Chapter 1 - Accounting Profession

Question 1

The Accounting Standards Council (ASC) provides the following definition of Accounting:

Answer 1

1. Service Activity
2. Accounting function - provide quantitative information, primarily financial in nature, about economic entities, intended to be useful in making economic decisions

Question 2

American Institute of Certified Public Accountants (AICP)’s Committee on Accounting Terminology defines Accounting as:

Answer 2

AICP-RCS

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 a financial character and interpreting the results thereof.

Question 3

Meaning of ASC

Answer 3

Accounting Standards Council

Question 4

They define Accounting as the process of Identifying, Measuring, and Communicating economic information to permit informed judgement and decision by users of the information.

Answer 4

AAA-IMC

American Accounting Association (AAA) in its Statement of Basic Accounting Theory

Question 5

Meaning of AAA

Answer 5

American Accounting Association

Question 6

What is the process of preparing and distributing accounting reports to potential users of accounting information?

Answer 6

Communicating

Question 7

These processes are pointless if the information contained in the accounting records cannot be communicated.

Answer 7

Identifying and Measuring

Question 8

What are the 3 implicit aspects in Communication process?

Answer 8

1. Recording
2. Classifying
3. Summarizing

*These 3 aspects are the processes mentioned in the American Institute of Certified Public Accountants (AICPA)’s Committee on Accounting Terminology definition.

Question 9

What is the process of systematically maintaining a record of all economic business transactions after they have been identified and measured?

Answer 9

Recording and Journalizing

Question 10

What is the process of sorting or grouping of similar and interrelated economic transactions into their respective classes?

Answer 10

Classifying

Question 11

How does the process of Classifying is accomplished?

Answer 11

By posting to the Ledger

Question 12

It is a group of accounts which are systematically categorized into asset accounts, liability accounts, equity accounts, revenue accounts, and expense accounts.

Answer 12

Ledger

Question 13

What is the process of preparing the Financial Statements?

Answer 13

Summarizing

Question 14

Financial Statements include:

Answer 14

1. Statement of Financial Position or Balance Sheet
2. Statement of Financial Performance or Income Statement
3. Statement of Comprehensive Income
4. Statement of Changes in Equity
5. Statement of Cash Flows

Question 15

Accounting is an information system that…

Answer 15

Accounting is an information system that

1. Measures business activities
2. Processes information into reports
3. Communicates reports

Question 16

These refer to the documents that report financial information about an entity to decision makers.

Answer 16

Set of Financial Statements

Question 17

It tells us how well an entity is performing in terms of profit or loss and where it stands in financial terms.

Answer 17

Financial reports

Question 18

What is the overall objective of Accounting?

Answer 18

The overall objective of Accounting is to provide quantitative information about a business that is useful to statement users (owners and creditors) in making economic decisions.

Question 19

What is the Accountants’ primary task?

Answer 19

Supply financial information so that the statement users (owners and creditors) could make informed judgement and better decisions.

Question 20

What is the essence of Accounting?

Answer 20

Decision usefulness

Question 21

What is the law that regulates the practice of accountancy in the Philippines?

Answer 21

Republic Act No. 9298

Question 22

This refers to the body authorized by law to promulgate rules and regulations affecting the practice of the accountancy profession in the Philippines.

Answer 22

Board of Accountancy

Question 23

It is responsible for preparing and grading the Philippine CPA examination

Answer 23

Board of Accountancy

Question 24

A ____________ shall be issued to CPAs in public practice only upon showing in accordance with rules and regulations promulgated by the _____________ and approved by the _____________ .

Answer 24

Certificate of Accreditation, Board of Accountancy, Professional Regulation Commission

Question 25

Meaning of PRC

Answer 25

Professional Regulation Commission

Question 26

It shall NOT register any corporation organized for the practice of public accountancy.

Answer 26

Securities and Exchange Commission

Question 27

Number of years the Certificate of Registration for public accountancy is valid

Answer 27

It is only valid for 3 years

Question 28

CPA’s generally practice their profession in these 3 main areas:

Answer 28

1. Public Accounting
2. Private Accounting
3. Government Accounting

Question 29

What is the field of Accounting that is composed of individual practitioners, small accounting firms, and large multinational organizations that render independent and expert financial services to the public?

Answer 29

Public Accounting

Question 30

Public Accountants usually offer these three kinds of services:

Answer 30

1. Auditing
2. Taxation
3. Management Advisory Services

Question 31

It is the examination of financial statements by independent CPA for the purpose of expressing opinion as tot he fairness with which the financial statements are prepared.

Answer 31

Auditing

Question 32

It is the attest function of Independent CPAs.

Answer 32

External Auditing

Question 33

It includes the preparation of annual income tax returns and determination of tax consequences of certain proposed business endeavors.

Answer 33

Taxation service