Accounting and Its Environment PDF 2024

UNIVERSITY OF SOUTHERN MINDANAO Chapter 1 Accounting and Its Environment AEC 01: Financial Accounting and Reporting Prepared by: Sandra Angela A. Bangcaya 2024  Learning Objectives Discuss accounting and explain its role in business....

UNIVERSITY OF SOUTHERN MINDANAO Chapter 1 Accounting and Its Environment AEC 01: Financial Accounting and Reporting Prepared by: Sandra Angela A. Bangcaya 2024  Learning Objectives Discuss accounting and explain its role in business. Describe the fundamental business model and find how it is applied to the various types of business. Distinguish between different forms and activities of business organizations. Explain the importance of the purpose and phases of accounting. Explain the fundamental accounting concepts and principles. AEC 01. Chapter 1. Page 2  Learning Objectives Summarize the salient features of the Accountancy Act of 2004, the Core Competencies Framework and the Code of Ethics for Professional Accountants and harness them to attain professional advancement. Explain why ethics are crucial in accounting. Identify and discuss the career opportunities open to accountants. AEC 01. Chapter 1. Page 3  Definition of Accounting Accounting is a service activity. Its function is to provide quantitative information, primarily financial in nature, about economic entities that is intended to be useful in making economic decisions. (Accounting Standards Council) Accounting is the art of recording, classifying, summarizing in a significant manner and in terms of money, transactions and events which are, in part at least, of a financial character, and interpreting the results thereof. (American Institute of Certified Public Accountants) AEC 01. Chapter 1. Page 4 Fundamental Business Model AEC 01. Chapter 1. Page 5  Types of Business Generally there are three types of business: 1. Servicing 2. Merchandising 3. Manufacturing Products and services that businesses offer: 1. Service 5. Infrastructure 2. Trader 6. Financial 3. Manufacture 7. Insurance 4. Raw Materials AEC 01. Chapter 1. Page 6  Forms of Business Organizations Sole Proprietorship. There is only one owner called the proprietor. The owner receives all profits, absorbs all losses and is solely responsible for all debts of the business. Partnership. In a contract of partnership, two or more persons bind themselves to contribute money, property or industry to a common fund, with the intention of dividing the profit among themselves. Two or more persons may also form a partnership for the exercise of a profession (Civil Code of the Philippines, Article 1767). Corporation. A corporation is an artificial being created by operation of law, having the right of succession and the powers, attributes and properties expressly authorized by law or incident to its existence (The Corporation Code of the Philippines, Sec.2). AEC 01. Chapter 1. Page 7  Activities in Business Organization Financing Activities. These are business activities that involves obtaining and managing of financial resources. Investing Activities. These are business activities that involves the purchase and disposal of long-term assets. Operating Activities. These are business activities that are done to provide goods and render services to clients. AEC 01. Chapter 1. Page 8  Purpose and Phases of Accounting Recording. The function of accounting which includes the routine and mechanical process of writing down business transactions and events. Classifying. The function of accounting which involves sorting or grouping similar transactions and events into their respective kind and classes. Summarizing. The function of accounting is achieved through the preparation of financial statements or financial reports. Interpreting. The function of accounting which involves the analytical and interpretative skills of an accountant. AEC 01. Chapter 1. Page 9  Fundamental Concepts that underlie the accounting process Entity Concept. The entity is separate from other entities and individuals Periodicity Concept. Life of the entity is divided into equal time periods for reporting purposes Stable Monetary Unit Concept. Unit of measure to use in the FS is the Philippine Peso. Going Concern. An entity will continue in operation for the foreseeable future. AEC 01. Chapter 1. Page 10  Basic Principles in order to generate information that is useful to users Objectivity Principle. The accounting process and statements are based on the most reliable data available so that they will be as accurate as possible Historical Cost. Assets should be recorded at original or acquisition cost Revenue Recognition Principle. Revenue is recognized in the accounting period when goods and services are earned. Expense Recognition Principle. Expense is recognized in the accounting period when incurred. AEC 01. Chapter 1. Page 11  Generally Accepted Accounting Principles Adequate Disclosure. Requires all relevant information that would affect the user’s understanding and assessment of the entity should be disclosed in the financial statement. Materiality. Financial Statements is concerned with information that is significant enough to affect evaluations and decisions. Consistency Principle. The firm should use the same accounting method from period to period to achieve comparability over time within a single enterprises. AEC 01. Chapter 1. Page 12  Professional Accountant holders of baccalaureate degree in Bachelor of Science in Accountancy taken and passed the licensure examination for Certified Public Accountants carry the title as “CPA.” who is under the supervision of the Professional Regulation Commission (PRC) in the practice of their profession. AEC 01. Chapter 1. Page 13 Scope of Practice CPAs in the CPAs in Government Public Practice CPAs in CPAs in Education/ Commerce and Academe Industry AEC 01. Chapter 1. Page 14  Core Competence Framework for Entry to the Philippine Accountancy Profession Knowledge General knowledge Organizational and business knowledge Information technology (IT) knowledge Accounting knowledge AEC 01. Chapter 1. Page 15  Core Competence Framework for Entry to the Philippine Accountancy Profession Skills Intellectual Interpersonal Communication AEC 01. Chapter 1. Page 16  Core Competence Framework for Entry to the Philippine Accountancy Profession Values Professional ethics Moral values AEC 01. Chapter 1. Page 17  Fundamental Principles of being an ethical professional accountant Integrity A professional accountant should be straightforward and honest in all professional and business relationships. Objectivity A professional accountant should not allow bias, conflict of interest or undue influence of others to override professional or business judgments. Professional Competence and Due Care A professional accountant has a continuing duty to maintain professional knowledge and skill at the level required to ensure that a client or employer receives competent professional service. A professional accountant should act diligently and in accordance with applicable technical and professional standards. Confidentiality Confidential information acquired as a result of professional and business relationships should not be used for the personal advantage of the professional accountant or third parties. Professional Behavior A professional accountant should comply with relevant laws and regulations and should avoid any action that discredits the profession. AEC 01. Chapter 1. Page 18  Branches of Accounting Auditing Bookkeeping Financial Accounting Financial Management Management Accounting Taxation Government Accounting AEC 01. Chapter 1. Page 19  Summary Accounting is a service activity. There are different types of business according to service/products offered. There are 3 basic forms of business according to ownership. The business transactions can be classified into 3 types of activities. The GAAP ensures a company's financial statements are complete, consistent, and comparable The fundamentals principles of accountants form the standard of behavior expected of a professional accountant. It reveals the profession's recognition of its public interest responsibility. AEC 01. Chapter 1. Page 20  Assignment Click link for the assignment Deadline: August 16, 2024, 12noon. https://forms.gle/R6PXcxbAo3z1j3Sd7 AEC 01. Chapter 1. Page 21  Reference Ballada, W. & Ballada, S., 2019. Basic Financial Accounting and Reporting. Manila, Philippines: DomeDane Publishers & Made Easy Books. Cabrera, M.E. & Cabrera, G.A. (2018-2019). Financial Accounting and Reporting. Manila, Philippines: GIC Enterprises & Co., Inc.. AEC 01. Chapter 1. Page 22 End of Presentation AEC 01. Chapter 1. Page 23