CONCEPTUAL FRAMEWORK EUT
ACCOUNTING
Accounting Standards Council
DEFINITION: Accounting is a service activity
FUNCTION: > Provide quantitative information
> Financial in nature
> Useful in making economic decision
Committee on Accounting Terminology of the
Accounting Institute of Certified Public Accountants
DEFINITION: Accounting is the art of recording,
classifying and summarizing in a significant manner and
in terms of money, transactions and events which are
part at least of a financial character and interpreting the
results thereof
American Accounting Association
DEFINITION: Accounting is the process of identifying,
measuring and communicating economic information
to permit informed judgment and decision by users of
the information
IMPORTANT POINTS:
1. Accounting is about quantitative information
2. Information is likely to be financial in nature
3. Information should be useful in decision-making
Accounting components (based on AAS Definition)
a. Identifying – analytical component
b. Measuring – technical component
c. Communicating – formal component
a. IDENTIFYING
- recognition or non-recognition of business activities
as “accountable events”
R3M3MB3R:
 NOT all business activities are accountable.
 An event is accountable or quantifiable when it
has an effect on ALOE
 Only economic activities are emphasized and
recognized in accounting
Transactions
- economic activities of an entity
a. External Transactions / Exchange Transactions
- involving one entity and another entity
o Purchase of goods from supplier
o Sale of goods
o Payments of salaries
b. Internal Transactions
- involving the entity only
o Production
-resources transformed into products
o Casualty
-sudden and unanticipated loss from fire, flood,
earthquake and other natural events
b. MEASURING
- assigning of peso amounts to
accountable events
Philippine Peso
- unit of measuring accountable economic transactions
Measurement bases:
1. historical cost (most common)
2. current cost
3. realizable value
4.present value
c. COMMUNICATING
- preparing and distributing accounting reports to
potential users of accounting information
- accounting as “universal language of business”
COMMUNICATION PROCESS
1. RECORDING or JOURNALIZING
- systematically maintaining a record of all economic
business transactions
2. CLASSIFYING
- sorting or grouping of similar and interrelated
economic transactions into their classes
- accomplished by posting to the ledger
3. SUMMARIZING
- preparation of financial statements
FINANCIAL STATEMENTS:
A. Statement of Financial Position
B. Income Statement
C. Statement of Comprehensive Income
D. Statement of Changes in Equity
E. Statement of Cash Flows
LEDGER
- group of accounts systematically categorized into
ALORE Accounts
ACCOUNTING as an INFORMATION SYSTEM
- measures business activities, processes information
into reports and communicate the reports to decision
makers
FINANCIAL REPORTS
- tells how well an entity is in terms of profit and loss
and where it stands in financial terms
OVERALL OBJECTIVE of Accounting:
Provide quantitative financial information about a
business that is useful to statement users particularly
owners and creditors in making economic decisions
Accountant’s PRIMARY TASK:
Supply financial Information so that the statement users
could make informed judgment and better decision
ESSENCE of Accounting:
DECISION-USEFULNESS
CONCEPTUAL FRAMEWORK EUT
REPUBLIC ACT NO. 9298
- law regulating the practice of accountancy in the
Philippines
- Philippine Accountancy Act of 2004
Qualifying practice of accountancy profession:
 Finish a degree in Bachelor of Science in
Accountancy
 Pass exam given by Board of Accountancy
Board of Accountancy
- body authorized by law to promulgate rules and
regulations affecting the practice of the accountancy
profession in the Philippines
- responsible for preparing and grading the Philippine
CPA examinations
Computer-based examination is offered TWICE a
year, May and October
LIMITATION of the practice of PUBLIC ACCOUNTANCY
 Single practitioners and partnerships
- shall be registered CPA’s
 Certificate of Accreditation
- promulgated by the BOA and approved by
PRC wherein such registrant has acquired a
minimum of 3 years of meaningful
experience in any areas of public accounting
including taxation
 Securities and Exchange Commission
- shall not register any corporation organized
for the practice of public accountancy
ACCREDITATION to practice Public Accountancy
 Register with the BOA and PRC for the practice
of public accountancy
 Professional Regulation Commission
- shall issue the Certificate of Registration to
practice Public Accountancy which shall be
valid for 3 years and renewable every 3
years upon payment of required fees
CERTIFIED PUBLIC ACCOUNTANTS
3 MAIN AREAS of PRACTICE
1. Public Accounting
2. Private Accounting
3. Government Accounting
PUBLIC ACCOUNTING
- composed of individual practitioners, small accounting
firms and large multinational organizations that render
independent and expert financial services to the public
KINDS OF SERVICES
a. AUDITING
- examination of financial statements by independent
CPA for the purpose of expressing an opinion
- attest function of independent CPAs
Users of Audited Statements
1. BIR
2. Banks and lending institutions
3. Creditors and prospective investors
b. TAXATION SERVICE
- preparation of annual income tax returns and
determination of tax consequences of certain proposed
business endeavors
c. MANAGEMENT ADVISORY SERVICES
- used generally to refer to services to clients on matters
of accounting, finance, business policies, organization
procedures, product costs, distribution and other
phases of business conduct and operations
Inclusions:
a. Advice on installation of computer systems
b. Quality control
c. Installation and modification of accounting system
d. Budgeting
e. Forward planning and forecasting
f. Design and modification of retirement plans
g. Advice on mergers and consolidations
PRIVATE ACCOUNTING
- maintaining the records, producing the financial
reports, preparing the budgets and controlling and
allocating the resources of the entity
- determination of the various taxes the entity is obliged
to pay
- assist management in planning and controlling the
entity’s operations
CPAs – employees of organization
- Accounting staff
- Chief accountant
- Internal auditor
- Controller (highest)
90()
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
FOCUS:
Custody and administration of public funds
Branches of Government:
1. BIR – Bureau of Internal Revenue
2. COA – Commission on Audit
3. DBM – Department of Budget and Management
4. SEC – Securities and Exchange Commission
5. BSP – Bangko Sentral ng Pilipinas
CONCEPTUAL FRAMEWORK EUT
CONTINUING PROFESSIONAL DEVELOPMENT
- inculcation and acquisition of advanced knowledge,
skill, proficiency, and ethical and moral values after the
initial registration of the CPA for assimilation into
professional practice and lifelong learning
- raises and enhances the technical skill and
competence of the CPA
REPUBLIC ACT NO. 10912
- law mandating and strengthening the continuing
professional development program for all regulated
professions, including the accountancy profession
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
- represent the rules, procedures, practice and
standards followed in the preparation and presentation
of financial statements
Purpose of Accounting Standards
1. Identify proper accounting practices for the
preparation of financial statements – overall purpose
2. Create common understanding between preparers
and users of financial statements
3. Ensure comparability and uniformity in financial
statements

CPD Credit Units FRSC (Financial Reporting Standards Council)

- CPD credit hours required for the renewal of CPA - accounting standard setting body created by the PRC
licenses and accreditation of a CPA to practice the upon the recommendation of BOA to assist the BOA in
accountancy profession every 3 years carrying out its powers and functions provided under
- 120 CPD credit units – requirement R.A. Act No. 9298
- mandatory for CPAs - replaced Accounting Standards Council (ASC)
- required for the renewal of CPA license and
accreditation of CPA to practice the accountancy MAIN FUNCTION:
profession to establish and improve accounting standards that will
be generally accepted in the Philippines
65 years of age
- exempted from CPD (renewal purposes) ACCOUNTING STANDARDS
- “highest hierarchy” of GAAP – if promulgated by FRSC
ACCOUNTING vs. AUDITING
embraces auditing area of accounting APPROVED STATEMENTS:
specialization 1. PAS – Philippine Accounting Standards
constructive analytical 2. PFRS – Philippine Financial Reporting Standards
ceases when financial when FS are prepared,
statements are prepared they begin to audit COMPOSITION OF FRSC

The work of an auditor BEGINS when the work of

accountant ENDS.

ACCOUNTING vs. BOOKKEEPING

why how
conceptual procedural
reason or justification for development and
any action adopted maintenance of
accounting records

ACCOUNTING vs. ACCOUNTANCY

Reference only to a Profession of accounting
particular field of practice
accountancy

FINANCIAL
ACCOUNTING
Recording of business
transactions and the
eventual preparation of
Financial Statements
Internal and external
users
Emphasizes reporting to
Creditors and Investors
MANAGERIAL The CHAIRMAN and members of FRSC shall have a term
ACCOUNTING of 3 years renewable for another term
Accumulation and
preparation of financial
reports
Internal users
Accounting information
is used within an entity
CONCEPTUAL FRAMEWORK EUT

ASC FRSC IASC IASB

(Accounting (Financial (International (International
Standards Reporting Accounting Accounting
Council) Standards Standards Standards
Council) Council) Board)
IC PIC SIC IFRIC (UK)
(Interpretations (Philippine (Standing (International
Committee) Interpretations Interpretative Financial
Committee) Committee) Reporting
Interpretations
Committee)
PHIL.(basis): IASB: FRSC:
USA FASB IASB USA GAAP IFRS PFRS
(Financial (International (Generally (International (Philippine
Accounting Accounting Accepted Financial Financial
Standards Standards Accounting Reporting Reporting
Board) Board) Principle) Standards) Standards)

PIC (Philippine Interpretations Committee)

- prepare interpretations of PFRS for approval by the
FRSC and provide timely guidance on financial reporting
issues not specifically addressed in current PFRS
- interpretations – give authoritative guidance on issues
that are likely to receive divergent or
unacceptable treatment

IFRIC (International Financial Reporting

Interpretations Committee)
- counterpart of PIC in United Kingdom
- replaced SIC

IASC (INTERNATINAL ACCOUNTING STANDARDS

COMMITTEE)
- an independent private sector body, with the objective
of achieving uniformity in the accounting principles

IASB (International Accounting Standards Board)

- replaced IASC
- publishes standards in a series of pronouncements
called IFRS (International Financial Reporting Standards)
CONCEPTUAL FRAMEWORK EUT
CONCEPTUAL FRAMEWORK FOR FINANCIAL REPORTING
- a complete, comprehensive and single document
promulgated by the IASB

CONCEPTUAL FRAMEWORK
- summary of the terms and concepts that underlie the
preparation and presentation of financial statements
for external users
- guide standard-setters, preparers and users of
financial information in the presentation of statements
- underlying theory for the development of accounting
standards and revision of previously issued accounting
standards

FINANCIAL STATEMENTS
- prepared at least annually
- directed toward the common needs of a wide range of
users

PURPOSES OF CF
a. developing accounting standards and reviewing
existing standards
b. applying accounting standards and in dealing with
issues not yet covered by GAAP
c. review and adoption of IFRS
d. interpreting the information contained in FS
e. forming an opinion as to whether FS conform with
Philippine GAAP
f. provide information to those interested in the work of
the FRSC in the formulation of PFRS

USERS OF FINANCIAL INFORMATION