Nature and Purpose of Accounting

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Questions and Answers

What is the primary function of classifying in accounting?

Preparing financial reports

Grouping items under a common category (correct)

Summing up financial data

Analyzing financial conditions

Which body is responsible for issuing International Financial Reporting Standards?

International Financial Reporting Standards Interpretations Committee

Philippine Interpretations Committee

Financial Reporting Standards Council

International Accounting Standards Board (correct)

What is the purpose of the IFRIC Interpretations?

To create new accounting standards

To summarize financial data

To develop guidance on financial reporting issues (correct)

To manage the IASB's agenda

When was the International Accounting Standards Board formed?

2001 Signup and view all the answers

Which stage is NOT part of the IASB's due process for developing IFRSs?

Comprehensive review of existing standards Signup and view all the answers

What was the name of the IASB's interpretative body before December 2001?

Standards Interpretations Committee Signup and view all the answers

What does summarizing in accounting primarily involve?

Preparing various financial reports Signup and view all the answers

What happens to IFRIC Interpretations once they are approved by the IASB?

They become part of IFRS Signup and view all the answers

What is the primary purpose of accounting?

To provide necessary information for economic decision-making Signup and view all the answers

Which of the following is NOT a phase of accounting?

Estimating Signup and view all the answers

The process of identifying in accounting refers to which of the following?

Recognizing financial events that are accountable Signup and view all the answers

What does the communicating component of accounting involve?

Summarizing and distributing accounting reports Signup and view all the answers

Which organization is NOT mentioned as defining accounting?

International Financial Reporting Standards (IFRS) Signup and view all the answers

Which of the following best describes accounting?

A service activity providing quantitative financial information Signup and view all the answers

What does measuring in accounting involve?

Assigning amounts to economic events Signup and view all the answers

What characterizes the accounting nature as 'the language of business'?

The ability to share information effectively Signup and view all the answers

What was the primary role of the Financial Reporting Standards Council (FRSC) in the Philippines?

To set accounting standards Signup and view all the answers

What is the new name of the Financial Reporting Standards Council (FRSC) after its renaming?

Financial and Sustainability Reporting Standards Council (FSRSC) Signup and view all the answers

Which committee was created by the FSRSC to assist in sustainability reporting?

Philippine Sustainability Reporting Committee (PSRC) Signup and view all the answers

What does IFRS stand for?

International Financial Reporting Standards Signup and view all the answers

Which entity is responsible for promulgating rules and regulations affecting accountancy practice in the Philippines?

Professional Regulatory Board of Accountancy (PRBOA) Signup and view all the answers

What is the role of the Philippine Interpretations Committee (PIC)?

To develop interpretations of existing accounting standards Signup and view all the answers

Which organization was established by the IFRS Foundation to set sustainability disclosure standards?

International Sustainability Standards Board (ISSB) Signup and view all the answers

What was the predecessor of the International Accounting Standards Board (IASB)?

International Accounting Standards Committee (IASC) Signup and view all the answers

What does the Professional Regulatory Board of Accountancy (PRBOA) Resolution No. 44 Series of 2022 approve?

The adoption of IFRS Sustainability Disclosure Standards Signup and view all the answers

What is the primary purpose of accounting standards?

To identify suitable accounting practices for financial statements Signup and view all the answers

Which entity does NOT form part of the Philippine Sustainability Reporting Committee (PSRC)?

International Monetary Fund (IMF) Signup and view all the answers

Which of the following is NOT an accountancy-related organization mentioned?

International Financial Reporting Standards Board (IFRSB) Signup and view all the answers

Which law regulates the practice of accountancy in the Philippines?

Republic Act No. 9298 Signup and view all the answers

What type of interpretations does the Philippine Interpretations Committee (PIC) issue?

PIC Interpretations Signup and view all the answers

The Professional Regulation Commission (PRC) supervises which body?

Professional Regulatory Board of Accountancy (PRBOA) Signup and view all the answers

Which of the following standards was adopted by the Securities and Exchange Commission in the Philippines?

Philippine Accounting Standards (PAS) Signup and view all the answers

What is a requirement for CPAs to practice public accountancy?

Minimum of three years of meaningful experience Signup and view all the answers

What type of accountancy practice involves assisting management in decision-making activities?

Private Accountancy Signup and view all the answers

How often must CPAs renew their certificate of registration to practice public accountancy?

Every three years Signup and view all the answers

What is the minimum number of Continuing Professional Development (CPD) units required to be accredited to practice accountancy?

120 units Signup and view all the answers

In which setting do CPAs who work in the education field primarily operate?

Educational institutions Signup and view all the answers

Which of the following is NOT a service typically provided in public accountancy?

Teaching accounting Signup and view all the answers

What is the maximum number of CPD units that can be carried over to the next three-year period?

None Signup and view all the answers

Which governmental body is NOT mentioned as a common employer for CPAs?

Department of Education (DepEd) Signup and view all the answers

Study Notes

Nature of Accounting

Accounting is a service activity that provides quantitative financial information about economic entities.
This information helps users make informed economic decisions.
It's the process of identifying, measuring, and communicating economic information.
A system that measures business activity, creates reports, and communicates findings to decision-makers.
Accounting involves recording, classifying, and summarizing financial transactions and events.
Interpretation of results is also part of accounting.
This information is defined by various accounting standards bodies (ASC, AAA, PICPA, AICPA)

Purpose and Objective of Accounting

The objective of accounting is to provide information needed for economic decision-making.

Components of Accounting

Identifying: Recognizing business activities/transactions as accountable events. Only transactions with financial impact are considered. An event is considered accountable if it affects assets, liabilities, or equity.
Measuring: Assigning amounts to accountable economic events and transactions.
Communicating: Summarizing information into reports and sharing them with users.

Phases of Accounting

Recording: Systematically recording financial transactions chronologically in appropriate books. Also known as bookkeeping.
Classifying: Sorting and grouping similar transactions into categories.
Summarizing: Summing financial data into reports, graphs or charts, to improve understanding.
Interpreting: Analyzing financial reports for meaningful judgments regarding financial condition and performance.

Accounting Standard-Setting Bodies

International Accounting Standards Board (IASB): Issues International Financial Reporting Standards (IFRS).
International Financial Reporting Standards Interpretations Committee (IFRSIC): Develops interpretations for existing IFRS and IAS.
Financial Reporting Standards Council (FRSC): Sets generally accepted accounting principles (GAAP) in the Philippines. Issues Philippine Accounting Standards (PAS) and Philippine Financial Reporting Standards (PFRS).
Philippine Interpretations Committee (PIC): Interprets PAS and PFRS.

Other Relevant Information

Accounting is also known as the "language of business".
The International Sustainability Standards Board (ISSB) establishes standards for sustainability disclosures.

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Description

Explore the fundamental components and objectives of accounting through this quiz. Test your understanding of how accounting provides vital financial information for economic decision-making and the processes involved in recording and summarizing financial activities.