Accounting Processes

• Accounting is a service activity, process, or science, that provides quantitative information useful for making economic decisions.
• It can also be described as the art of recording, classifying, and summarizing transactions of a financial nature.
• Accounting involves identifying, measuring, and communicating economic information to enable informed decisions for users.

Accounting Processes

• Identifying involves recognizing or not recognizing business activities as "accountable" events, affecting assets, liabilities, and equity.
• Not all business activities are accountable.
• External transactions involve one entity and another, while internal transactions occur entirely within the entity, such as production or casualty.
• Measuring assigns peso amounts to accountable transactions.
• Communicating involves preparing and distributing accounting reports to potential users, making accounting a "universal language of business."
• Communication includes recording (journalizing), classifying (posting to the ledger), and summarizing (financial statements).

Objectives and Task of Accountants

• The overall objective is to provide quantitative financial information about businesses to help users, especially owners and creditors, make economic decisions.
• It is an information system that measures business activities, processes data into financial reports, and communicates these reports to decision-makers.
• The primary task is to supply financial information for users to make informed judgments and decisions.
• Financial reports indicate an entity's performance in terms of profit and loss and its financial standing.

The Accountancy Profession

• Republic Act No. 9298, the Philippine Accountancy Act of 2004, regulates accountancy practice in the Philippines.
• Eligibility requires a Bachelor of Science in Accountancy and passing the CPA Examination by the Board of Accountancy (BOA).
• Computer-based Examinations are held twice annually, in May and October.
• The Board of Accountancy (BOA) formulates rules and regulations affecting accountancy practice and prepares and grades the CPA Exam.
• Only registered CPAs can practice public accountancy as single practitioners or in partnerships.
• A Certificate of Accreditation is issued to CPAs in public practice who meet BOA and PRC rules, including 3 years of experience in public practice, including taxation.
• The Securities and Exchange Commission (SEC) does not register corporations for public accountancy practice.
• All Public Accountants are required to register with BOA and PRC and Certificates of registration are valid for 3 years.

Areas of Accountancy Practice

• Public Accounting involves independent financial services to the public through individual practitioners, small firms, and multinational organizations that offer auditing, taxation, and management advisory services.
• Auditing involves examining financial statements by independent CPAs to express an opinion on their fairness.
• Taxation includes preparing income tax returns and determining tax consequences of business endeavors, requiring familiarity with tax laws and regulations.
• Management Advisory Services are to give advice on computer systems, quality control, accounting systems, budgeting, and forecasting.
• Private Accounting supports management in planning and controlling entity operations including maintaining records, preparing financial reports and budgets as well as controlling resources.
• The highest accounting officer is called the controller.
• Government Accounting focuses on the custody and administration of public funds, examining transactions involving the receipt and disposition of government funds and property.
• Common Government agencies include the BIR, COA, SEC, and BSP.

Continuing Professional Development (CPD)

• Republic Act No. 10912 mandates and strengthens CPD for all regulated professions.
• CPD ensures the acquisition of advanced knowledge, skill, and proficiency, enhancing CPAs' technical skills and competence.
• CPAs need to comply with 120 CPD credit units for accreditation and 15 CPD Units for license renewal, every 3 years.
• CPA's 65 years old and above are permanently exempted from CPD requirements when renewing their license, but not accreditation.
• Excess credit units do not carry over but masteral and doctoral degrees do.

Key Accounting Comparisons

• Accounting is constructive whereas Auditing is analytical.
• Accountants prepare financial statements, while auditors examine their conformity with accounting principles.
• Accounting is conceptual ("why"), while Bookkeeping is procedural ("how") and concerned with maintaining the records.
• Accountancy is the profession of accounting practice, while Accounting refers to specific fields like public, private, or government accounting.
• Financial Accounting emphasizes reporting to creditors and investors, along with the creation of financial statements for general use.
• Managerial Accounting focuses on preparing financial reports for internal users of an entity.

Accounting Principles and Standards

• Generally Accepted Accounting Principles (GAAP) are rules, procedures, and practices developed through experience, reason, custom, usage, and practical necessity.
• GAAP is followed in financial statement preparation and presentation.
• Accounting standards identify proper accounting practices, create common understanding, and ensure comparability and uniformity in financial statements.
• The Financial Reporting Standards Council (FRSC), formerly the Accounting Standards Council, establishes and improves accounting standards in the Philippines.
• Approved statements are known as Philippine Accounting Standards (PAS) and Philippine Financial Reporting Standards (PFRS).
• The Philippine Interpretations Committee (PIC) prepares interpretations of PFRS for FRSC approval.
• The International Accounting Standards Committee (IASC) aims to achieve uniformity in global accounting principles.
• Headquartered in London, UK, the IASC formulates standards for financial statement presentation and promotes their worldwide acceptance.
• The International Accounting Standards Board (IASB), formerly IASC, publishes standards in a series of pronouncements called International Financial Reporting Standards (IFRS).
• The standard-setting process includes research, discussion paper, exposure draft, and accounting standard.
• The adoption of IFRS is essential for achieving globally accepted financial reporting standards.
• Philippine Financial Reporting Standards collectively include PFRS (IFRS), PAS (IAS), and PIC (IFRIC).