFORMANCE – income and
expenses
1. Income – Is increases in assets, or
decreases in liabilities, that result in increases
in equity, other than those relating to
contributions from holders of equity claims.
2. Expenses – Are decreases in assets, or
increases in liabilities, that result in decreases
in equity, other than those relating to
distributions to holders of equity claims.
BASIC ACCOUNTING CONCEPT
1. Business Entity Concept – An accounting
entity is an organization or a section of an
organization that stands apart from other
organizations and individuals as a separate
economic unit.
2. Going Concern – Financial statements are
normally prepared on the assumption that the
reporting entity is a going concern and will
continue in operation for the foreseeable
future.
3. Stable Monetary Unit Concept – The
Philippine Peso is a reasonable unit of
measure and that its purchasing power is
relatively stable.
4. Periodicity Concept – An entity’s life can
be meaningfully subdivided into equal time
periods for reporting purposes.
GENERAL PURPOSE FINANCIAL STATEMENTS
INCOME STATEMENT
An income statement or profit and loss account
is one of the financial statements of a company
and shows the company’s revenues and
expenses during a particular period. It indicates
how the revenues are transformed into the net
income or net profit.
STATEMENT OF CHANGES IN OWNER’S
EQUITY
The statement of changes in equity is a
reconciliation of the beginning and ending
balances in a company's equity during a
reporting period.
STATEMENT OF FINANCIAL POSTION
The statement of financial position, often called
the balance sheet, is a financial statement that
reports the assets, liabilities, and equity of a
company on a given date. In other words, it
lists the resources, obligations, and ownership
details of a company on a specific day.
STATEMENT OF CASH FLOW
Is a financial statement that shows how
changes in balance sheet accounts and
income affect cash and cash equivalents, and
breaks the analysis down to operating,
investing, and financing activities.
ACCOUNTING EQUATION AND DOUBLE
ENTRY SYSTEM
ACCOUNTING EQUATION
This equation present the resources controlled
by the enterprise, the present obligations of the
enterprise and the residual interest in the
assets.
Assets = Liabilities + Owner’s Equity
DOUBLE ENTRY SYSTEM
Accounting is based on a double-entry system
which means that the dual effects of a
business transaction is recorded. A debit side
entry must have a corresponding credit side
entry.