CHAPTER 1- THE ACCOUNTING PROFESSION

LEARNING OBJECTIVES:

At the end of this chapter, the student should be able to:

1. Define and understand the nature of Accounting.

2. Trace the history of Accounting

3. Determine the Functions of Accounting

4. Identify the users of Accounting Information

5. Enumerate and explain the branches and areas of Accounting.

6. To discuss the Philippine Accounting Standards

7. To understand Republic Act 9298- Philippine Accountancy Act of 2004

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DEFINITION OF ACCOUNTING

The Accounting Standards Council defined “Accounting” as a service activity. Its function is to provide
quantitative information, primarily financial in nature, about economic entities, that is intended to be
useful in making economic decisions.

The Committee on Accounting Terminology of the American Institute of Certified Public Accountants defined
“Accounting” as the art of recording, classifying, and summarizing in a significant manner in terms of
money, transactions and events which are in part at least of a financial character and interpreting the results
thereof.

The American Accounting Association in its Statement of Basic Accounting Theory defined “Accounting” as the
process of identifying, measuring, and communicating economic information to permit informed judgment
and decision by users of the information.

ACCOUNTING AS SCIENCE AND ART

1. As a social science, accounting is a body of knowledge which has been systematically gathered,
classified and organized

2. As a Practical Art, accounting requires the use of creative skills and judgment (Millan, 2019)

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 WHAT IS A BUSINESS TRANSACTION?

- It is an event that has a direct effect on the operation of the economic unit and can be expressed in
terms of money.

Ex. Buying and Selling of goods, renting a building, paying employees, buying new office equipment, buying
new office equipment and any other activity of a business that involves exchanges of values in monetary
items

Accounting has a number of components:

1. Identifying as the analytical component

2. Measuring as the technical component

3. Communicating as the formal component

1. IDENTIFYING- This accounting process is the recognition or non-recognition of business activities as

“Accountable events.

Not all business activities are accountable. For example, the hiring of employees, the death of the entity
president and the entering into a contract are all business activities but such events are not accountable,
because they cannot be quantified or expressed in terms of a unit of measure.

Economic activities may be classified as external and internal.

External Transactions or exchange transactions are those economic events involving one entity and another entity

Examples: Purchase of merchandise from a supplier, borrowing money from a bank, sale of merchandise to
customer and payment of salaries to employees.

Internal Transactions are economic events involving the entity only. Examples:

Production and Casualty Loss

Production is the process by which resources are transferred into products. Casualty is any sudden and
unanticipated loss from fire, flood, earthquake and other event ordinarily termed as an act of God.

2. MEASURING- is the assigning of peso amounts to the accountable economic transactions and events.
Financial statements without monetary amounts would be largely unintelligible or incomprehensible.
The Philippines peso is the unit of measuring accountable economic transactions.

Four Measurement bases or financial attributes

Historical Cost- this is identified as the original acquisition cost.

Current Cost- this is identified as replacement cost or the current purchase price

Realizable Value—this is identified as current selling price or the amount that could currently be obtained by

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selling the asset in an orderly disposal.

Present Value- This is the discounted value of the future net cash inflows that the asset is expected to
generate in the normal course of business.

3. COMMUNICATING- is the process of preparing and distributing accounting reports to potential users of
accounting information. Implicit in the communication process are the recording, classifying and
summarizing aspects of accounting.

Recording or Journalizing is the process of systematically maintaining a record of all economic business
transactions after they have been identified and measured.

Classifying- is the sorting or grouping of similar and interrelated economic transactions into their respective
classes.

Summarizing- is the preparation of financial statements which include the statement of financial position,
income statement, statement of comprehensive income, statement of changes in equity and statement of
cash flows.

Interpreting- The accountant’s interpretation on the financial statement is needed. Analysis reports are
submitted together with the financial statements.

TYPES OF INFORMATION PROVIDED BY ACCOUNTING

1. Quantitative Information – Information expressed in numbers,, quantities, or units

2. Qualitative Information- Information expressed in words or descriptive form. Qualitative

information is found on the notes to financial statements as well on the face of the other components
of the financial statements.

3. Financial Information- Information expressed in money, financial information is also quantitative

information because monetary amounts are normally expressed in numbers (Millan, 2019)

BRIEF HISTORY OF ACCOUNTING

Accounting can be traced as far back as the prehistoric times. Since the dawn of civilization when mankind
began to engage in trade, perhaps more than 10,000 years ago, methods of record keeping and accounting
have been invented.

As early as 8500B.C, accounting has already existed. Archaeologists have found clay tokens as old as 8500 B.C.
In Mesopotamia which were usually cones, disks spheres, and pellets. These tokens correspond to
commodities like sheep, clothing ot bread. They were used in the Middle West in keeping records. After some
time, the tokens were replaced by wet clay tablets. During such time, experts concluded this to be the start of
the art of writing (Source: http://EzineArticles.com/456988)

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Other ancient civilizations keeping account records are Babylonia (4,500 BC), Egypt (2,250BC), China and
Greece.

In the Middle ages (13th and 15th centuries), trades flourished in places such as Florence, Venice and Genoa)
this has brought advancement in account keeping methods. In 1211 A.D, one of the systems
in accounting was kept by a Florentine Banker. However the system was primitive as the concept of equality
for entries was absent. Double Entry records first came out during 1340 AD in Genoa.

In 1494, the first systematic record keeping dealing with the “double entry recording system” was formulated
by Fr. Luca Pacioli, a Franciscan monk and mathematician. The double entry recording system was included
in Pacioli’s book titled “Summa di Arithmetica Geometria Proportioni et Proportionalita published on
November 10, 1494 in Venice.

In this book, Pacioli introduced three important books of records, namely:

a. Memorandum Entry- For all information on a transaction

b. Journal Book- For the original entry

c. Ledger Book- For the final entry

The concept of Double Entry Recording is being used up to this day. Thus, Fr. Luca Pacioli is considered as the
Father of Modern Accounting. (Millan, 2019 and Roxas, Valencia, 2018)

FUNCTION OF ACCOUNTING IN BUSINESS

Accounting is often referred to as the “Language of Business” because it is fundamental to the

communication of financial information.

Accounting has the following two broad functions in a business:

1. To provide external users with information that is useful in making among others,
investment and credit decisions.

2. To provide internal users with information that is useful in managing the business (Millan, 2019).

USERS OF ACCOUNTING INFORMATION

1. Internal Users- Those who are directly involved in managing the business.

Examples: Business Owners who are directly involved in managing the business, Board of Directors,
Managerial Personnel

2. External Users- Those who are not directly involved in managing the business.

Examples: Existing and Potential Investors, Lenders, Government Agencies, Non-Managerial E

Employees, Customers, Public. (Millan, 2019)

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TYPES OF ACCOUNTING INFORMATION CLASSIFIED AS TO USER’S NEEDS

1. General Purpose Accounting Information- It is an information designed to meet the common needs of
most statement users, it is provided by financial accounting and is prepared primarily for external
users.
2. Special Purpose Accounting Information- Is information designed to meet the specific needs of
particular statement users. It is provided by management accounting or other branches and is
prepared primarily for internal users. (Millan, 2019)

EXAMPLES OF DECISIONS AND TYPES OF INFORMATION NEEDED TO MAKE THOSE DECISIONS

(Millan, 2019)

Users Example of Decision/s to make Example of Information needed

1. External User - Existing Investor: - Audited Financial

Statements of the
(Investor) Whether to hold or sell business to aid in
investment in stocks analysing the value of the
company (General
Potential Investor Purpose Information)
Whether or not to buy
shares of stocks

2. External User (Lender - Lender: - Audited Financial

Statements of the
or Supplier) Whether or not to extend business to aid in
loan to a business analysing the
company’s ability to pay
- Supplier: its debts (General
Purpose Information)
Whether or not to extend
credit to a business

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 3. Internal User Whether or not to increase the sale - Analysis of the effects of
price of a product sales volume and sales
(Manager) prices to earnings
(Special Purpose
Information)

How much capital is needed to

manufacture a new product?
Budget Report ( Special
Purpose Information)

GENERALLY ACCEPTED ACCOUNTING PRINCIPLES

Accounting rules, procedures, and practices came to be known as Generally Accepted Accounting
Principles (GAAP).

Simply stated, Generally Accepted Accounting Principles represent the rules, procedures, practice and
standards followed in the preparation and presentation of financial statements.”

Generally Accepted Accounting Principles are like Laws that must be followed in financial reporting.

FINANCIAL REPORTING STANDARDS COUNCIL (Replaces the ASC)

On November 18, 1981, The Philippine Institute of Certified Public Accountants, the national professional
body of CPA’s in the Philippines, created the Accounting Standards Council as the accounting standard body
in the Philippines, to establish and improve accounting standards that will be generally accepted in the
Philippines.

In 2004, The Philippine Regulations Commission (PRC) created the Financial Reporting Standard Council
(FRSC) replacing the ASC. The FRSC was created to assist the Board of Accountancy (BOA) to carry out its
powers and functions provided under Republic Act No. 9298, The Philippine Accountancy Act of 2004

The approved accounting standards of the FRSC are known as the Philippine Financial Reporting
Standards (PFRS) and Philippine Accounting Standards (PAS) which fully took effect on January 1, 2005,
statements of the FRSC are known as “Philippine Accounting Standards or PAS and Philippine Financial
Reporting Standards or PFRS.”

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CAREER FIELDS IN ACCOUNTING

1) Public Accounting- composed of individual practitioners, accounting firms and large multinational
organizations that render independent expert financial services to the public in a professional fee
basis. (Dean Ester F Ledesma)

Professional Accountants who work in public accounting firms are usually Certified Public
Accountants (CPA’s). A Public Accountant may perform one or more of the following services:
(Arenas T, Chua, M. & Villarina F. (2018)

a.) Auditing- In performing an Audit, the accountant makes an independent examination of the
financial statements of a business enterprise. The auditor evaluates the accounting system of
business enterprise and carefully examines the records to see to it that transactions have been
properly recorded. After conducting his examination, the auditor issues a report expressing an
opinion as to the fairness of the financial statements.

b.) Management Advisory Services- includes the design, installation and improvement of firm’s
general accounting system and other system deemed necessary for controlling and distributing
manufacturing costs. Individuals who provide management advisory services need not be CPA’s.
in fact they need not be Accountants at all. The area of Management A d v i s o r y S e r v i c e s
includes financial planning and control, the

development or improvement of an accounting or computer system, financial forecasting,

and advice on mergers and consolidations.

c.) Tax Services- It includes giving advice in the possible tax consequences of a certain financial
decisions, preparing income tax returns and representing clients before government agencies
such as BIR during a tax audit.

2) Private Accounting- An accounting job done in private business enterprises. The accountant works as
an employee of a business enterprise. They may be employed in various capacities. (Arenas T, Chua,
M. & Villarina F. (2018)

The Chief Accounting Officer of a business enterprise is called Controller. The

Chief Financial Officer is called Finance Manager.

Tasks in Private Accounting

a.) General Accounting- performing the entire accounting process, from identifying to recording
transactions and the preparation of financial statements for the use of management.

b.) Cost Accounting- it has something to do with controlling, determining and controlling costs
particularly those costs in producing a product or service.

c.) Budgeting- Provides management a plan for future operations after this plan has been applied,
summaries and reports comparing the actual accomplishments with the plan are provided.

d.) Internal Auditing- Establishes accounting procedures are being followed throughout the year.
The task of conducting a review of the company’s operations to determine adherence to
management policies and measuring efficiency of operations.

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 e.) Accounting/ Management Information System- task of designing and setting up a manual or
computerized accounting system.

3.) Government Accounting- Accounting for the national government and its instrumentalities such as
provinces, towns and cities. They are of concerned with public funds. (Arenas T, Chua, M. & Villarina F. (2018)

Example of government agencies requiring the services of professional accountants are the commission
on Audit (COA), Bureau of Internal Revenue (BIR), Bangko Sentral ng Pilipinas, GSIS, and Bureau of
Custom.

4. Accounting Education- is another Professional field where the accountant assumes the role of
researcher, teacher and reviewer. (Vera Cruz- Manuel, Z. (2018)

Researcher- investigates and makes a study creating, applying, relating or improving accounting theories
and business concepts that suit the changes taking place in a particular business or industry.

Accounting Professor- is responsible for the formation of competitive accountants and consultants and
teaching subjects such as accounting, auditing, management advisory services and other subjects.

Accounting Reviewer- helps prepare the candidates for the CPA Licensure Examination. AREAS OF

SPECIALIZATION: (Vera Cruz- Manuel, Z. (2018), (Dean Ester F. Ledesma)

Basic Accounting or Bookkeeping- is the routine activity of recording, classifying and summarizing
business transactions in a systematic manner. It is the procedural aspect of accounting.

Financial Accounting- involves the preparation and interpretation of Financial Statements primarily for
external users.

Cost Accounting- deals with the recording, classifying and summarizing the details of material, labor and
overhead necessary to produce and sell a product or service.

Managerial Accounting- is the presentation of accounting data primarily for management who are
considered the internal users. The special reports will assist managers in planning, directing and
controlling the operation of the business as well as in managing enterprise resources.

Auditing- deals with independent verification and examination of the accounting records for the purpose
of giving an opinion on the fairness of its presentation.

Government Accounting- deals with the administration or uses of public funds, to bring about service to
the community.

Fiduciary Accounting (Trust Accounting, Estate Accounting, Receivership Accounting)- Handling of

accounts managed by a person entrusted with the custody and management of property for the benefit of
another. (Examples: Banks, Insurance Companies, Mutual Trust, Pension Plans)

Environment Accounting- The area of accounting that focuses on programs, activities and projects that
are focused on care for Mother Earth.

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 Social Responsibility Accounting- Reporting of programs and projects that have to do with the
upliftment of the welfare of the people of a community or nation.
PHILIPPINE REGULATORY AGENCIES

The practice of the accounting profession, among others, is governed by regulatory bodies such as the
Professional Regulation Commission, Board of Accountancy and the Philippine Institute of Certified Public
Accountants. The financial reports prepared are also affected by the rulings and promulgations issued out by the
Securities and Exchange Commission, Bangko Sentral ng Pilipinas, and the Bureau of Internal Revenue.

Professional Regulation Commission

This is a government body in charge of regulating and licensing the practice of a profession like accounting,
medicine, engineering, nursing and others. Among its primary functions are the following:

a.) Maintaining and enforcing professional examinations

b.) Promulgating and implementing standards and ethics in the practice of profession
c.) Providing legal and other regulatory services such as hearing formal complaints
d.) Acting on valid complaints by suspending and revoking license of an erring professional.

Board of Accountancy

Republic Act 3105 regulated on March 17, 1978, the practice of accounting by creating the Board of
Accountancy. It is under the jurisdiction of the PRC and is tasked in setting up and promulgating a set of
professional standards and ethics in the practice of the accounting profession. It is composed of a chairman
and six members appointed by the President of the Philippines upon the recommendation of the PRC. It
constantly monitors the practice of accountancy in the Philippines by conducting exams to CPA candidates,
granting certificates to board passers, registering and suspending members, conducting dialogues with
accountancy students, examinees, and accountants.

Securities and Exchange Commission (SEC)

SEC was established on October 26, 1936, under C.A 83. Its task is to safeguard public interest. It regulates
business operations specifically of partnerships and corporations, entities granted license/ franchise to
operate, and foreign companies doing business in the country.

Bangko Sentral ng Pilipinas (BSP)

BSP Regulates the operations of all banks, as well as all importations (goods coming into the country) and
exportations (goods going out to other countries) of goods. It also closely monitors foreign currency
transactions and the Philippine Peso exchange rate ensuring its stability through a series of measures it
undertakes.

Bureau of Internal Revenue (BIR)

BIR ensures compliance of tax and license requirements by all businesses. People and business entities
earning income are required to fill up and submit periodic tax returns and pay for licenses, fees and taxes.

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PHILIPPINE ACCOUNTING STANDARDS

PURPOSE OF ACCOUNTING STANDARDS

The overall purpose of accounting standards is to identify proper accounting practices for the preparation and

presentation of financial statements.

Accounting standards create a common understanding between preparers and users of financial statements particularly

the measurement of assets and liabilities.

A set of high-quality accounting standards is a necessity to ensure comparability and uniformity in financial statements

based on the same financial statements.

FINANCIAL REPORTING STANDARDS COUNCIL (FRSC)

- Established by the Board of Accountancy (BOA) in 2006 under the Implementing Rules and Regulations
of the Philippine Accountancy Act of 2004 to assist the board in carrying out its power and function to
promulgate accounting standards in the Philippines.
- The FRSC’s main function is to establish generally accepted accounting principles in the Philippines in
achieving this objective the FRSC considers Standards issued by the IASB.
- The FRSC is the successor of the Accounting Standards Council (ASC) which was created in November
1981 by the Philippine Institute of Certified Public Accountants to establish Generally Accepted
Accounting Principles.
- The approved statements of the FRSC are known as Philippine Accounting Standards
- Issues new releases to announce the issuance of final standards and interpretations, exposure drafts and
other matters which are posted in the Philippine Accounting Standards Section of the PICPA website
(www.picpa.com.ph)
- The FRSC issues its standards in a series of pronouncements called Philippine Financial Reporting
Standards (PFRS’s). these consist of
(a) Philippine Financial Reporting Standards (These correspond to International Financial
Reporting Standards)
(b) Philippine Accounting Standards (These correspond to International Accounting
Standards)
(c) Philippine Interpretations (These correspond to Interpretations of the International
Financial Reporting Interpretations Committee (IFRIC)

The FRSC is composed of 15 members with a chairman who had been or is presently a senior accounting
practitioner and 14 representatives from the following:

Board of Accountancy 1
Securities and Exchange 1
Commission
Bangko Sentral ng Pilipinas 1

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Bureau of Internal Revenue 1
Commission on Audit 1
Major Organization of Preparers 1
and users of financial statements-
Financial Executives Institute of the
Philippines (FINEX)
Accredited National Professional
Organizations of CPA’s

Public Practice 2
Commerce and Industry 2
Academe and Education 2
Government 2

The chairman and members of the FRSC shall have a term of 3 years renewable for another term.

The AASC is composed of 15 members with a chairman who had been or is presently a senior
practitioner in the Public Practice and 14 representatives from the following: (PER IRR of RA 9298)

Board of Accountancy 1
Securities and Exchange 1
Commission
Bangko Sentral ng Pilipinas 1
Commission on Audit 1
An association or organization of 1
CPA’s in active public practice of
accountancy
Accredited National Professional
Organizations of CPA’s

Public Practice 6
Commerce and Industry 1
Academe and Education 1
Government 1

The AASC is composed of 18 members with a chairman who had been or is presently a senior
practitioner in the Public Practice and 17 representatives from the following: (PER BOA RESOLUTION
NO. 22 SERIES OF 2020)

Board of Accountancy 1
Securities and Exchange 1
Commission
Bangko Sentral ng Pilipinas 1
Commission on Audit 1
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Insurance Commission 1
An association or organization of 1
CPAs in active public practice of
accountancy
Accredited National Professional
Organizations of CPA’s

Public Practice 9
Commerce and Industry 1
Academe and Education 1

REPUBLIC ACT 9298- PHILIPPINE ACCOUNTANCY ACT OF 2004 (REVISED IN 2016)

Objectives of the Philippine Accountancy Act:

o The standardization and regulation of accounting education.

o The examination for registration of CPAs.

o The supervision, control and regulation of the practice of Accountancy in the Philippines

Scope of Practice of Accountancy:

o Practice of accountancy shall include, both not limited to the following:

• Practice of Public Accountancy – Practice of public accountancy shall constitute in a person, be

it his/her individual capacity, or as a partner or as a staff member in an accounting or auditing
firm, holding out himself/herself as one skilled in the knowledge, science and practice of
accounting, and as a qualified person to render professional services as a certified public
accountant; or offering or rendering, or both, to more than one client on a fee basis or otherwise.

• Practice in Commerce and Industry – Practice in commerce and industry shall constitute in a
person:

✓ Involved in decision making requiring professional knowledge in the science of accounting,

(as well as the accounting aspects of finance and taxation).

✓ When the CPA represents his employer before government agencies on tax and other
matters related to accounting.

✓ When such employment or position requires that the holder thereof must be a CPA.

• Practice in Education / Academe – Practice in education or the academe shall constitute in a

person in an educational institution which involve teaching of accounting, auditing, management
advisory services, finance, business law, taxation, and other technically related subjects.

✓ A CPA is considered to be engaged in the practice of accountancy in education / academe if

he/she is employed in educational institutions as teachers of accounting, auditing, MAS,
(accounting aspects of) finance, business law, taxation and other technically related
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 subjects.

✓ Members of the Integrated Bar of the Philippines (IBP) may be allowed to teach law and
taxation subjects.

✓ The position of either the Dean or department chairman (or its equivalent) that supervises
the BSA program of an educational institution is deemed to be in practice of accountancy in
the academic /education and therefore must be occupied only by a duly registered CPA.

• Practice in Government – Practice in the government shall constitute in a person who holds, or is
appointed to, a position in an accounting professional group in government or in a government-
owned and/or controlled corporation, including those performing proprietary functions, where
decision making requires.

Limitations of the Practice of Public Accountancy:

o Single practitioners (individual CPAs) and Partnership of CPAs shall be registered CPAs in the
Philippines.
o The SEC shall not register any corporation organized for the practice of public accountancy. In
other words, corporation form of CPA firm is not allowed.
o A certificate of accreditation issued only after showing that the registrant has acquired the
minimum 3 years meaningful experience in any of the areas of accountancy (whether in the
public accountancy, commerce and industry, education/academe and government).

o Certificate of Accreditation – a certificate under seal, issued by the PRC upon the
recommendation by the BOA, attesting that Individual CPAs, including the staff members thereof,
firms including the sole proprietors and the staff members thereof and partnerships of CPAs including
the partners and the staff members thereof, are duly accredited to practice public accountancy in the
Philippines.

Prohibition in the Practice of Accountancy:

o Non-CPAs:

✓ Are not allowed to practice accountancy in the Philippines.

✓ Cannot use the title “Certified Public Accountant” or “CPA”.

✓ Should not indicate (thru display or use any title, sign, card, advertisement, or other
device) that he practices or offers to practice accountancy or that he is a CPA.

o Non-Filipino professional accountants/CPAs:

✓ Are also not allowed to practice accountancy in the Philippines, unless:

• Through foreign reciprocity.

• With valid temporary/special permit duly issued by the BOA and the PRC.

professional knowledge in the science of accounting, or where a civil service eligibility as a CPA is a
prerequisite.
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Professional Regulatory Board of Accountancy (BOA):

o The BOA is the official government agency empowered to enforce RA 9298.

o BOA is under the supervision and administrative control of the Professional Regulation
Commission (PRC).

• Composition of BOA:
✓ BOA shall be composed of a chairman and 6 members (all of which are to be appointed by
the President of the Philippines).

✓ BOA shall elect a vice-chairman from among its members for a term of 1 year.

✓ According to the IRR, the 4 sectors in the practice of accountancy shall as much as
possible be equitably represented in the BOA.

Qualifications of BOA members:

At the time of appointment, he/she must be:

✓ Natural-born citizen and a resident of the Philippines.

✓ Duly registered CPA with at least 10 years of work experience in ANY scope of practice of
accountancy.

✓ Of good moral character and must not have been convicted of crimes involving moral
turpitude.

✓ Not have any pecuniary interest, directly or indirectly, in any school, college, university or
institution conferring an academic degree necessary for admission to the practice of
accountancy (those that offer BSA degree) or where review classes in preparation for the
licensure examination are being offered or conducted, nor shall he/she be a member of the
faculty or administration thereof at the time of his/her appointment to the BOA.

✓ Not be a director/officer of the APO (PICPA) at the time of his/her appointment – this is an
additional requirement under the IRR.

Term of office of BOA members:

✓ The Chairman and the members of the BOA members shall hold office for a term of 3 years.

✓ Any vacancy during the term of a member shall be filled up for the unexpired portion of the
term only. Appointment to fill up an unexpired term is not to be construed as a complete term.

✓ No person who has served 2 successive complete terms shall be eligible for reappointment

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 until the lapse of 1 year.

✓ No person shall serve in the BOA for more than 12 years.

Powers and Functions of the BOA:

The BOA shall exercise the following specific powers, functions and responsibilities:

✓ To prescribe and adopt the rules and regulations necessary for carrying out the provisions of
this Act (RA 9298).

✓ To supervise the registration, licensure and practice of accountancy in the Philippines.

✓ To administer oaths.

✓ To issue, suspend, revoke, or reinstate the Certificate of Registration for the practice of the
accountancy profession.

✓ To adopt its own official seal.

✓ To prescribe and/or adopt a Code of Ethics for the practice of accountancy.

✓ To conduct an oversight into the quality of audits of financial statements through a review of
the quality control measures.

Grounds for Suspension or Removal of BOA Members:

✓ The President of the Philippines, upon the recommendation of the PRC may suspend or remove
any BOA member on the following grounds:

▪ Neglect of duty or incompetence.

▪ Violation or tolerance of any violation of RA 9298 and its IRR or the CPA Code of Ethics and
the technical and professional standards of practice for CPAs.

▪ Final judgment of crimes involving moral turpitude.

▪ Manipulation or rigging of the CPA's licensure examination results, disclosure of secret and
confidential information in the examination questions prior to the conduct of the said
examination or tampering of grades.

CPA Examinations:

o All applicants for registration for the practice of accountancy shall be required to undergo a
licensure examination to be given by the BOA in such places and dates as the PRC may
designate subject to compliance with the requirements prescribed by the PRC in accordance
with Republic Act No. 8981.

• Qualifications of Applicants for CPA Examinations:

✓ Must be a Filipino citizen.

✓ Must be of good moral character.

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 ✓ Must be a holder of the degree of BSA conferred by a school, college, academy or
institute duly recognized and/or accredited by the CHED or other authorized
government offices.

✓ Has not been convicted of any criminal offense involving moral turpitude.

Scope of Examinations:

▪ The CPA examination shall cover, but are not limited to, the following subjects:

✓ Financial Accounting and Reporting

✓ Advanced Financial Accounting and Reporting

✓ Management Advisory Services

✓ Auditing

✓ Regulatory Framework for Business Transactions

✓ Taxation

• Rating in the CPA Examinations:

✓ To pass the CPA exams: A candidate must obtain at least a general average of
75%, with no grades lower than 65% in any given subject.

✓ Conditional status: If a candidate obtains a rating of 75% and above in at least a

majority of the subjects tested, he/she will be given conditional credits for the
subjects passed.

• Removal Examination:

✓ The candidates with conditional status shall take an examination in the remaining
subjects within 2 years from the preceding examination.

✓ If the candidate fails to obtain at least a general average of 75% and a rating of at
least 65% in each of the subjects reexamined, he/she shall be considered as failed
in the entire examination.

✓ The original exam and the removal exam are counted as one exam only.

• Candidates required to take Refresher Course:

Any candidate who fails in 2 complete CPA exams shall be disqualified from taking
another set of examinations unless he/she submits evidence to the satisfaction of
the BOA that he/she enrolled in and completed a refresher course with at least 24
units of subjects given in the CPA exams.

The examination in which the candidate was conditioned together with the
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 removal examination on the subject in which he/she failed shall be counted as
one complete examination.
The IRR provides that the required refresher course (whether regular or special
refresher course) shall be offered only by an educational institution granting a degree of
BSA.

Issuance of Certificates of Registration and Professional Identification Card:

o Certificate of Registration – a certificate under seal bearing a registration number, issued to an

individual, by the PRC, upon recommendation by the BOA, signifying that the individual has complied
with all the legal and procedural requirements for such issuance including, in appropriate cases,
having successfully passed the CPA licensure examination.

A certificate of registration shall be issued to examinees who pass the CPA licensure
examination subject to payment of fees prescribed by the PRC.

✓ The Certificate of Registration shall bear the signature of the chairperson of the PRC and the
chairman and members of the BOA, stamped with the official seal of the PRC and of the BOA,
indicating that the person named therein is entitled to the practice of the profession with all the
privileges appurtenant thereto. The said certificate shall remain in full force and effect until
withdrawn, suspended or revoked.

o Professional Identification Card – a card with validity of 3 years bearing the registration number, date
of issuance with an expiry date, due for periodic renewal, duly signed by the Chairperson of the PRC
issued by the PRC to a registered CPA upon payment of the annual registration fees for 3 years.

Expiration:
o Certificate of Registration – has no expiry; shall remain in full force until/unless withdrawn,
suspended or revoked.

o Professional Identification Card – subject to expiry; renewable every 3 years.

17
REFERENCES:

Agamata, Franklin T & Berbano Alfred. (2022) . Fundamentals of Accounting. Manila , Philippines:
Education_Online, Inc.

Arenas T, Chua, M. & Villarina F. (2022). Fundamentals of Accounting Principles. Quezon City: National
Book Store

Kieso, Donald E., Kimmel Paul & Weygandt, Jerry J. (2022). Accounting Principles. USA: Courier
Kendallville

Millan, Zeus Vernon. (2023). Financial Accounting and Reporting. Baguio City: Bandolin Enterprise

Roxas, Gregorio, F. & Valencia Edwin G. (2023). Basic Accounting. Baguio City: Valencia Educational
Supply

Tolentino, Gloria J. & Lupisan Ma. Concepcion Y. (2023). Accounting for Partnership and Corporation.
Manila: Millenium Books, Inc.

Vera Cruz- Manuel, Z. (2023). 21st Century Accounting Process 16th Edition. Quezon City: Raintree
Trading & Publishing Inc.

18
 EXERCISE 1

(TRUE or FALSE)

Name: Year and Section:

Date: Score:

Write TRUE if the statement is correct or FALSE if it is incorrect.

1. Accounting is an art and a perfect science

2. Internal accounting reports are more strictly governed by the required accounting
standards than the general accounting for external users

3. Employees and investors are external users of financial reports

4. The success or failure of business is due to accounting records are kept

5. Bookkeeping is synonymous to accounting

6. Auditing is performed before financial accounting starts

7. The American Institute of Certified Public Accountants describes Accounting as an Art.

8. Management accounting provides reports for internal users. These financial reports
observe generally accepted accounting principles

9. Bookkeeping is the procedural portion of the Accounting Process

10. Accounting identifies, measures and communicates information about economic entities
for use in making economic decisions.

11. Auditing is recording, classifying and summarizing of business transactions

12. In classifying phase of accounting, items are sorted and grouped.

13. The Accounting Standards Council sees accounting as a service activity

14. Accounting is broader in scope than Bookkeeping

15. Accounting serves as a means of communication in the business only

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 EXERCISE 2

(MULTIPLE CHOICE)

Name: Year and Section:

Date: Score:

Encircle the letter that corresponds to the best answer

1. The function of Accounting is to provide

a. Quantitative Information

b. Qualitative Information

c. Quantitative and Qualitative Information

d. Mission and Vision

2. Which of the following is not an appropriate description of Accounting?

a. Accounting is an information system

b. Accounting is an exact science and art

c. Accounting is the language of Business

d. Accounting is a process that leads to understandable information

3. The following are the external users of general purpose financial statements, except:

a. Creditors

b. Managers

c. Government

d. Employees

4. Statement 1: Accounting is useful in making economic decisions Statement 2:

Accounting demands critical thinking and creative skills

a. Only Statement 1 is correct

b. Only Statement 2 is correct

c. Both Statements are correct

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d. Both statements are incorrect

5. This work in accounting is performed after the work of accountant is completed

a. Bookkeeping

b. Recording

c. Auditing

d. Reporting

6. Accountants employed by a business firm or a non- government organization are said to be engaged in

a. General Accounting

b. Public Accounting

c. Private Accounting

d. Independent Accounting

7. These external users of financial reports primarily use accounting information to assess their return on
investment im the business

a. Government and its agencies

b. Investors

c. Management

d. Creditors

8. The field of accounting which is directly involved in the preparation of financial statements is:

a. Cost Accounting

b. Managerial Accounting

c. General Accounting

d. Internal Auditing

9. The field of accounting which deals on ensuring adherence to prescribed management policies is:

a. General Accounting

b. Cost Accounting

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c. Managerial Accounting

d. Internal Auditing

10. This accounting organization aims to promulgate and improve the accounting standards that will
constitute GAAP in the Philippines.

a. Philippine Institute of Certified Public Accountants

b. The Professional Regulatory Board of Accountancy

c. Professional Regulation Commission

d. Financial Reporting Standards Council

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 EXERCISE 3

(MATCHING TYPE)

Name: Year and Section:

Date: Score:

Identify what is being referred in each statement given. Refer your answer to the list provided for and write your answer before
each number.

a. Financial Accounting g. Auditing

b. Accounting h. Classifying

c. Budget Accounting i. Basic Accounting

d. Management Accounting j. Recording

e. Financial Accounting k. Management Advisory Services

f. Controller l. Reporting

1. Sorting and grouping similar items together

2.It covers the efficient management of cash and other resources by anticipating or predicting
monetary objectives in the future

3. It includes the design, installation and improvement of the firm’s general accounting system necessary
for controlling

4. Examination of the accuracy of the accounting records

5. Provides management of plan for future operations

6. Focuses on records, business transactions, developed into sets of financial reports

7. The highest accounting officer in a company

8. Branch of accounting that is concerned primarily with the preparation of general purpose financial
statements

9. What function do accounting journals serve in the accounting process?

10. The procedural element of accounting

 EXERCISE 4

1. The objectives of the Philippine Accountancy Act of 2004 are the following except
a. The standardization and regulation of accounting education
b. Examination for registration of certified public accountants
c. Supervisions, control and regulation of the practice of accountancy
d. Integration of accountancy profession

2. The body mandated by law to promulgate rules and regulations affecting the practice of Accountancy.
a. Professional Regulation Commission
b. Philippine Institute of Certified Public Accountants
c. Professional Regulatory Board of Accountancy
d. Commission on Higher Education

3. The members of the Professional Regulatory Board of Accountancy shall be appointed by the
a. Philippine Institute of CPAs (PICPA) c. President of the Philippines
b. Professional Regulation Commission (PRC) d. Association of CPAs in Public Practice (ACPAPP)

4. Which of the following statements about the composition of the Board of Accountancy is incorrect?
a. The four sectors in the practice of Accountancy shall as much as possible be equally
represented in the Board.
b. The Board shall be composed of a chairman and six members
c. The members of the board shall be appointed by the President of the Philippines from a list of
three recommendees for each position and ranked by the Commission, from a list of five
nominees for each position submitted by Accredited Professional Organization (APO)
d. The Board shall elect a chairman from among its members to serve for a term of one year

5. The following statements relate to the term of office of the chairman and members of the Board
of Accountancy. Which of them is incorrect?
a. The chairman and members of the Board of Accountancy shall hold office for a term of three years
b. Any vacancy occurring within the term of a member shall be filled up for the unexpired
portion of the term only
c. Appointment to fill up an expired term is not to be considered as a complete term
d. The Board of Accountancy member who has served two successive complete terms as
chairman or member shall be eligible for reappointment until the lapse of three years

6. Which of the following is not a qualification of a member of the Board of Accountancy?

a. He must be a natural born citizen and a resident of the Philippines.
b. He must not be a director or officer of the Accredited National Professional Organization of
CPAs at the time of his appointment.
c. He must be of good moral character and must not have been convicted of crimes involving
moral turpitude.
d. He must be a duly registered certified public accountant with at least ten years of experience
in public accounting.

7. Which of the following is not a function of the Board of Accountancy as specified in the Philippine
Accountancy Act of 2004?
a. To investigate violations of the Accountancy Law and the rules and regulations promulgated
therewith.
b. To look from time to time into the conditions affecting the practice of the accountancy profession
c. To create and direct accrediting agencies that are entrusted the functions of reviewing higher
educational institutions’ policies and practices leading to accreditation/reaccreditation of
BSA program.
d. To determine and prescribe minimum requirements leading to the admission of candidates to
the CPA licensure examination.

8. Which of the following is not one of the functions of the Board of Accountancy as specified in RA 9298?
a. To look from time to time at the conditions affecting the practice of the accountancy profession
b. To appoint members of the AASC
c. To investigate violations of RA 9298 and its IRRs
d. To determine the prescribed minimum requirements leading to the admission of candidates
to the CPA examination
 9. The following statements relate to RA 9298. Which statement is true?
a. The Professional Regulation Commission has the authority to remove
any member of the Board of Accountancy for negligence,
incompetence or any other just cause
b. Insanity is not a ground for proceeding against a CPA
c. A person shall be considered to be in the professional practice of
accounting if, as an officer in a private enterprise, he makes decisions
requiring professional accounting knowledge
d. After three years, subject to certain conditions, the Board of
Accountancy may order the reinstatement of a CPA whose
certificate of registration has been revoked

10. No person shall serve the Professional Regulatory Board of Accountancy for more than
a. 3 years c. 9 years
b. 6 years d. 12 years

The best preparation for tomorrow is doing your best today- H. Jackson Brown Jr.