Accounting Profession

• Accounting is a service activity.
• Accounting function is to provide quantitative information, primarily financial in nature that is useful in making economic decisions.
• AICPA - Accounting is the art of recording, classifying, and summarizing.
• AAA - Accounting is the process of identifying, measuring, and communicating economic information.
• (AAA) American Accounting Association
• (AICPA) American Institute of Certified Public Accountants
• (ASC) Accounting Standards Council
• Overall objective of accounting is to provide quantitative financial information that is useful to users, particularly owners and creditors
• Essence of Accounting: Decision usefulness
• Important Points in Accounting:

  1. Quantitative information
  2. Financial in nature
  3. Useful in decision
• Accounting definition that states its very purpose was given by AAA
• AAA definition has 3 components:

  1. Identifying - analytical component
  2. Measuring - technical component
  3. Communicating - formal component
• Identifying: recognition or non-recognition of business activities as accountable events.
• "True or False"

  True: Not all business are accountable
• An event is accountable or quantifiable when it has effect on assets, liabilities, and equity.
• Subject matter of accounting is economic activity.
• Economic activity are referred to as transactions classified as external or internal.
• External Transactions: involves one entity and another entity.
• Internal Transactions: involves the entity only or within.
• Measuring: Assigning of peso amounts to accountable events.
• Communicating: Preparation and distribution of accounting reports to users of information.
• 3 Processes under Communication Process:

  1. Recording
  2. Classifying
  3. Summarizing
• Recording: Systematically maintaining a record of all economic business transactions after identifying and measuring.
• Classifying: Sorting similar and interrelated economic transactions into their classes.
• Recording: Accomplished by Journalizing.
• Classifying: Accomplished by Posting to Ledger.
• Ledger: Group of accounts systematically categorized into assets, liability, equity, revenue, and expense accounts.
• Summarizing: Preparation of financial statements.
• Republic Act No. 9298: Law regulating the practice of accountancy in the Philippines, known as the "Philippine Accountancy Act of 2004".
• May 13, 2004: Date of approval of the RA no. 9298.
• Board of Accountancy: Body authorized by law to promulgate rules and regulations affecting the practice of the accountancy profession in the Philippines.
• Board of Accountancy: Responsible for preparing and grading the Philippine CPA examination.
• (BOA) Board of Accountancy
• Limitations of the Practice of Public Accountancy

  1. Single practitioners and partnerships shall be registered CPA.
  2. Certificate of Accreditation shall be issued to CPA upon only showing accordance with rules promulgated by BOA and approved by PRC.
  3. Acquired a minimum of 3 years of experience in any areas of public practice including taxation.
  4. SEC shall not register any corporation organized for public accountancy.
• (PRC) Professional Regulation Commission
• CPA, firms and partnerships, staffs, and partners are required to register with BOA and PRC for public accounting.
• Certificate of Registration: Given by PRC with recommendation of BOA that is valid for 3 years and renewable every 3 years with payment of required fees.
• Areas of Accounting:

  1. Public
  2. Private
  3. Government
• Public Accounting: Renders independent and expert financial services to the public.
• Public Accounting Services:

  1. Auditing
  2. Taxation
  3. Management Advisory