CHAPTER 1 COMMUNICATING - formal PUBLIC ACCOUNTING

THE ACCOUNTANCY PROFESSION preparing and distributing independent and expert financial
accounting reports services to the public
DEFINITION OF ACCOUNTING Accounting - universal language of auditing, taxation, management
[Accounting Standards Council] business services
service activity Recording/Journalizing
quantitative information -​ maintaining a record of Auditing
financial in nature economic transactions -​ External auditing
economic decisions Classifying -​ examination of FS
-​ sorting similar and related -​ expression of opinion
[American Institute of Certified economic transactions -​ attest function
Public Accountants] Summarizing Requires audited FS:
recording, classifying, summarizing -​ preparation of FS -​ BIR (filing of tax)
- significant manner -​ Bank and lending
- financial in nature OVERALL OBJECTIVE OF institutions (loan)
interpreting the results ACCOUNTING -​ Creditors and prospective
To provide quantitative information investors (decision)
[American Accounting Association] about a business useful to users in
identifying, measuring, making economic decisions Taxation Services
communicating -​ preparation of annual
economic information ACCOUNTING AS INFORMATION income tax returns
informed judgment and decision SYSTEM -​ determination of tax
-​ measures activities consequences
IMPORTANT POINTS: -​ processes information into -​ Thorough familiarity with
-​ Quantitative information reports the tax laws and regulations
-​ Financial in nature -​ communicate reports
-​ Useful in decision making Management and Advisory Services
-​ advice installation of
IDENTIFYING - analytical THE ACCOUNTANCY PROFESSION computer system
recognition or nonrecognition REPUBLIC ACT NO. 9298 -​ quality control
accountable events Philippine Accountancy of 2004 -​ installation and
-​ economic activities -​ regulates the practice of modification of accounting
-​ affects ALE accountancy system
external transactions To qualify to practice accountancy: -​ budgeting
-​ along with another entity A person must finish the degree -​ forward planning and
internal transactions in BS Accountancy and pass the forecasting
-​ within the entity only government examination by BOA
production Board of Accountancy PRIVATE ACCOUNTING
-​ resources transformed into -​ promulgate rules and Controller
products regulations affecting the -​ highest accounting officer in
casualty practice of accounting an entity
-​ sudden/unanticipated loss profession in the Philippines Purpose: assist management in
-​ preparing and grading the planning and controlling the entity’s
MEASURING - technical CPA examination operations
assigning of peso amounts -​ maintaining records
FS without monetary amounts is PRACTICE OF PUBLIC -​ producing financial reports
unintelligible or incomprehensible ACCOUNTANCY -​ preparing budgets
historical cost -​ allocating resources
-​ acquisition cost Single practitioners and practice
current value -​ Shall be registered CPAs GOVERNMENT ACCOUNTING
-​ fair value, value in use, SEC shall not register any analyzing, classifying, summarizing
fulfillment value, current corporation organized for the and communicating transactions
cost practice of public accountancy (receipts and dispositions of
government funds)
custody and administration of FINANCIAL ACCOUNTING VS
public funds MANAGEMENT ACCOUNTING
Financial Accounting
CONTINUING PROFESSIONAL -​ general purpose reports
DEVELOPMENT -​ for internal and external
Republic Act No. 10912 users
mandating and strengthening the Management Accounting
continuing professional -​ for internal users only
development program
-​ acquisition of advanced
knowledge, skill, and
proficiency
CPD Credit Units
CPD credit hours required
120 CPD credit units
-​ accreditation of CPA to
practice accountancy
profession
-​ BOA resolution
15 CPD credit units
-​ renewal of CPA license
-​ exception: 65 years old and
above
Excess credit units shall not be
carried over the next three-year
period, except for those earned for
masteral and doctorate degrees

ACCOUNTING VS AUDITING
accounting embraces auditing
Accounting
-​ constructive
-​ ends after FS is prepared
Auditing
-​ analytical
-​ after accounting process
-​ examines the FS

ACCOUNTING VS BOOKKEEPING
Bookkeeping (how)
-​ procedural
-​ development and
maintenance of accounting
records
Accounting (why)
-​ conceptual
-​ reason or justification for
the action adopted

ACCOUNTING VS ACCOUNTANCY
Accountancy - profession
Accounting - particular field of
accountancy