THEORETICAL FOUNDATION OF ACCOUNTING AND THE PHILIPPINE ACCOUNTANCY PROFESSION

Auditing

primary service offered by most public accounting practitioners; specifically known as external auditing

Taxation

includes preparation of annual income tax returns and determination of tax consequences of certain proposed business endeavors

Management Advisory Services

generally refers to services to clients on matters of accounting, finance, business policies and many other phases of business conduct and operations.

Private Practice

major objective of private accountant is to assist management in planning and controlling the entity’s operations.

Government accounting

encompasses the process of analyzing, classifying, summarizing and communicating all transactions, involving the receipt and disposition of government funds and property and interpreting the results thereof.

Accounting in Education

focuses on teaching accounting, taxation, business law, finance, business management and other related fields in any higher education institutions.

2017

year when CPD law was implemented

PHILIPPINE ACCOUNTANCY ACT OF 2004

This is also known as Republic Act no. 9298. This is the law regulating the practice of accountancy in the Philippines. The act is comprised of five (5) articles

five (5)

how many articles are there un republic act no. 9298

PHILIPPINE ACCOUNTANCY ACT OF 2004

I. Title, declaration of policy, objective and scope of practice (Sections 1-4)

II. Professional Regulatory Board of Accountancy (Sections 5-12)

III. Examination, Registration and Licensure (Sections 13-25)

IV. Practice of Accountancy (Sections 26-35)

V. Penal and Final Provisions (Sections 36-44)

44 sections

how many sections are there in PHILIPPINE ACCOUNTANCY ACT OF 2004

article 4

article where four areas of accountancy profession was stated

article 2

this article includes the composition, term of office, and superior office of accountancy

article 3

this article includes the examination, registration, and licensure of Philippine accountancy act of 2004

article 4

this article includes the certificate of accreditation to practice public accountancy and continuing professional development.

Accounting

A service activity providing quantitative financial information about economic entities for making economic decisions.

F

T/F standards shall not prevail over the conceptual framework

T

T/F In the absence of a standard or an interpretation that specifically applies to a transaction, management shall consider the applicability of the Conceptual Framework

F

T/F Even though the Conceptual Framework is used as a guide in developing Standards, there will be times that some provisions in the Framework will depart from the Standard.

basis for conclusion

departure should be explained in the ______________ provision of that Standard.

8

how many chapters are there in the conceptual framework of 2018

T

T/F These are the chapters in conceptual framework 2018
1. Objective of financial reporting
2. Qualitative characteristics of useful financial information
3. Financial statements and the reporting entity
4. Elements of financial statements
5. Recognition and derecognition
6. Measurement
7. Presentation and disclosure
8. Concepts of capital and capital maintenance

General-purpose Financial Reporting

this provide financial information about the reporting entity that is useful to existing and potential investors, lenders and other creditors in making decisions about providing resources to the entity."

F

T/F The financial information provided by general- purpose financial reporting is about economic users.

T

T/F The financial information is being addressed to primary users, i.e., existing and potential investors, lenders and other creditors.

T

T/F The decisions being made by the primary users generally relate to providing resources to the entity.

primary users

They are concerned with risk inherent in and return provided by their investments.

Lenders and Other creditors

They are concerned with information which enables them to determine whether their loans, interest thereon and other amounts owing to them will be paid when due.

Employees

They are interested in information about stability and profitability of the entity.

Customers

They are interested in information about continuance of an entity especially when they have a long-term involvement with or are dependent on the entit

Government and Their Agencies

They are interested in allocation of resources and therefore activities of the entity

Public

They are interested in information about trends and range of its activities.

F

T/F The OTHER USERS includes the following: Employees, Lenders, Customers, Government and public

T

T/F one of the specific objectives of financial reporting is to provide information useful in assessing cash flow prospects of the entity

F

T/F 1. Providing information useful in making decisions about providing resources to the entity is one of the general objectives of financial reporting

Components of Accounting

identifying, measuring, and communicating

identifying

Recognizing accountable events like external or internal transactions.

measuring

Assigning peso amounts to economic transactions.

communicating

Preparing and distributing accounting reports to users.

informal era

Use of bullae, clay tablets, Code of Hammurabi, and Quipu for accounting.

developmental era

Contributions of Amatino Manucci, Luca Pacioli, Jacques Savary, and Nicolas Petri.

Globalization Era

establishment of organizations and law in accountancy

Act no. 3105

law in 1923, which helped filipino accountants to be recognized as Certified Public Accountants

Philippine Accountancy Act of 2004

act enacted replacing the 1975 law.

Professional Regulatory Board of Accountancy

body authorized by law to promulgate rules and regulations affecting the practice of the accountancy profession in the Philippines.

three

Refers to a complete term of _____ years for the chairman or member in the Board of Accountancy (BOA), with a maximum of two successive terms and a maximum of twelve (12) years of service in BOA.

Certificate of Accreditation to Practice Public Accountancy

Signifies that a CPA can principally practice public accountancy after acquiring three (3) years of experience and earning 120 units of Continuing Professional Development (CPD) program, valid for three years and renewable indefinitely.

Continuing Professional Development (CPD)

Involves acquiring advanced knowledge, skills, and ethical values after initial CPA registration for professional practice and lifelong learning.

Conceptual Framework for Financial Reporting

Serves as the foundation for developing accounting standards, promoting transparency, strengthening accountability, and contributing to economic efficiency.

Financial Reporting

Aims to provide useful financial information to existing and potential investors, lenders, and creditors for decision-making regarding resource provision to the entity.

Cash flow prospects

may be dividends and/or share in net income (for investors) or principal and interest payments (for lenders and other creditors). Financial reporting may provide relevant information regarding this matter

Economic resources and claims

pertain to a company's financial position whereas changes in resources and claims pertain to companies to both (1) financial performance and (2) other events or transactions such as issuance of debt or equity instruments.

financial position

It pertains to the information about an entity's economic resources and claims against it, i.e., assets, liabilities and equity

Financial performance

It relates to information about the return the entity has produced from its economic resources, i.e., income and expenses.

F

T/F financial position helps the users to understand the return that the entity has produced on the economic resources.

Cashflows

This talks about inflow and outflow of cash arising from any kind of transaction an entity undergoes.

Accrual Basis of Accounting

It depicts the effects of transactions and other events and circumstances on a reporting entity's economic resources and claims in the periods in which those effects occur

Qualitative

what Characteristics of Useful Financial Information is attributes that enhance the usefulness of financial accounting information, including fundamental characteristics like faithful representation and relevance, and enhancing characteristics like comparability and understandability.

Fundamental Qualitative Characteristics

These directly relate to the content or substance of financial information; these qualitative characteristics dictate whether information is useful or not.

relevance

which of the following is not part of the enhancing characteristics: Comparability, relevance, understandability, and timeliness

materiality

This is a practical rule in accounting which dictates that strict adherence to GAAP is not required when the items are not significant enough to affect the evaluation, decision and fairness of the financial statements.

Applying materiality

based on either nature, magnitude (relative size) or both of the items to which the information relates

Observing materiality

dependent on good judgment, professional expertise and common sense.

Enhancing Qualitative Characteristics

These directly relate to the presentation or form of the financial information

F

T/F ingredients of faithful representation includes completeness and free from error only

intra-comparability

this is comparability within an entity; aka horizontal comparability

inter-comparability

this is comparability across entities; aka dimensional comparability

comparability

This pertains to the ability of information to be brought together for the purpose of noting points of likeness and difference.

consistency

this refers to use of the same method for the same item, either from period to period within an entity, or in a single period across entities

F

T/F there are barriers in achieving quantitative characteristics which is measurement uncertainty and cost

T

T/F This is a pervasive constraint on information that can be provided by financial reporting.

Relevance

Capacity of information to influence decisions, with ingredients like predictive value, confirmatory value, and materiality, ensuring that the information is pertinent to economic decisions.

Faithful Representation

Requires financial reports to represent economic phenomena accurately, with ingredients like completeness, neutrality, and being free from error, ensuring accurate depiction of transactions.

Comparability

Ability to bring together information for noting similarities and differences, including intra-comparability within an entity and inter-comparability across entities, enhancing the usefulness of financial information.

Professional Judgment

The application of expertise and experience to assess whether the cost of reporting outweighs or falls short of the benefit, especially when it is difficult to measure.

Consolidated Financial Statements

Financial statements prepared when the reporting entity comprises both parent and subsidiaries, providing consolidated information for primary users of the parent.

Unconsolidated Financial Statements

Financial statements prepared when the parent alone is the reporting entity, offering information related to the parent only.

Combined Financial Statements

Financial statements prepared when the reporting entity comprises two or more entities not linked by a parent-subsidiary relationship.

Reporting Entity

Any economic unit that is required or chooses to prepare financial statements, not necessarily a legal entity.

T

T/F individual corporation, two or more entities, and parent corporation can be called forms of reporting entity

reporting period

This pertains to a timeframe when financial statements are prepared for general purpose financial reporting.

Accounting Assumptions

Basic notions or fundamental premises on which the accounting process is based, including Going Concern, Accounting Entity, Time Period, and Monetary Unit.

Going concern

This is the only assumption mentioned in the 2018 Framework

time period

This postulate requires that the indefinite life of an entity is subdivided into accounting periods which are usually of equal length for the purpose of preparing financial statements.

accounting entity

assumption that states that entity is separate from the owners, managers, and employees who constitute the entity.

Asset

An element of financial statements representing a present economic resource controlled by the entity as a result of past events.

Liability

An element of financial statements representing the present obligation of the entity to transfer an economic resource as a result of past events.

Equity

An element of financial statements representing the residual interest in the assets of the entity after deducting all its liabilities.

Income

An element of financial statements representing increases in assets or decreases in liabilities that result in increases in equity, excluding contributions from equity holders.

Expense

An element of financial statements representing decreases in assets or increases in liabilities that result in decreases in equity, excluding distributions to equity holders.

measurement

This is the process of quantifying the elements recognized in financial statements in monetary terms.

Entry value

This reflects prices in acquiring an asset or incurring a liability.

Exit value

This reflects prices in selling or using an asset or transferring or fulfilling a liability.

T

T/F the categories of measurement basis are historical cost, current value, current cost

F

T/F historical cost uses entry value measurement and is commonly adopted in preparing financial statement

Historical Cost

This entry price or entry value measurement base is commonly adopted in preparing financial statements.

Historical Cost

This provides monetary information about elements of financial statements using information derived from the price of the transaction or other event that gave rise to them

Current Value

This provides monetary information about elements of financial statements using information updated to reflect conditions at measurement date.

Current cost

uses entry value measurement base.

Recognition

The process of capturing an item that meets the definition of any element of financial statements for inclusion in the financial statements.