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Chapter 1 - The Accountancy Profession

The document defines accounting and discusses its key components and objectives. It also describes the accountancy profession, distinguishing it from related fields like bookkeeping and auditing. The overall objective of accounting is to provide quantitative financial information to help users make informed decisions. The accountancy profession in the Philippines is regulated by the Philippine Accountancy Act and the Board of Accountancy, which oversees registration and standard setting.

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167 views4 pages

Chapter 1 - The Accountancy Profession

The document defines accounting and discusses its key components and objectives. It also describes the accountancy profession, distinguishing it from related fields like bookkeeping and auditing. The overall objective of accounting is to provide quantitative financial information to help users make informed decisions. The accountancy profession in the Philippines is regulated by the Philippine Accountancy Act and the Board of Accountancy, which oversees registration and standard setting.

Uploaded by

forn letty
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Chapter 1: The Accountancy Profession

1. Define Accounting

Accounting is the process of identifying, measuring and communicating economic information to permit
informed judgement and decision by users of the information.

2. What are the important points made in the definition of accounting?

Important points:

a) Accounting is about quantitative information.


b) The information is likely to be financial in nature.
c) The information should be useful in decision making.

Components of Accounting

a) Identifying – analytical component.


b) Measuring – technical component
c) Communicating – formal component

3. Explain “identifying” as component of accounting.

Recognition and nonrecognition of business activities as accountable events, because not all
business activities are accountable events. An event is accountable or quantifiable when it has an
effect on assets, liabilities and equity.

4. What are transactions?


Transactions are economic activities classified either external or internal.

5. Distinguish external and internal transactions.


a) External - economic events involving one entity and another entity.
b) Internal – economic events involving the entity only.

6. Explain “Measuring” as a component of accounting?

Assigning of peso amounts to the economic transactions and events.

7. What are the measurement bases used in accounting?


a) Historical Cost – most common measure of financial transactions.
b) Current Cost
c) Realizable Value
d) Present Value
8. Explain “Communicating” as component of accounting.
Process of preparing and distributing accounting reports to potential users of accounting
information. Communicating is the reason why accounting has been called “universal language of
business”.

9. Explain recording, classifying, and summarizing in relation to the communicating component of


accounting.
a) Recording or journalizing
b) Classifying – accomplished by posting to the ledger.
c) Summarizing – preparation of financial statements.
c.1 Statement of Financial Position
c.2 Income Statement
c.3 Statement of Comprehensive Income
c.4 Statement of changes in Equity
c.5 Statement of Cash flows
c.6 Notes

10. Explain accounting as an information system.


Accounting measures business activities, process into reports and communicate these reports.

11. What is the overall objective of accounting?


To provide quantitative information that is useful to users in making decisions.

12. Describe Accountancy Profession.


RA 9298 – is the law that regulates practice of accountancy in the Philippines.
Philippine Accountancy Act of 2004

Board of Accountancy – is the body authorized by law to promulgate rules and regulations affecting
the practice of accountancy profession.

13. Explain the limitation of the practice of accountancy.

a) Single practitioners and partnerships in public practice shall be CPA.


b) Certificate of Accreditation shall be issued only if such registrant has acquired a minimum of
three years of meaningful experience in any areas of public practice.
c) SEC shall not register any corporation organized for the practice of public accountancy.

14. Explain the accreditation to practice of accountancy.


a) Those in public practice should be register with the BOA and PRC.
b) PRC shall issue certificate of registration to practice public accountancy which shall be valid for
three years and renewable every three years with fee.
15. What are the three main areas in the practice of the accountancy profession.
a) Public Accounting – Auditing, taxation and management advisory services
b) Private Accounting
c) Government Accounting

16. Distinguish accounting and auditing.


Accounting is constructive in nature. It ceases when FS are already prepared.
Auditing is analytical. The work of an auditor begins when the work of accountant ends.

17. Distinguish accounting and bookkeeping.


Bookkeeping is procedural and concerned in maintaining accounting records. It is how of
accounting.
Accounting is conceptual and concerned with the why, reason or justification for any action
adopted.

18. Distinguish Accounting and Accountancy


Accountancy is profession and accounting serve as reference to a particular field.

19. What is Financial and Managerial Accounting?


Financial accounting is concerned with recording business transactions and preparation of general-
purpose reports or Financial statements for internal and external users (creditors and investors).
Managerial accounting is the accumulation and preparation of financial reports for internal users
only.

20. What is the meaning of generally accepted accounting principles or GAAP?


GAAP is conventional. It represents rules, procedures, practice and standards followed in the
preparation and presentation of financial statements.

21. Explain the purpose of accounting standards.


Is to identify proper accounting practices in preparation and presentation of financial statements. It
that creates common understanding between preparers and users and ensures comparability and
uniformity.

22. What do you understand about Financial Reporting Standard Council?


Previously ASC. A standard setting body created by PRC upon recommendation of BOA to assist
them in carrying out its powers and functions provided under RA 9298.

Its main function is to establish and develop GAAP. The accounting standards promulgate by the
body will be the highest hierarchy.
23. What is the composition of FRSC?

15 Members – 1 Chairman, 1 BOA, 1 SEC, 1 BSP, 1 BIR, 1 COA, 1 FINEX, and 8 Accredited national
professional organization of CPAs (2 in Public practice, 2 in Commerce in Industry, 2 in Academe and
Education, and 2 in government). Term is 3 years renewable for another term.

24. What do you understand about PIC and IFRIC?


Philippine Interpretations Committee – was formed by the FRSC. Its role is to prepare
interpretations of PFRS to provide authoritative guidance on financial reporting issues not
specifically addressed in current PFRS.

IFRIC – counterpart of PIC in UK.

25. What do you understand about International Accounting Standards Committee?

An independent private sector which objective is to achieve uniformity in the accounting principles.
a) Formulate and publish accounting standards
b) Improvement and harmonization of regulations, standards and procedures.

26. What is IASB?


Replaced by IASC. IASB publishes IFRS. However, it has adopted now by the International Accounting
Standards (IAS).

IFRS – Global Phenomenon intended to bring greater transparency and higher degree of
comparability in financial reporting.

27. What are collectively included in Philippine Financial Reporting Standards (PFRS)?
PFRS is our GAAP and include all of the following:
a) PFRS
b) PAS
c) PIC

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