FAR 2 Accounting Principles PDF

FAR 2 ACCOUNTING Overall objective - provide quantitative financial DEFINITION information - Service entity that provides quantitative info. - A...

FAR 2 ACCOUNTING Overall objective - provide quantitative financial DEFINITION information - Service entity that provides quantitative info. - Art of recording, classifying, and summarizing HISTORY HIGHLIGHTS in a significant manner and in terms of money. INFORMAL ERA - Process of identifying, measuring and 8500 B.C. communicating economic information. -tokkens sealed in clay balls(bullae) - Information system that measures, processes -first form of bill of lading and communicates financial info about 3600 B.C. economic entities. -clay tablets recorded payment of wages and COMPONENTS tracked costs of labors 1. Identifying 2286-2242 B.C. - analytical component - code of Hammurabi requires merchants - Involves recognition/non-recognition of trading goods to give buyers sealed business acts as accountable events. memorandum Accountable events: 11th - 14th century A.D. External or Exchange transactions -Inca empire from South America used - involves one entity and another entity knotted cords of diff lengths and colors called Internal transactions quipu to keep accounting records. - involves the entity only (yourself) 2. Measuring DEVELOPMENT ERA - Technical component 1211 - Involves assigning peso amount to the -earliest evidence of bookkeeping was found accountable economic transactions in Florence, France. Measurement can be categorized: 1299-300 Valuation by opinion -Amatino Manucci kept financial records of his - affected by estimates firm’s branch showing details identified as Valuation by fact double-entry bookkeeping. - unaffected by estimates -Amatino Manucci as the father of double 3. Communicating bookkeeping. - Formal component 1494 - Preparing and distributing accounting reports -Luca Pacioli describes double entry - Interpreting significance of the processed bookkeeping through his book (Summa de information Arithmetica, Geometria, Proportioni et Three Aspects Proportionalita w/c includes Particularis de Recording Computis et Scripturis) - journalizing -Method of Venice or the Italian Method - maintaining record of all economic business 1673 transactions -France government introduced the Classifying submission of an annual fair value statement - posting of financial position to protect the economy - grouping of similar and interrelated from bankruptcies in the document economic transaction Ordonnance de Commerce of 1673 Summarizing -Jacques Savary made it and is known as Code - prep of financial statement Savary  FAR 2 17th century 1975 -Nicola Petri was the person to group similar -Presidential Decree no. 692(revised transactions in a separate record and enter accountancy law) replaced 1923 law the monthly totals in the journal -PIPCA accredited as bona fide professional org representing CPAs FORMAL ERA 1981 18th century -ASC was created -formation of an accounting profession 1987 started as influenced by the rise of industrial -guidelines for the mandatory continuing society in Britain professional education (CPE) for CPAs 1903 2004 -United States Steel published consolidated -RA no. 9298 replaced the 1975 law. financial statement -existing law for the practice of accountancy 1909 profession -US corporate income tax law permitted a -FRSC replaced ASC deduction for depreciation charges in the 2013 calculation of taxable income -CPD replaced CPE 1920s 2017 -Eugen Schmalenbach published The Model -CPD law was implemented Chart of Accounts to address comparability of PHILIPPINE ACCOUNTANCY ACT OF 2004 financial data across different companies. - Also known as RA no. 9298 - Regulates the practice of accountancy in the GLOBALIZATION ERA Philippines 1973 OBJECTIVES (SECTION 3) - IASC was established 1. The standardization and regulation of 1978 accounting education; - code of ethics for professional accountants 2. The examination for registration of certified was released public acctants; and 2001 3. The supervision, control, and regulation of the -IASB replaced IASC practice of accountancy in the Philippines 2002 -FASB and IASB entered into a memorandum FOUR AREAS OF ACCOUNTANCY PROFESSION of understanding called Norwalk Agreement (SECTION 4) committing themselves to the convergence of Public practice US GAAP and IFRS - practice of public accountancy; 2004 - composed of individual practitioners, small -ASEAN Mutual Recognition Arrangements for accounting firms and large multinational organizations Accountancy was signed rendering independent and expert financial services to the public which include: ACCOUNTANCY PRACTICE IN THE PHILIPPINES -Auditing 1923 - primary service offered by most public accounting -Act. No. 1305 paved the way for the Filipino practitioners accountants to be recognized as CPE - specifically known as external auditing; expressing an -there were 43 CPAs opinion as to the fairness with which the financial 1967 statements are prepared; also known as attest -RA no. 5166 replaced 1923 law function.  FAR 2 -Taxation- includes preparation of annual income tax Term of Office: Complete term of three (3) years; the returns and determination of tax consequences of chairman or the member can be re-appointed for a certain proposed business endeavors. maximum of two successive complete terms. -Management Advisory Services- generally refers to However, those who completed two successive services to clients on matters of accounting, finance, complete terms can be re-appointed, provided that business policies and many other phases of business there is a lapse of one year. Furthermore, no person conduct and operations. shall serve in BOA for more than twelve (12) years. Private practice Superior Office: BOA is under Professional Regulatory - practice in commerce and industry Commission (PRC). - to assist management in planning and controlling the PRACTICE OF ACCOUNTANCY (SECTIONS 26-35) entity's operations. Certificate of Accreditation to Practice Public Government accounting Accountancy: This certificate signifies that the CPA can - practice in government now principally practice public accountancy. This - involving the receipt and disposition of government certificate is issued to a CPA who (a) has already funds and property and interpreting the results acquired a minimum of three (3) years of meaningful thereof. experience in any areas of public practice and (b) has -focus is custody and administration of public funds. earned at least 120 units of continuing professional Accounting in Education development (CPD) program. Lastly, this certificate is - practice in academe valid for three years and can be renewed indefinitely - focuses on teaching in any higher education unless it is disallowed by BOA for just cause. institutions. Continuing Professional Development: This refers to PROFESSIONAL REGULATORY BOARD OF the inculcation and acquisition of advanced ACCOUNTANCY (SECTIONS 5-12) knowledge, sill, proficiency and ethical and moral Definition: This is the body authorized by law to values after the initial registration of the Certified promulgate rules and regulations affecting the Public Accountant for assimilation into professional practice of the accountancy profession in the practice and lifelong learning. Philippines. This body is shortly referred to as the ADDITIONAL INFORMATION REGARDING CPD: Board of Accountancy (BOA). Based on latest rulings, renewal of the CPA license Composition: 1 chairman and six 6 members with one requires 15 CPD credit units which should be earned 1 vice-chairman from the members to be elected by in a compliance period of three (3) years. the body For renewal of accreditation to practice public Qualification: accountancy, it is required to earn 120 CPD credit -Must be a natural-born citizen and a resident of the units which should be earned in a compliance period Philippines; of three (3) years. -Must be a duly registered Certified Public Accountant An exemption to earn CPD credit units for license with a least ten (10) years of work experience in any renewal is granted to CPAs reaching the age of 65 scope of practice of accountancy; years. The exemption doesn't cover CPD credit unit -Must be of good moral character and must not have requirement for accreditation to practice public been convicted of crimes involving moral turpitude; accountancy. -Must not have any pecuniary interest, directly or CPAs who are working or practicing the profession or indirectly, in any school, college, university or furthering their studies abroad shall be temporarily institution conferring an academic degree necessary exempted from compliance with CPD credit units, for admission to the practice of accountancy or where provided that they have been out of the country for at review classes in preparation for the licensure least two years immediately prior to the date of examination are being offered or conducted, nor shall renewal. he/she be a member of the faculty or administration thereof at the time of his/her appointment to the Board.  FAR 2 DEFINITION OF TERMS 1. IASC - International Accounting Standards Committee 2. IASB - International Accounting Standards Board 3. FASB - Financial Accounting Standards Board 4. US GAAP - United States Generally Accepted Accounting Principles 5. IFRS - International Financial Reporting Standards 6. PIPCA - Philippine Institute of Certified Public Accountants 7. ASC - Accounting Standards Council 8. CPE - Continuing Professional Education 9. FRSC - Financial Reporting Standards Council 10. CPD - Continuing Professional Development 11. BOA - Board of Accountancy 12. PRC - Professional Regulation Commission