Introduction to the Accountancy Profession

38 question-and-answer flashcards covering key definitions, components, legal provisions, regulatory bodies, sectors, and professional organizations related to the Introduction to the Accountancy Profession lecture.

According to the Accounting Standards Council (ASC), what is the primary function of accounting?

To provide quantitative, primarily financial, information about economic entities that is useful in making economic decisions.

How did the Committee on Accounting Terminology of the AICPA define accounting?

As the art of recording, classifying, and summarizing in a significant manner and in terms of money, transactions and events of a financial character, and interpreting the results.

What is the American Accounting Association’s (AAA) definition of accounting?

The process of identifying, measuring, and communicating economic information to permit informed judgment and decision by users.

Name three key characteristics common to modern definitions of accounting.

(1) User-based discipline; (2) Quantitative in nature; (3) Subject to interpretation.

What are the three major components of the accounting process highlighted by the AAA definition?

Identifying, measuring, and communicating.

What is meant by the identifying process in accounting?

Analyzing events and transactions to determine whether they should be recognized (journalized) in the accounting records.

How is an external exchange event defined?

A reciprocal giving and receiving of economic resources or the settlement of obligations between an entity and another party (e.g., sales, purchases, debt payments).

What is a non-reciprocal transfer event?

A one-way transaction where the entity gives or receives value without receiving or giving anything in return, such as donations, gifts, taxes, or theft losses.

Describe an external event other than transfer.

An event caused by external factors that changes an entity’s resources or obligations without an actual transfer of resources, e.g., changes in fair value or vandalism.

Give an example of an internal event classified as production.

Conversion of raw materials into finished goods for sale to customers.

What is an internal casualty event?

Damage, destruction, or loss of property from sudden, unexpected events like fire, flood, or earthquake.

What is the measuring process in accounting?

Determining monetary amounts at which elements of financial statements are recognized and reported.

Define the communicating process in accounting.

Preparing and distributing accounting reports to users, encompassing recording, classifying, and summarizing.

What does recording (journalizing) involve?

Systematically maintaining a chronological record of recognized economic transactions.

What is meant by classifying in accounting?

Sorting or grouping similar transactions into ledgers for easier summarization.

What is summarizing in the context of accounting?

Preparing financial statements such as the statement of financial position, income statement, and cash-flow statement.

What law governs the practice of accountancy in the Philippines?

Republic Act No. 9298, the Philippine Accountancy Act of 2004.

How many rules are contained in RA 9298?

Five rules covering Title & Policy, the Board of Accountancy, Examination/Registration, Practice of Accountancy, and Penal & Final provisions.

How is the Professional Regulatory Board of Accountancy (PR-BOA) composed?

A chairman and six members appointed by the President from lists submitted by the Commission and the APO.

State two qualifications required of a PR-BOA member.

Must be a natural-born Filipino CPA with at least 10 years’ practice and of good moral character (other qualifications include residency, no faculty or APO conflict, etc.).

What is the term of office for PR-BOA members?

Three years, with a maximum of two successive complete terms and a lifetime limit of 12 years.

Who assumes the chairman’s duties when the position becomes vacant?

The elected vice-chairman of the Board for the remainder of the term until a new chairman is appointed.

List one key power of the PR-BOA.

To issue, suspend, revoke, or reinstate Certificates of Registration for the practice of accountancy (others include rulemaking, monitoring, investigation, etc.).

Give one ground for removal of a Board member.

Neglect of duty, incompetence, violation of the CPA Code of Ethics, or final judgment of crimes involving moral turpitude, among others.

What are the four recognized sectors of accountancy practice under RA 9298?

Public practice, commerce and industry, education (academe), and government.

What is the primary service traditionally offered in public practice?

Auditing (external auditing), representing the attest function of CPAs.

What does taxation service in public practice include?

Preparation of tax returns and advising on tax consequences of business decisions; representation in tax investigations.

What is meant by Management Advisory Service (MAS)?

Consulting services on accounting, finance, organizational procedures, cost, distribution, and other business operations.

Name one limitation applicable to CPAs in public practice in the Philippines.

Must obtain a Certificate of Accreditation (3 years’ meaningful experience plus CPD units) and may not operate through a corporation.

Who is usually the highest accounting officer in commerce and industry?

The controller (or chief accounting officer).

What special requirement applies to the dean or department chair in accounting education?

The position must be occupied by a duly registered CPA.

When is CPA eligibility required in government accounting positions?

When the role involves decision making requiring professional accounting knowledge or when civil service rules mandate CPA eligibility.

Which organization is the Accredited Professional Organization (APO) for CPAs?

The Philippine Institute of Certified Public Accountants (PICPA).

State one requirement PICPA must satisfy to maintain APO status.

Membership must be open to all registered CPAs without discrimination (other requirements include sectoral representation, financial prudence, SEC registration, etc.).

How often must PICPA renew its Certificate of Accreditation?

Every three (3) years.

Give one example of a sectoral organization that collaborates with PICPA.

Association of Certified Public Accountants in Public Practice (ACPAPP) (others: ACPACI, nACPAE, GACPA).