DEFINITIONS OF ACCOUNTING
Accounting is a service activity.
Its function is to provide
quantitative information, primarily
financial in nature to be useful in
making economic decisions.
ASC
Accounting is an art of recording,
classifying, & summarizing
transactions and events.
AICPA
Accounting is the process of
identifying, measuring, &
communicating economic
information.
AAA
PS: this definition has stood the
test of time
IMPORTANT POINTS:
1. Quantitative
2. Financial in nature
3. Useful in decision making
COMPONENTS OF ACCOUNTING:
1. IDENTIFYING – the analytical
component
- Recognition and nonrecognition of
accountable events
 Not all business activities are
accountable.
 An event is accountable or
quantifiable if it has effect on
assets, liabilities, & equity.
 Sociological & psychological
matters are not a concern of
accounting
 The subject matter of accounting
is economic activity or
measurement of economic
resources (assets) & economic
obligations (liabilities)
Economic activities (transactions) can be
classified into:
a. External – involves another entity
Examples: Purchase, borrowing,
sale, payment
b. Internal – involves the entity and
within the entity only.
Examples : *Production – process by
which resources are transformed
into products
*Casualty – sudden & unanticipated
loss from fire, quake, flood and
other events termed as act of God.
COMPONENTS OF ACCOUNTING:
2. MEASURING – technical
component
- assigning of peso amounts
 PHILIPPINE PESO
- Unit of measure
MEASUREMENT BASES:
a. Historical Cost – most common measure
b. Current Value – fair value, value in use,
fulfillment value, & current cost.
Accounting as an
information system
measures, processes, and
communicates the financial
statements – a document
that report particularly to
owners & creditors the
financial information about
an entity and tell us how well
an entity is performing in
terms of profit and loss.
COMPONENTS OF ACCOUNTING:
3. COMMUNICATING – preparing
& distributing accounting report
- through communicating,
accounting is considered as the
“universal language of business”
COMMUNICATING PROCESS:
a. RECORDING/JOURNALIZING
- process of systematically maintaining a
record of transactions identified &
measured.
b. CLASSIFYING – sorting or grouping of
similar transactions.
- done by posting to the ledger – a group of
accounts categorized into
assets,liabilities,equity,revenue, & expense.
c. SUMMARIZING – preparation of financial
statements
THE ACCOUNTANCY
PROFESSION
REPUBLIC ACT NO. 9298
(Philippine Accty. Act of
2004)
- Law regulating practice
of accountancy.
PS. Accountancy has a status
equal to that of law &
medicine.
*BOA – promulgates rules &
regulations in the practice of
accountancy profession.
- responsible for preparing &
grading the Philippine CPA
Examination.
LIMITATION OF PRACTICE OF
PUBLIC ACCOUNTANCY
 Single practitioners &
partnerships for practice of
public accountancy shall be
CPAs
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A certificate of accreditation shall be
issued to CPAs in public practice by
the PRC, they are required a
minimum of 3 years of meaningful
experience in any areas of public
practice.
The SEC shall not register any
corporation organized for public
practice.
The PRC shall issue the Certificate of
Registration to practice public
accountancy which shall be valid for
3 years and renewable every 3 years
CPAs, firms & partnership shall be
registered with BOA & PRC for the
practice of public accountancy
3 MAIN AREAS OF CPA
PROFESSION:
1. PUBLIC ACCOUNTING
- render independent & expert financial
services to the public
3 KINDS OF PUBLIC SERVICES:
a. Auditing/External Auditing
– primary service offered
- examination of financial statements to
express opinion as to fairness & if it has
complied with the GAAP
*External auditing is the attest function of
independent CPAs
b. Taxation – reparation of annual income
tax returns
- accountant must be familiar with tax laws
& regulations, must be updated with
changes
c. Management Advisory Services
- became increasingly important in recent
years
- has no precise coverage
3 MAIN AREAS OF CPA
PROFESSION:
2. PRIVATE ACCOUNTING
- employed in business entities as
accounting staff, chief accountant, internal
auditor, & controller – highest accounting
officer
 The major objective of private
accountant is to assign management
in planning & controlling the entity’s
operations.
3. GOVERNMENT ACCOUNTING
- concerned with transactions involving the
government funds & property
- its focus is the custody & administration
of public funds.
CONTINUING PROFESSIONAL
DEVELOPENT (CPD_
- Acquisition o advanced
knowledge, proficiency after
registration of CPA into
professional practice &
lifelong learning.
- It raises & echances technical
skill & competence
- Mandary for CPAs
Republic Act no. 10912
- Law mandating the
CPD program
CPD CREDIT UNITS
- CPD credit hours
required for renewal
of CPA license &
accreditation
 New BOA
Resolution, all CPA
are required to
comply with 120
CPD credit units
CPD unit is gradual:
2017 – 80 units
2018 – 100 units
2019 – 120 units
 Excess units earned
can’t be carried over
to the next 3 years
except units earned
for masteral &
doctoral degrees.
 A CPA is exempted
from CPD for
renewal of license
but not to
accreditation upon
age of 65