Chapter 1 - Accounting Profession Flashcards
The Accounting Standards Council (ASC) provides the following definition of Accounting:
- Service Activity
- Accounting function - provide quantitative information, primarily financial in nature, about economic entities, intended to be useful in making economic decisions
American Institute of Certified Public Accountants (AICP)’s Committee on Accounting Terminology defines Accounting as:
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.
Meaning of ASC
Accounting Standards Council
They define Accounting as the process of Identifying, Measuring, and Communicating economic information to permit informed judgement and decision by users of the information.
AAA-IMC
American Accounting Association (AAA) in its Statement of Basic Accounting Theory
Meaning of AAA
American Accounting Association
What is the process of preparing and distributing accounting reports to potential users of accounting information?
Communicating
These processes are pointless if the information contained in the accounting records cannot be communicated.
Identifying and Measuring
What are the 3 implicit aspects in Communication process?
- Recording
- Classifying
- Summarizing
*These 3 aspects are the processes mentioned in the American Institute of Certified Public Accountants (AICPA)’s Committee on Accounting Terminology definition.
What is the process of systematically maintaining a record of all economic business transactions after they have been identified and measured?
Recording and Journalizing
What is the process of sorting or grouping of similar and interrelated economic transactions into their respective classes?
Classifying
How does the process of Classifying is accomplished?
By posting to the Ledger
It is a group of accounts which are systematically categorized into asset accounts, liability accounts, equity accounts, revenue accounts, and expense accounts.
Ledger
What is the process of preparing the Financial Statements?
Summarizing
Financial Statements include:
- Statement of Financial Position or Balance Sheet
- Statement of Financial Performance or Income Statement
- Statement of Comprehensive Income
- Statement of Changes in Equity
- Statement of Cash Flows
Accounting is an information system that…
Accounting is an information system that
- Measures business activities
- Processes information into reports
- Communicates reports
These refer to the documents that report financial information about an entity to decision makers.
Set of Financial Statements
It tells us how well an entity is performing in terms of profit or loss and where it stands in financial terms.
Financial reports
What is the overall objective of Accounting?
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.
What is the Accountants’ primary task?
Supply financial information so that the statement users (owners and creditors) could make informed judgement and better decisions.
What is the essence of Accounting?
Decision usefulness
What is the law that regulates the practice of accountancy in the Philippines?
Republic Act No. 9298
This refers to the body authorized by law to promulgate rules and regulations affecting the practice of the accountancy profession in the Philippines.
Board of Accountancy
It is responsible for preparing and grading the Philippine CPA examination
Board of Accountancy
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 _____________ .
Certificate of Accreditation, Board of Accountancy, Professional Regulation Commission
Meaning of PRC
Professional Regulation Commission
It shall NOT register any corporation organized for the practice of public accountancy.
Securities and Exchange Commission
Number of years the Certificate of Registration for public accountancy is valid
It is only valid for 3 years
CPA’s generally practice their profession in these 3 main areas:
- Public Accounting
- Private Accounting
- Government Accounting
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?
Public Accounting
Public Accountants usually offer these three kinds of services:
- Auditing
- Taxation
- Management Advisory Services
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.
Auditing
It is the attest function of Independent CPAs.
External Auditing
It includes the preparation of annual income tax returns and determination of tax consequences of certain proposed business endeavors.
Taxation service
