Professional Documents
Culture Documents
Chapter 1 The Accountancy Profession
Chapter 1 The Accountancy Profession
CHAPTER 1
“THE ACCOUNTANCE PROFESSION”
LEARNING OBJECTIVES:
To understand the definition of accounting.
To describe the overall objective of accounting.
To describe the practice of the accountancy profession in the Philippines.
To understand the Continuing Professional Development in the field of accounting.
To know the meaning of generally accepted accounting principles.
To identify the standard-setting body in the Philippines.
To describe the creation of the International Accounting Standards Board.
To know the meaning of IFRS.
1. DEFINITION OF ACCOUNTING
1.1 Definition:
The definition also states that accounting has a number of components, namely:
a) Identifying as the analytical component.
b) Measuring as the technical component.
c) Communicating as the formal component.
1.2.1 Identifying
Not all business activities are accountable (for example, hiring of employees, the death
of the entity president and entering into a contract).
An event is accountable or quantifiable when it has an effect on assets, liabilities and
equity.
The subject matter of accounting is economic activity or the measurement of economic
resources (assets) and economic obligations (liabilities). Only economic activities are
emphasized and recognized in accounting.
Sociological and psychological matters are beyond the province of accounting.
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1.2.1.1 External and Internal transactions
b) Internal transactions – are economic events involving the entity only. For example,
production and casualty loss.
1.2.2 Measuring
Measuring is the assigning of peso amounts to the accountable economic transactions and
events.
1.2.3 Communicating
A key product of this information system is a set of financial statements – the documents
that reports financial information about an entity to decision makers.
The overall objective of accounting is “to provide quantitative financial information about a
business that is useful to statement users particularly owners and creditors in making economic
decisions”.
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3. THE ACCOUNTANCY PROFESSION
3.1 Republic Act No. 9298 (a.k.a Philippine Accountancy Act of 2004)
It is the law regulating the practice of accountancy in the Philippines.
2. Taxation
Preparation of annual income tax returns and determination of tax
consequences of certain proposed business endeavors.
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3.6.2 Private Accounting
Employed in business entities in various capacity as accounting staff, chief
accountant, internal auditor and controller (the highest accounting officer in an
entity).
Major objective: to assist management in planning and controlling the entity’s
operations.
ASC FRSC
3. Philippine Interpretations
Correspond to Interpretations of the IFRIC and the Standing
Interpretations Committee, and Interpretations developed by the
Philippine Interpretations Committee.
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7.3 FRSC Composition and Their Terms
7.3.1 Composition
7.3.1 Terms
The Chairman and members of FRSC shall have a term of 3 years renewable for
another term. Any member of the ASC shall not be disqualified from being
appointed to the FRSC.
8.1 IASC
Independent private sector body, with the objective of achieving uniformity in the
accounting principles which are used by business and other organizations for financial
reporting around the world.
8.2 Objectives
1. To formulate and publish in the public interest accounting standards to be observed in
the presentation of financial statements and to promote their worldwide acceptance and
observance.
2. To work generally for improvement and harmonization of regulations, accounting
standards and procedures relating to the presentation of financial statements.
IASB now replaces the IASC. IASB published standards in a series of pronouncements called
the International Financial Reporting Standards (IFRS). However, the IASB adopted the body
of standards issued by the IASC.
The IASB standard setting process includes the correct order namely:
1. Research
2. Discussion Paper
3. Exposure Draft
4. Accounting Standard
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10. MOVE TOWARD IFRS
The FRSC has adopted in their entirety all IAS and IFRS.
The move toward IFRS is essential to achieve the goal of one uniform and globally
accepted financial reporting standards.
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