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)
What are the 4 sectors of accountancy?
- Practice in Public Accountancy
- Practice in Commerce and Industry
- Practice in Education or Academe
- Practice in the Government
***NOTE: Practicing under numbers 2-4 are considered in private practice
4 sectors of accountancy
This involves rendering of accounting and auditing services to one or more clients on a fee basis
Services Rendered:
a. Auditing has traditionally been the primary service offered. Auditing or specifically external auditing is the “examination of financial statements by independent certified public accountant for the purpose of expressing an opinion as to the fairness with which the financial statements are prepared” This represents the “ATTEST FUNCTION” of CPAs.
b. Taxatioj service includes the preparation of annual income tax returns and determination of tax consequences of certain proposed business endeavors. The CPA not infrequently represents the client in tax investigations
c. Management advisory service has no precise coverage. generally, this refers to services to clients on matters of accounting, finance, business policies, organization procedures, product costs, distribution and many other phases of business and operations.
Limitations:
a. Certificate of Accreditation
-Requires three years of meaningful experience
-CPD requirements
b. NO corporation form is allowed to be registered for the practice of public accountancy
Public Accountancy
4 sectors of accountancy
-This sector is also known as private accounting.
-This refers to employment in the private sector in a position that involves decision-making requiring professional knowledge in the science of accounting. The highest accounting officer is a business entity is a controller.
Commerce and Industry
4 sectors of accountancy
This sector is employment in an education institution which involves teaching of accounting, auditing, MAS, law, taxation, finance, and other related topics.
Education or Academe
4 sectors of accountancy
This sector is employment r appointment to a position in an accounting professional group in the government or GOCC which involves decision making requiring professional knowledge in the science of accounting or where civil service eligibility as a CPA is a pre-requisite.
Government
Preface to PFRS
These are the laws in accounting, used as a guide in the preparation of financial statements. These are guiding principles rather than law, technically speaking. Meaning, that this is principle-based rather than rule-based.
IFRS/PFRS/GAAP
Preface to PFRS
This set out recognition, measurement, presentation and disclosure requirements dealing with transactions and events that are important in general purpose financial statements.
PFRS
Preface to PFRS
What is the Scope of PFRS
PFRS apply to all profit-oriented entities preparing general purpose financial statements. These financial statements are directed towards the common information needs of a wide range of users.
Preface to PFRS
What is the Structure of PFRS?
Standards approved by FRSC include paragraphs in bold type and plain type, which have equal authority. Paragraphs in bold type indicate the main principles while paragraphs in plain type indicate supporting principles.
