ACCOUNTANCY AND PFRS PREFAC Flashcards
This organization said that Accounting is a service entity. 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 (ASC)
This organization said that Accounting is the art of recording, classifying, and summarizing in a significant manner and in terms of money, transactions ad events which are part at least of a financial character and interpreting the results thereof.
Committee on Accounting Terminology of the American Institute of Certified Public Accountants (CAT of AICPA)
This organization said that Accounting is the process of identifying, measuring, and communicating economic information to permit informed judgment and decision by users of the information.
***NOTE: Based from the definitions we can say that:
1. Accounting is a user-based discipline.
2. Accounting is quantitative in nature
3. Accounting is subject to interpretation.
***The definition that has stood the test of time.
American Accounting Association (AAA)
Three Important Aspects or Components of the Accounting Process
- Identifying process (Analytical Component)
- Measuring process (Technical Components)
- Communicating Process (Formal Component)
Three Important Aspects or Components of the Accounting Process
It is the process of analyzing events and transactions to determine whether or not they will be recognized.
-Only accountable events are recognized (i.e. journalized).
On the other hand, non-accountable events are not recognized but disclosed in the notes to financial statements if they have accounting relevance.
Identifying Process (Analytical Component)
Three Important Aspects or Components of the Accounting Process
What are the types of events and transactions
a. External Events
b. Internal Events
Types of events and transactions
This type of events and transactions are transactions involving the entity and another entity.
a. 1)Exchange - an event wherein there is a reciprocal giving and receiving of economic resources or extinguishment of obligations. Examples: sale, purchase, payment of liabilities
a. 2) Non-reciprocal transfer - is a one-way transaction when the entity giving does not receive anything in return. Examples: Donation, or gifts, payments of taxes and fines, theft, provision
a.3)External event other than transfer - an event that changes an entity’s economic resources or obligations caused by an external party or even but does not involve transfer or resources. Examples: changes in fair value, vandalism, obsolescence
External Events
Types of events and transactions
This type if events and transactions are events that do not involve outside party or event
b.1) Production
b.2) Casualty
Internal Events
Three Important Aspects or Components of the Accounting Process
This component is the process of determining the monetary amounts at which the elements of financial statements are to be recognized and carried in the balance sheet and income statement.
Measuring Process (Technical Component)
Three Important Aspects or Components of the Accounting Process
This component is the process of preparing and distributing accounting reports to potential users of accounting information. Implicit in this component are recording, classifying and summarizing aspects of accounting
Communicating Process (Formal Component)
Three Important Aspects or Components of the Accounting Process
This is the process of systematically maintaining a record of all economic business transactions after they have been identified and measured.
Recording or Journalizing
Three Important Aspects or Components of the Accounting Process
This is the sorting or grouping of similar and interrelated economic transactions into their respective class. Accomplished by posting to the ledger.
Classifying
Three Important Aspects or Components of the Accounting Process
This is the preparation of financial statements which include the statement of financial position, income statement, statement of comprehensive income, statement of cash flows, and statement of changes in equity
Summarizing
This is the law regulating the practice of accountancy in the Philippines. This law is known as the Philippine Accountancy Act of 2004.
Republic Act No. 9298
This is the body authorized by law to promulgate the rules and regulations
Professional Regulatory Board of Accountancy (PR-BOA)