[FUNACC] (P4) Chapter 1: The World of Accouting

Don Vicente Fabella

founder of the Jose Rizal University in 1919, holds the distinction of being the first Filipino CPA in the United States.

Arthur Andersen (now defunct), PriceWaterhouseCoopers, Ernst & Young, KPMG, and Deloitte Tohmatsu International.

Big Five of the accounting world,:

Republic Act No. 9298,

was signed into law by President Gloria Macapagal-Arroyo on May 13, 2004. This law repealed Presidential Decree No. 692, the Revised Accountancy Law, which was enacted May 5, 1975.

Practice of Public Accountancy

shall constitute in a person, be it his/her individual capacity, or as a partner or as a staff member in an accounting or auditing firm, holding out himself/herself as one skilled in the knowledge, science and practice of accounting, and as a qualified person to render professional services as a certified public accountant (CPA); or offering or rendering, or both, to more than one client on a fee basis

Practice in Commerce and Industry

shall constitute in a person involved in decision making requiring professional knowledge in the science of accounting, or when such employment or position requires that the holder thereof must be a certified public accountant.

Practice in Education/Academe

shall constitute in a person in an educational institution which involve teaching of accounting, auditing, management advisory services, finance, business law, taxation, and other technically related subjects: Provided, That members of the Integrated Bar of the Philippines (IBP) may be allowed to teach business law and taxation subjects.

Practice in Government

shall constitute in a person who holds, or is appointed to, a position in an accounting professional group in government or in a government-owned and/or -controlled corporation, including those performing proprietary functions, where decision making requires professional knowledge in the science of accounting, or where a civil service eligibility as a certified public accountant is a prerequisite.

professional accountant

is a defined as "an individual who holds a valid certificate issued by the Board of Accountancy (i.e., Certified Public Accountant), whether he/she be in public practice, industry, commerce, the public sector or education."

Integrity

A professional accountant should be straightforward and honest in all professional and business relationships. ____ also implies fair dealing and truthfulness.

Objectivity

A professional accountant should not allow bias, conflict of interest or undue influence of others to override professional or business judgments.

professional services

A professional accountant should act diligently and in accordance with applicable technical and professional standards when providing _____

Attainment of professional competence.

The normal pattern of development starts initially with a high standard of general education followed by specific education, training and examination in professionally relevant subjects, and whether prescribed or not, a period of work experience.

Maintenance of professional competence.

This requires a continuing awareness and an understanding of relevant technical professional and business developments. Continuing professional development develops and maintains the capabilities that enable a professional accountant to perform competently within the professional environments.

Confidentiality

A professional accountant should respect the ________ of information acquired as a result of professional and business relationships and should not disclose any such information to third parties without proper and specific authority unless there is a legal or professional right or duty to disclose.

Professional Behavior

A professional accountant should comply with relevant laws and regulations and should avoid any action that discredits the profession.

Ethics

is concerned with right and wrong and how conduct should be judged to be good or bad. It is about how we should live our lives and, in particular, how we should behave towards other people. It is therefore relevant to all forms of human activity.

Business ethics

tells what is right or wrong in a business situation, while professional ethics tells the same thing regarding a profession. Ethical conflicts can arise, however, when what might be best for the entity is wrong morally or professionally.

Ethical Dilemma

by definition, is a situation in which there is no obvious right or wrong decision but rather a right or right answer.

ethical reasoning

When we are attempting to solve an ethical dilemma, we follow a process of __________. We look at the information available to us and draw conclusions based on that information in relation to our own ethical standards.

analyze the consequences, analyze the actions, and make a decision.

In its simplest way, an ethical problem can be solved in three basic steps:

sleep-test ethics

Sometimes when faced with limited information and therefore, without any alternatives, the "___________" can be help.

"sleep-test ethics"

In Defining Moments, by Joseph Badaracco Jr., ______ is supposed to tell people whether or not they have made a morally sound decision. A person who made a right choice can sleep soundly after making the decision. - It anchors its belief on the idea that people should rely on their personal insights, feelings and instincts when faced with a difficult problem. It is the ethics of intuition.

Accounting Standards Council (ASC)

On Nov. 18, 1981, the Philippine Institute of Certified Public Accountants (PICPA) created the ____________________ to establish and improve accounting standards that will be generally accepted in the Philippines.

Philippine Accountancy Act of 2004

Per Section 9(A) of the Rules and Regulations Implementing Republic Act No. 9298* otherwise known as the _______________, the Financial Reporting Standards Council (FRSC) shall be the new accounting standard setting body thus, replacing the Accounting Standards Council (ASC).

fifteen (15) members with a Chairman, who had been or presently a senior accounting practitioner in any of the scope of accounting practice and fourteen (14) representatives and two representatives each from the accredited national professional organization of CPAs in public practice, commerce and industry, education/academe and government.

The Financial Reporting Standards Council (FRSC) shall be composed of:

The International Accounting Standards Board (IASB)

is an independent private sector body. Its objective is to achieve convergence in the accounting principles that are used by businesses and other organizations for financial reporting around the world.

International Accounting Standards Committee (IASC).

Effective Apr. 1, 2001, the ____________________ assumed accounting standard setting responsibilities from its predecessor body, the International Accounting Standards Committee (IASC).

"International Financial Reporting Standards" (IFRS).

The International Accounting Standards Board announced in April 2001 that its accounting standards would be designated ______________.

Accounting Standards Council (ASC)

In developing accounting standards that will be generally accepted in the Philippines, the ___________________ considered standards issued by other standard-setting bodies such as the U.S. Financial Accounting Standards Board (FASB) and the International Accounting Standards Committee (now the (ASB). In the past years, the ____ based most of the standards it issued on U.S. accounting standards.

Philippine Accounting Standards (PASs)

[Philippine ASC Moves to IAS/IFRS] _______ correspond to the adopted International Accounting Standards (IASs).

Philippine Financial Reporting Standards (PFRSs)

[Philippine ASC Moves to IAS/IFRS]

correspond to the adopted International Financial Reporting Standards (IFRSs).

• Auditing

• Bookkeeping

• Financial Accounting

• Financial Management

• Management Accounting

• Taxation

• Other Aspects

The main branches of accounting (7)

Accountancy and Accounting

is a profession whose members are engaged in the collection of financial data, the summary of that data, and then the presentation of information in a form which helps recipients take effective decisions.

' _______' to describe the profession, and the term '______' to refer to the subject.

Auditing

forms a most important branch of accountancy. Once accounts have been prepared, they may have to be checked in order to ensure that they do not present a distorted picture. The checking of accounts and the reporting on them is known as _______. Businesses have their accounts audited as a legal requirement.

Auditors

are usually trained accountants who specialize in checking accounts rather than preparing them.

external auditors

Auditors that are appointed from outside the organization, they are usually referred to as ______. They are likely to go in for much more selective testing; have limited independence.

(Corporate) external auditors

Auditors that are appointed by the shareholders, and not by the management.

internal auditors

Auditors that are employees of the entity. They are appointed by, and answer to, the entity's management. They perform routine tasks and undertake detailed checking of the entity's accounting procedures

Bookkeeping

is a mechanical task involving the collection of basic financial data. The data are first entered in special records known as books of account, and then extracted and summarized in the form of a profit and loss account and a balance sheet.

books of account

Bookkeeping is a mechanical task involving the collection of basic financial data. The data are first entered in special records known as _______, and then extracted and summarized in the form of a profit and loss account and a balance sheet.

profit and loss account

[Bookkeeping]

A ____ and ____ shows whether the business has made a profit or loss during the year, i.e. it measures how well the business has done.

balance sheet

[Bookkeeping]

A _______ lists what the entity owns (its assets), and what it owes (its liabilities) as at the end of the year.

Cost bookkeeping

is the process that involves the recording of cost data in books of account. It is, therefore, similar to bookkeeping except that data are recorded in very much greater detail.

Cost accounting

______ makes use of those data once they have been extracted from the cost books in providing information for managerial planning and control. Forms one of the main sub-branches of management accounting.

Financial Accounting

is the more specific term applied to the preparation and subsequent publication of highly summarized financial information. It will also be of interest to other parties, e.g. employees and creditors.

Management Accounting

incorporates cost accounting data and adapts them for specific decisions which management may be called upon to make. A ________ system incorporates all types of financial and non-financial information from a wide range of sources.

Taxation

is a highly complex technical branch of accounting. Accountants involved in tax work are responsible for computing the amount of tax payable by both business entities and individuals.

tax avoidance

If tax experts attempt to reduce their clients' tax liabilities strictly in accordance with the law, this is known as '________'

Tax evasion

The non-declaration of sources of income on which tax might be due; is a very serious offense.

Academicians, Students and Educators Alliance, Inc. (ASEAN Inc.)

is a non-stock, non-profit corporation organized and registered with the Securities and Exchange Commission (SEC). Its Chairman and 1st Nominee is Prof. WIN Ballada, is a sectoral party for purposes of participating in the Party List System of Representation under Republic Act No. 7941.