Accounting Basics Overview
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Questions and Answers

What is the primary purpose of accounting?

  • To provide quantitative information for economic decision making (correct)
  • To evaluate the performance of employees
  • To generate statistical reports for management
  • To handle tax compliance for businesses

In the accounting process, what does the term 'identifying' refer to?

  • Measuring the value of assets and liabilities
  • Recognizing business activities as accountable events (correct)
  • Classifying economic transactions into categories
  • Interpreting financial reports for decision-making

What is meant by 'measurement' in the context of accounting?

  • Analyzing trends in financial data
  • Assigning monetary values to accountable economic transactions (correct)
  • Distributing accounting reports to users
  • The process of preparing financial statements

Which of the following types of transactions represents external transactions?

<p>A company purchasing inventory from a supplier (D)</p> Signup and view all the answers

What are the two measurement bases commonly used in accounting?

<p>Historical cost and fair value (A)</p> Signup and view all the answers

Which of the following is NOT a characteristic of the accounting communication process?

<p>Summarizing data in multiple formats (D)</p> Signup and view all the answers

What type of internal transaction occurs through production?

<p>Transformation of resources into products (B)</p> Signup and view all the answers

What role does recording play in the accounting process?

<p>It systematically maintains records of transactions (D)</p> Signup and view all the answers

What is the primary objective of the International Accounting Standards Committee (IASC)?

<p>To achieve uniformity in accounting principles for financial reporting. (D)</p> Signup and view all the answers

Which organization replaced the International Accounting Standards Committee (IASC)?

<p>International Accounting Standards Board (IASB) (A)</p> Signup and view all the answers

What is the sequence of the IASB standard-setting process?

<p>Research, discussion paper, exposure draft, accounting standard. (B)</p> Signup and view all the answers

How does the Philippine Financial Reporting Standards (PFRS) relate to the International Financial Reporting Standards (IFRS)?

<p>PFRS includes standards that are numbered the same as IFRS. (A)</p> Signup and view all the answers

What did the IFRIC replace?

<p>Standing Interpretation Commission (SIC) (A)</p> Signup and view all the answers

Why is the shift toward IFRS considered essential?

<p>To achieve one uniform and globally accepted financial reporting standard. (D)</p> Signup and view all the answers

What entities are covered under the Philippine Financial Reporting Standards?

<p>All organizations, including public and private sectors. (A)</p> Signup and view all the answers

What is the role of the International Accounting Standards Board (IASB)?

<p>To formulate and publish international accounting standards. (D)</p> Signup and view all the answers

What is the minimum number of years of experience required for a CPA to receive a certificate of accreditation in public practice?

<p>Three years (B)</p> Signup and view all the answers

How long is the certificate of registration to practice public accountancy valid?

<p>Three years (C)</p> Signup and view all the answers

What is the total number of CPD units required for the accreditation of a CPA every three years?

<p>120 units (A)</p> Signup and view all the answers

Which area requires the most CPD units for CPA accreditation?

<p>Technical Competence (D)</p> Signup and view all the answers

What is the main purpose of classifying economic transactions?

<p>To sort similar transactions into classes (D)</p> Signup and view all the answers

At what age is a CPA permanently exempted from CPD requirements?

<p>65 years (D)</p> Signup and view all the answers

Which of the following is NOT included in the financial statements summarization process?

<p>Management reports (A)</p> Signup and view all the answers

Which of the following is NOT included in the definition of private accounting?

<p>Analyzing transactions (B)</p> Signup and view all the answers

What does the Philippine Accountancy Act of 2004 regulate?

<p>The practice of accountancy in the Philippines (C)</p> Signup and view all the answers

What does government accounting primarily focus on?

<p>Administration of public funds (D)</p> Signup and view all the answers

Which of the following best describes public accounting?

<p>A field for independent financial services to the public (A)</p> Signup and view all the answers

How many CPD units are required in the area of Professional Values, Ethics & Attitude for CPA accreditation?

<p>5 units (B)</p> Signup and view all the answers

Which activity is part of the management advisory services?

<p>Advice on computer system installation (C)</p> Signup and view all the answers

What is the role of the Board of Accountancy in the Philippines?

<p>To promulgate rules and regulations for accountancy practice (D)</p> Signup and view all the answers

What is NOT a service provided in the field of public accounting?

<p>Internal auditing for corporations (A)</p> Signup and view all the answers

Who can practice public accountancy in the Philippines?

<p>Only registered certified public accountants (B)</p> Signup and view all the answers

What is the primary function of the Financial Reporting Standards Council (FRSC)?

<p>To establish and improve accounting standards generally accepted in the Philippines (D)</p> Signup and view all the answers

Which of the following accounting bodies is primarily responsible for the promulgation of Filipino accounting standards?

<p>Financial Reporting Standards Council (A)</p> Signup and view all the answers

What are the Philippine Accounting Standards (PAS) and Philippine Financial Reporting Standards (PFRS)?

<p>Approved statements of the Financial Reporting Standards Council (B)</p> Signup and view all the answers

How many members are part of the Financial Reporting Standards Council?

<p>15 members (D)</p> Signup and view all the answers

Which of the following is NOT a component of the Financial Reporting Standards Council composition?

<p>Department of Education (C)</p> Signup and view all the answers

The Philippine Interpretations Commission (PIC) was created to serve what purpose?

<p>To prepare interpretations of the PFRS for FRSC approval (C)</p> Signup and view all the answers

Why are generally accepted accounting principles (GAAP) important in financial reporting?

<p>They ensure consistency and comparability in financial statements. (D)</p> Signup and view all the answers

Which organization was initially responsible for formalizing GAAP in the Philippines?

<p>Accounting Standards Council (A)</p> Signup and view all the answers

Flashcards

Identifying in accounting

The process of recognizing or not recognizing business activities as 'accountable' events. It involves identifying events that have a quantifiable impact on assets, liabilities, and equity.

External transactions

Economic events that involve one entity and another entity.

Internal transactions

Economic events that happen solely within a business. No other parties are involved.

Measuring in accounting

Assigning peso amounts to accountable economic events, effectively putting a price tag on transactions.

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Historical cost

The original cost at which something was acquired.

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Communicating in accounting

The process of preparing and distributing accounting reports to potential users of accounting information.

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Recording or journalizing

Systematically maintaining a record of all economic business transactions after they have been identified and measured.

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Classifying and summarizing in accounting

The act of arranging, classifying, and summarizing accounting information in a meaningful way

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Classifying in accounting

The process of sorting and grouping similar economic transactions into their respective categories.

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Summarizing in accounting

The preparation of financial statements, such as the balance sheet, income statement, and cash flow statement.

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Auditing in public accounting

The act of examining a company's financial records by an independent expert to provide an opinion on the reliability of the financial statements.

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Management advisory services

Providing advice on various business matters, including financial reporting, accounting systems, and tax planning.

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Public accounting

The field of accounting focused on providing financial services to the public.

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Philippine Accountancy Act of 2004

The law regulating the practice of accountancy in the Philippines. It mandates requirements and standards for accountants.

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Board of Accountancy in the Philippines

The governing body responsible for setting and enforcing rules related to the accounting profession in the Philippines.

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Accounting (as a field)

A specific branch of accounting, such as public, private, or government accounting.

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Certificate of Accreditation

A document that allows a Certified Public Accountant (CPA) to practice public accounting, valid for three years, and requiring renewal every three years. To obtain this, a CPA needs a minimum of three years of meaningful experience in public practice, including taxation.

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Government Accounting

The process of analyzing, classifying, summarizing, and communicating all transactions involving the receipt and disposition of government funds and property, with a focus on the custody and administration of public funds.

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Continuing Professional Development (CPD)

A mandatory program for all regulated professions, including accounting, to enhance knowledge, skills, and ethics after initial registration.

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CPD Credit Units

The units required for professional development to renew a CPA license (15 units) or to be accredited for public practice (120 units).

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Private Accounting

The area of accounting that focuses on maintaining records, preparing budgets, and controlling resources within a specific organization.

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Required Public Accounting Experience for Accreditation

The minimum number of years of public accounting experience required to obtain the Certificate of Accreditation to practice public accounting. A CPA must have a minimum of three years of experience in public accounting practice including taxation.

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Accounting Process

The process of identifying, measuring, recording, classifying, summarizing, and communicating economic events within a company.

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Exemption from CPD for CPAs over 65

The exemption from CPD requirements for CPAs who reach the age of 65 years.

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Generally Accepted Accounting Principles (GAAP)

A set of rules, procedures, and standards followed when preparing and presenting financial statements. Think of them as the laws of financial reporting.

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Financial Reporting Standards Council (FRSC)

The main accounting standard-setting body in the Philippines, responsible for establishing and improving accounting standards for Philippine companies.

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Philippine Accounting Standards (PAS) & Philippine Financial Reporting Standards (PFRS)

The official accounting standards issued by the FRSC, used by companies in the Philippines.

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Philippine Interpretations Commission (PIC)

A body created by the FRSC to provide interpretations of PFRS and guidance on financial reporting issues not specifically addressed in the standards.

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Purpose of Accounting Standards

The overall purpose of accounting standards is to ensure that financial statements accurately reflect a company's financial position and performance. This provides a common understanding between preparers and users of financial statements.

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Importance of High-Quality Accounting Standards

High-quality accounting standards help ensure that financial statements are comparable and uniform, allowing investors and creditors to make informed decisions.

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Development of Accounting Standards

Accounting standards are created by a body of experts and are subject to ongoing review and updates to reflect changes in business practices and economic conditions.

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What are PAS & PFRS?

The approved statements of the Financial Reporting Standards Council (FRSC) are known as Philippine Accounting Standards (PAS) and Philippine Financial Reporting Standards (PFRS).

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International Accounting Standards Committee (IASC)

An independent organization focused on creating global accounting standards for financial reporting, promoting uniformity across businesses worldwide.

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International Accounting Standards Board (IASB)

The successor to IASC, publishing a set of accounting standards called International Financial Reporting Standards (IFRS) to achieve standardized financial reporting globally.

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Philippine Financial Reporting Standards (PFRS)

A collection of accounting standards adopted in the Philippines, aligning with IFRS and IAS to achieve consistent financial reporting.

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Philippine Financial Reporting Standards (PFRS)

The standards within PFRS that correspond to IFRS.

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Philippine Accounting Standards (PAS)

The standards within PFRS that correspond to IAS.

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Philippine Interpretations

Interpretations within PFRS that align with the IFRIC's explanations of IFRS, providing further guidance for complex situations.

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IASB Standard-Setting Process

The process of IASB making new accounting standards, following a specific order of steps: research, discussion paper, exposure draft, and final standard.

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The Move Toward IFRS

The goal of using a single, globally accepted set of accounting standards to improve transparency and comparability across different countries.

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Study Notes

Accounting Definition

  • Accounting is a service activity providing quantitative financial information about economic entities.
  • It's the art of recording, classifying and summarizing financial transactions and events.
  • Accounting is the process of identifying, measuring, and communicating economic information for informed judgments and decisions.

Identifying

  • The process recognizes or doesn't recognize business activities as "accountable" events.
  • An event is accountable when it affects assets, liabilities, and equity.
  • Types of events include: external transactions (involving two entities), internal transactions (within one entity), production, and casualties.

Measuring

  • Assigning peso amounts to accountable economic transactions and events.
  • The Philippine Peso is the unit of measurement for those transactions.
  • Measurement bases include historical cost (original acquisition cost) and current value (fair value, value in use, fulfillment value, current cost).

Communicating

  • Preparing and distributing accounting reports to potential users.
  • Recording, classifying, and summarizing are implicit in the communication process.
  • Recording or journalizing records transactions.
  • Classifying groups similar transactions in ledgers.
  • Summarizing creates financial statements (statement of financial position, income statement, statement of comprehensive income, statement of changes in equity, statement of cash flows).

The Accountancy Profession

  • Republic Act No. 9298 (Philippine Accountancy Act of 2004) regulates accountancy practice in the Philippines.
  • The Board of Accountancy is the body that promulgates rules and regulations.
  • Accounting encompasses public, private, and government accounting.
  • Public accounting includes individual practitioners, small firms, and large multinational organizations providing independent financial services to the public.

Accreditation to Practice Public Accountancy

  • The Professional Regulation Commission (PRC) issues certificates.
  • Requirements for licensure include three years of experiences in public accounting areas like taxation.
  • Certificates are valid for three years, renewable.

Continuing Professional Development (CPD)

  • Republic Act No. 10912 mandates CPD for accountancy professionals.
  • CPD is the acquisition of advanced knowledge, skills, and proficiency after initial registration involving professional expertise, ethics and values.
  • Continuing education requirements exist for licensure renewals and professional accreditation.
  • CPA renewal requires CPD credits (15 units).
  • Accreditation requires 120 CPD credits.

Generally Accepted Accounting Principles (GAAP)

  • GAAP are the rules, procedures, and standards for preparing financial statements.
  • They ensure comparability and uniformity across financial statements.

Different Accounting Bodies

  • Financial Reporting Standards Council (FRSC) is the accounting standards setting body formed by the Professional Regulation Commission (PRC).
  • FRSC sets generally accepted accounting standards in the Philippines.
  • Approved pronouncements are called Philippine Accounting Standards (PAS) and Philippine Financial Reporting Standards (PFRS).

International Accounting Standards

  • International Accounting Standards Board (IASB) develops International Financial Reporting Standards (IFRS).
  • IFRS is the goal for one globally unified financial reporting standard.
  • The Philippine Financial Reporting Standards (PFRS) correspond to IFRS.

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Lecture: The Accountancy Profession PDF

Description

This quiz covers fundamental concepts of accounting, including definitions and the processes of identifying and measuring financial transactions. Understand how to recognize accountable events and the importance of different measurement bases. Perfect for anyone looking to enhance their accounting knowledge.

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