Accounting Basics Overview

Podcast

Play an AI-generated podcast conversation about this lesson

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?

A company purchasing inventory from a supplier Signup and view all the answers

What are the two measurement bases commonly used in accounting?

Historical cost and fair value Signup and view all the answers

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

Summarizing data in multiple formats Signup and view all the answers

What type of internal transaction occurs through production?

Transformation of resources into products Signup and view all the answers

What role does recording play in the accounting process?

It systematically maintains records of transactions Signup and view all the answers

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

To achieve uniformity in accounting principles for financial reporting. Signup and view all the answers

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

International Accounting Standards Board (IASB) Signup and view all the answers

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

Research, discussion paper, exposure draft, accounting standard. Signup and view all the answers

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

PFRS includes standards that are numbered the same as IFRS. Signup and view all the answers

What did the IFRIC replace?

Standing Interpretation Commission (SIC) Signup and view all the answers

Why is the shift toward IFRS considered essential?

To achieve one uniform and globally accepted financial reporting standard. Signup and view all the answers

What entities are covered under the Philippine Financial Reporting Standards?

All organizations, including public and private sectors. Signup and view all the answers

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

To formulate and publish international accounting standards. 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?

Three years Signup and view all the answers

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

Three years Signup and view all the answers

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

120 units Signup and view all the answers

Which area requires the most CPD units for CPA accreditation?

Technical Competence Signup and view all the answers

What is the main purpose of classifying economic transactions?

To sort similar transactions into classes Signup and view all the answers

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

65 years Signup and view all the answers

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

Management reports Signup and view all the answers

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

Analyzing transactions Signup and view all the answers

What does the Philippine Accountancy Act of 2004 regulate?

The practice of accountancy in the Philippines Signup and view all the answers

What does government accounting primarily focus on?

Administration of public funds Signup and view all the answers

Which of the following best describes public accounting?

A field for independent financial services to the public Signup and view all the answers

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

5 units Signup and view all the answers

Which activity is part of the management advisory services?

Advice on computer system installation Signup and view all the answers

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

To promulgate rules and regulations for accountancy practice Signup and view all the answers

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

Internal auditing for corporations Signup and view all the answers

Who can practice public accountancy in the Philippines?

Only registered certified public accountants Signup and view all the answers

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

To establish and improve accounting standards generally accepted in the Philippines Signup and view all the answers

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

Financial Reporting Standards Council Signup and view all the answers

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

Approved statements of the Financial Reporting Standards Council Signup and view all the answers

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

15 members Signup and view all the answers

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

Department of Education Signup and view all the answers

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

To prepare interpretations of the PFRS for FRSC approval Signup and view all the answers

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

They ensure consistency and comparability in financial statements. Signup and view all the answers

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

Accounting Standards Council Signup and view all the answers

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.

Studying That Suits You

Use AI to generate personalized quizzes and flashcards to suit your learning preferences.

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.