INTEGRATED ACCOUNTING REVIEWER
ACCOUNTING - a service activity that records transactions of
the business and prepares a progress report about its financial
position and result of operation. Recording, Classifying,
Summarizing and Interpreting
 Provide quantitative information, primarily financial in
nature, about economic entities that is intended to be
useful in making economic decisions.
 Is considered the language of business because it
communicates relevant financial information to decision
makers
USERS OF ACCOUNTING INFORMATION
STAKEHOLDERS – the one who has interest in the economic
performance of a business
OWNER or INVESTOR – the one who invest capital in a
business venture with the objective of receiving a return from
the profit earned the business.
MANAGER – appointed steward of the business, tasked to
ensure efficient operation and wise use of its resources and
responsible for organizing, planning, directing and controlling
the operation of the business.
LENDER – this user reviews the financial statements of an
applicant as a means of evaluating liquidity or ability to pay.
SUPPLIER – this may be considered the firm’s “partner” in
business who usually extends service and merchandise on
credit depending on the firm’s capability to pay
GOVERNMENT – this user requires all earners (individuals or
business firms) to submit regularly their financial statements
and is also responsible in establishing the rates of taxes to be
paid
EMPLOYEE – this statement user is interested in company’s
operating performance. If it earns well, remuneration will be
higher and more benefits will be enjoyed
CUSTOMER – this user considers not only the price and quality
of the product but also the company’s reputation and ability to
deliver the product on time
ENTREPRENEUR – this one take risk in putting up a business
venture for a product or service which is result of one’s skill
and creative mind
FORMS OF BUSINESS ORGANIZATION
1. SOLE PROPRIETORSHIP - organized by one person.
 No formal legal process is required
 Can be handled and managed easily
 He/she gets all of the profit.
2. PARTNERSHIP - owned by two or more persons who
contribute money, property or industry
 Subject to governmental requirements
 Unlimited liability
 Difficulty in managing
 Limited life
3. CORPORATION - Separate legal entity from its owners
 Subject to rigid governmental requirements
 Juridical person, Unlimited life
BRANCHES OF ACCOUNTING
1. PUBLIC ACCOUNTING - career field open to firms and individual
CPAs who offers to the public for a fee, expert services like
bookkeeping, auditing, accounting, tax and consultancy. For
auditing, accounting and tax services it is a must that they passed
the CPA licensure examination first.
2. INDUSTRY ACCOUNTING - also called as Private Accounting is
another career field where more accountants are employed than
in Public Accounting because of the huge number of
merchandising and other firms.
3. GOVERNMENT ACCOUNTING - where one works as a government
accountant in government agencies. They render opinions in
government financial statements.
4. RESEARCH AND EDUCATION - field where the accountant
assumes the role of researcher, teacher and reviewer.
REGULATORY BODIES IN THE PHILIPPINES
1. PRC (PROFESSIONAL REGULATORY COMMISSION) - In charge of
regulating and licensing the practice of a profession like accounting,
medicine, engineering, nursing and the like. Its functions are
A) Maintaining and enforcing professional examinations.
B) Promulgating and implementing standards
C) Providing legal and other regulatory services
2. BOA (BOARD OF ACCOUNTANCY) - under jurisdiction of PRC and is
tasked in setting up and promulgating a set of professional standards
and ethics in the practice of the accounting profession. It constantly
monitors the practice of Accountancy in the Philippines.
3. PICPA (PHILIPPINE INSTITUTE OF CERTIFIED PUBLIC
ACCOUNTANT) - Professional organization of CPAs. Setting up and
implementing rules vital to the accounting profession.
Under PICPAs umbrella are the following:
4. ACPAE - Association of Certified Public Accountants in Education
5. GACPA - Government Association of Certified Public Accountants
6. AIA – Association of International Accountants
7. ACPACI - Association of Certified Public Accountants in Commerce
and Industry
8. SEC (SECURITIES AND EXCHANGE COMMISSION) - Its task is to
safeguard public interest. It regulates business organizations like
Partnership and Corporations.
9. BSP (BANGKO SENTRAL NG PILIPINAS) - regulates the operations
of all banks, as well as importations and exportation of goods. It also
monitors foreign currency transactions and the Ph Peso exchange
rate.
10. BIR (BUREAU OF INTERNAL REVENUE) - ensures compliance of tax
and license requirements by all businesses. Collection of fees and
taxes is a primary responsibility of this agency as this is the principal
source of funding the various projects/activities of the government.
11. IASB (INTERNATIONAL ACCOUNTING STANDARD BOARD - tasked
to formulate new standards for financial reporting and measurement
called IFRS (International Financial Reporting Standards)
12. PFRS/PAS (PHILIPPINES FINANCIAL REPORT SYSTEM/PHILIPPINE
ACCOUNTING STANDARD) - are the new set GAAP issued by the
Accounting Standards Council (ASC) to govern the preparation of
financial statements. Agency tasked in reviewing, preparing and
codifying standards for use in accounting practice

ACCOUNTING FRAMEWORK
QUALITATIVE CHARACTERISTICS
FOUR PRINCIPAL ATTRIBUTES:
1. UNDERSTANDABILITY - Requires that terminologies must
be clear, orderly presentation in order to make a goods
assessment and sound judgment.
2. RELEVANCE - Prescribes the quality of information that will
make a difference and influence a statement user to make
a meaningful decision
In order to be relevant information must be timely
and material (based on nature and size)
3. RELIABILITY - Degree of confidence users have on the
financial statements because they can be depended upon
as free from material errors or misstatements.
To be reliable information must be:
a. FAITHFUL REPRESENTATION - Requires that
information should not mislead users
b. SUBSTANCE OVER FORM - Substance shall prevail
over its form
c. NEUTRALITY - Information must be free from bias
and manipulation
4. PRUDENCE - Requires that the accountant to perform
caution when using estimates or information that is
market by uncertainty
PRINCIPLES - broad laws or rules adopted as guides to the
conduct and practice of the profession
ETHICS – set of moral values and principles that is required of
a professional so that the reports submitted can be trusted by
the users
FUNDAMENTAL CONCEPTS AND PRINCIPLES OF
ACCOUNTING
BUSINESS ENTITY CONCEPT - assumes that the entity is
separate from its owners. In preparing reports only the
elements of Financial Statement of the business should only be
presented.
COST ACCOUNTING (EXCHANGE PRICE) - Assets, liabilities,
revenues and expenses should be recorded based on cost. Cost
is the amount agreed upon in an arm’s length transaction. It
may be based on the cash or its cash equivalent if there is no
cash paid in the transaction.
Remember that cost changed cost price now may not be the
cost later.
ACCRUAL CONCEPT - Revenues is recorded based on when
they are rendered regardless of collection
Expenses are recorded based on when it was incurred
regardless of payment.
OBJECTIVITY CONCEPT - Requires that assets acquired must be
verifiable and substantiated by source documents. This
principle also supports the cost principle since valuation of
assets at cost is definite.
DISCLOSURE CONCEPT - The value of information found in the
financial statements may be enhanced to help users make
informed judgment when additional notes or explanations are
given. Adequate disclosure should be presented in the Notes to
Financial Statements.
MATERIALITY CONCEPT -The materiality principle states that an
accounting standard can be ignored if the net impact of doing so
has such a small impact on the financial statements that a reader of
the financial statements would not be misled
REPORTING PERIOD -It is understood that a complete and accurate
financial picture of the business may only be made at the end of its
life.
However, since users need reporting of financial information on a
regular basis, then its life has to be divided into specific time
intervals called accounting period. This will enable the enterprise to
prepare periodic Financial Statement.
MONEY MEASUREMENT CONCEPT (UNIT OF MEASURE) - All
business transactions are recorded using only one unit of
measurement. Since money is used as medium of exchange.
TYPES AND EFFECTS OF TRANSACTION
FOUR TYPES OF TRANSACTION
1. SOURCES OF ASSETS
a. Increase in assets=Increase in liabilities
b. Increase in assets= Increase in owner’s equity
2. EXCHANGE OF ASSETS
a. Increase in one assets= decrease in assets
3. USE OF ASSETS
a. Decrease in assets= Decrease of liabilities
b. Decrease in assets= Decrease of owner’s equity
4. EXCHANGE OF CLAIMS
a. Increase in liabilities= decrease in owners’ equity
b. Increase in owner’s equity= decrease in liabilities
c. Increase in one liability= decrease in another liability
d. Increase in one owner’s equity=decrease in another
owners equity
THREE CLASSES OF BUSINESS ACTIVITIES
OPERATING ACTIVITY
(Current Assets and Current Liabilities) - consist of principle
activities that a company performs to earn income.
INVESTING ACTIVITY (Non Current Assets) - consist of buying and
selling of long-term assets and other investments.
FINANCING ACTIVITY
(Non Current Liabilities and Capital) - Transactions with creditors
or investors used to fund either company operations or
expansions. Include events and transactions that affect a business'
equity and long-term liabilities.
INTERNAL CONTROL - plan of organization which includes all the
practices, techniques and procedures designed to provide an
effective accounting system to safeguard assets, check accuracy
and reliability of accounting data
COMPONENTS OF INTERNAL CONTROL
1. ENVIRONMENTAL CONTROL – requires high level of integrity
and ethical values and formulating operating strategies that will
protect the welfare of company and its stakeholders
2. MONITORING ACTIVITIES – requires set of procedures to be
followed such as defined specific responsibilities for
employees emphasizing segregation of duties/works for
check and balance
3. RECORD CONTROL – ensures that all transactions are
properly documented and recorded
4. ASSET CONTROL – ensures that assets are physically
protected and recorded with their respective serial numbers
and location code
ACCOUNTING INFORMATION SYSTEM (AIS) - involves the
collection, storage, and processing
of financial and accounting data used by internal users to report
information to investors, creditors, and tax authorities.
IMPREST SYSTEM - internal control procedure which aims
to protect the cash receipts and disbursements of the
business, it requires that no one person should be allowed
to handle all aspects of cash transactions
MEASUREMENT SYSTEM – in an AIS the processing phase
which involves analyzing, measuring, recording,
classifying, and summarizing
ACCOUNTING AREAS
1. BASIC ACCOUNTING OR BOOKKEEPING – routine activity of
recording, classifying, and summarizing business
transactions in a systematic manner.
2. FINANCIAL ACCOUNTING - involves the preparation and
interpretation of financial statements intended for external
users (provides reports)
3. COST ACCOUNTING – concerned with systematic recording
and measurement of the cost of manufacturing a product
and the cost of rendering service.
4. MANAGEMENT ACCOUNTING – responsible for preparing
reports for internal users of the company in planning,
directing and controlling its various operations and
resources
5. AUDITING – involves the review and examination of
accounting records and financial statements and from which
a professional and unbiased opinion is given as to the
fairness of the accounting information contained in financial
statement
6. GOVERNMENT ACCOUNTING – deals with the
administration or use of the public funds to bring about
service to community
7. TAX ACCOUNTING – deals with tax matters affecting firms
(partnership and corporation), individuals, trusts and estates.
It involves preparation of tax returns, interpretation and
application of tax rules.
8. FORENSIC ACCOUNTING – new discipline which integrates
accounting, auditing and investigative skills. Forensic
accountant works as fraud examiner involving illegal
transactions such as cash embezzlement, bankruptcy or
money laundering. This is done by tracking down FS.
ACCOUNTING FRAMEWORK – a pervasive structure compose of
basic rules, procedures, and premises that guide the accountant’s
action and provides formation of standards
ETHICS PRINCIPLE – serves as a guide to good performance,
proper conduct, and behavior expected of professionals
ACCOUNTANCY ACT – rules and regulations covering the
practices of accounting is embodied in IRR 9298
PROFESSIONAL ETHICS
1. OBJECTIVITY - needs to be independent and free from bias.
This means that financial reporting like a company's
financial statements need to be based on evidence and
not opinions.
2. COMPLETENESS – the data should not be omitted to avoid
false and misleading information in financial statement
3. COMPETENCY - ability to use applicable information
technology and systems to meet work needs. Compliance
with applicable standards, rules, regulations and systems of
internal control; interpret and evaluate results, prepare
documentation; create financial reports
4. CONFIDENTIALITY - involves a set of rules or a promise
usually executed through confidentiality agreements that
limits access or places restrictions on certain types of
information.
5. INDEPENDENCE - practice having no financial or other
interest in the client whose financial statements are being
examined.
6. INTEGRITY – requires accountants to be honest and
forthright with a client's financial information, should
restrict themselves from personal gain or advantage using
confidential information.
7. SOCIAL RESPONSIBILITY – refers to legal and social
obligation of an individual or entities towards the promotion
and preservation of the interests of the society
ETHICAL RISK
1. CONCEALING LOSSES - refers to a company's financial
position when total expenses exceed total revenues.
Net loss is the amount of money the company lost during
the period.
2. CIRCUMVENTING CONTROLS - to avoid the real issues by
artfulness or deception; avoid by anticipating or outwitting
3. REPORTING ARTIFICIAL PROFITS
4. FICTITIOUS DISBURSEMENTS - an employee makes a
distribution of company funds for a dishonest
purpose include forging company checks, the submission of
false invoices, doctoring timecards, and so forth.
 DEBTOR/MAKER – this is the party who promises to
AIS PRINCIPLE pay an obligation or debt
NET REALIZABLE VALUE – value of the receivables
1. COMPATIBILITY – helps one identify changes taking place after deducting the allowance for bad debts
in the entity between two or more periods, will able to RESIDUAL VALUE – recovery value of an asset at the
determine the change of its performance or position end of its estimated useful life
2. FLEXIBILITY - should be able to adapt to changes in the FACE VALUE – the principal amount
company based on its needs, operations, and management. UTILITY VALUE – productive value of an asset
3. COST-BENEFIT - refers to an accounting constraint that states the cost
representing its ability to yield service
of providing information must be measured against the benefit derived
BOOK VALUE – the net amount of a depreciable asset
from the use of that same information after deducting accumulated depreciation
MATURITY VALUE – this is the total amount to be paid on the due
BUSINESS DOCUMENTS – an evidence of business transactions date of the obligation
such as official receipt, cash voucher and invoice MATURITY DATE – the date that the debt becomes due
INCOME SUMMARY – temporary account used to clear the books CAPITAL EXPENDITURES – these are cash outlays for freight,
of revenues and expenses, the balance of which represents the custom duties and other incidental expenses which are usually
net income or net loss for the period added to the cost of the asset bought
T ACCOUNT – a tool that is used to classify and summarizes the REBATE – discount granted for paying an account promptly
effects of transactions on the accounting values MARKET VALUE – properties invested by the owner should be
WORKSHEET – a tool used to summarize all the information recorded as this value, the amount that could be paid for an asset
needed to make adjusting entries and facilitate preparation of at an arm’s length transaction
the financial statements as well as the closing entries GAIN ON SALE – recognized when the proceeds from the sale of
CHART OF ACCOUNTS – table of contents listing the titles and the asset is higher than its book value
numbers of the accounts found in the general ledger PERCENTAGE TAX – 3% tax paid for gross receipts or sales of
SUBSIDIARY LEDGER – a record showing the details and running goods and services by the business
balance of a customer’s account
GENERAL JOURNAL – the book of original entry where
transactions are recorded
GENERAL LEDGER – the book of final entry which shows the
compilation of accounts wherein the debits and credits of each
account is entered into one place so that the balance may be
determined at anytime
TRIAL BALANCE – a summary form listing all the general ledger
accounts with their corresponding debits and credits balances
ADJUSTED TRIAL BALANCE – a trial balance prepared at the end
of the year before preparing the financial statements
POST CLOSING TRIAL BALANCE – prepared after making the
closing entries, to prove the equality of the debits and credits
CLOSING ENTRY – entries prepared at the end of every
accounting period to clear the books of temporary accounts
DOUBLE ENTRY PROCEDURE – a simple accounting device
showing the increase side and decrease side of an account. The
duality of transaction requires that an entry must have an equal
debit and credit amount
OPERATING CYCLE – the period it takes for a cash to be used or
converted back into cash
ACCOUNTING CYCLE – series of steps and procedures
performed in one accounting period
COMPOUND ENTRY – an entry made up of more than one debit
and more than one credit
TRANSPOSITION ERROR - an error of data entry that occurs
when two digits that are either individual or part of a larger
sequence of numbers are accidentally reversed (transposed)
when posting a transaction.
SLIDE ERROR - an error that results from moving the decimal
point of a figure to the left or right of its correct position.
MISPOSTING ERROR - to transfer (an item) to an incorrect
ledger in bookkeeping.
INTEREST INCOME – interest to be recognized by the payee