CFAS

• Communicating


  The process of transforming data into useful accounting information, such as financial statements and other accounting reports, for dissemination to users
• Identifying


  The process of analyzing events and transactions to determine whether or not they will be recognized
• Accounting


  The process of identifying, measuring, and communicating economic information to permit informed judgement and decision by users of the information
• Implicit to communicating process

  1. Recording or Journalizing: process of systematically maintaining a record of all economic business transactions after they have been identified

  2. Classifying (Posting To Ledger): sorting or grouping of similar economic transactions into their respective classes

  3. Summarizing: preparation of financial statements e.g., statement of financial position, statement of comprehensive income, statement of changes in equity, and statement of cash flows
• Measuring


  Involves assigning numbers, normally in monetary terms, to the economic transactions or events
• Types of Events

  • External Events: events that involve an external party
  • Internal Events: events that do not involve an external party
• Measurement Bases

  • Historical Cost: original acquisition cost and most common measure
  • Current Value: Fair Value, Present Value, Realizable Value, Value in Use, Current Cost
• Accounting Cycle

  1. Analyzing source documents

  2. Recording in journal

  3. Posting to Ledger

  4. Unadjusted Trial Balance

  5. Adjusting Entries

  6. Preparation of Financial Statements

  7. Closing Entries

  8. Post Closing Trial Balance

  9. Reversing Entries (OPTIONAL)
• Adjusting Entries


  • Accrued Income, Doubtful Accounts, Accrued Expense, Depreciation, Prepaid Expense, Deferred Income
• Example: J purchased office supplies on August 1, 2020 amounting to P100,000 in which the company immediately paid in cash. At December 31, 2020, which is also the end of the accounting period, inventory records show that the amount of remaining office supplies amount to P40,000
• Adjusting Entries Examples


  • Various examples of adjusting entries like Accrued Income, Doubtful Accounts, Depreciation, Prepaid Expense, Deferred Income
• The basic purpose of Accounting is to provide information about economic activities intended to be useful in making economic decisions
• An Accountant’s primary task is to supply financial information so that users could make informed judgments and better decisions
• The Accountancy Profession is regulated by RA 9298 (Philippine Accountancy Act of 2004)
• Limitation of the Practice of Public Accountancy: Only single practitioners and partnerships shall be allowed to practice public accountancy. The SEC shall not register any corporation organized for the practice of public accountancy. These practitioners need 3 meaningful experiences for them to acquire the certificate of accreditation
• Types of Accounting Information Classified as to User’s Needs

  • General Purpose Accounting Information - designed to meet the common needs of most statement users. This information is governed by Philippine Financial Reporting Framework.

  Special Purpose Accounting Information - designed to meet the specific needs of particular statement users. This info is provided by other types of Accounting. E.g., managerial Accounting, tax basis accounting, and etc.
• 4 main areas where CPAs can practice their profession

  • Public Accounting - composed of individual practitioners, small accounting firms, and large firms that render independent and expert financial services to the public. (Auditing, Taxation, and Management Advisory Services)

  Private Accounting - CPAs who are employed in business entities in various capacities as accounting staff, chief accountant, internal auditor, and controller.

  Government Accounting - the focus of government accounting is the custody and administration of public funds

  Academe
• The Board of Accountancy is the body authorized by law to promulgate rules and regulations affecting the practice of the accountancy profession. They are also responsible for preparing and grading the Philippine CPA examination
• Continuing Professional Development is the acquisition of advanced knowledge, skill, and proficiency. It also raises and enhances the technical skill and competence of the Certified Public Accountant. CPD credit unit: only 15 CPD credit units for renewal of license, however, 120 CPD credit units are required for the Accreditation of a CPA to practice the Accountancy profession
• Auditing is one of the areas of accounting. It is analytical, the work of an auditor begins when the work of an accountant ends. The auditor examines the financial statements
• Accounting is essentially constructive in nature, accounting ceases when financial statements are already prepared
• Accounting vs. Bookkeeping

  Accounting is conceptual and concerned with the "why," while bookkeeping is the procedural element of accounting and focuses on the "how" of accounting
• GAAP - Generally Accepted Accounting Principles
• Accounting vs. Auditing

  Accounting is essentially constructive in nature and ceases when financial statements are prepared. Auditing, on the other hand, begins when the work of an accountant ends. An auditor examines financial statements to ascertain their conformity with GAAP
• Financial Accounting vs. Managerial Accounting

  Financial Accounting is primarily concerned with recording business transactions and preparing financial statements for general purpose reports for both internal and external users. Managerial Accounting, on the other hand, focuses on developing accounting information for internal users only, emphasizing areas like budgeting, forecasting, and costing
• Accounting vs. Accountancy

  Accounting is used in reference only to accountancy such as public accounting, private accounting, and government accounting. Accountancy refers to the profession of accounting practice
• PIC - Philippine Interpretation Committee
• PHILIPPINE FINANCIAL REPORTING STANDARDS (PFRS) – criteria
• Financial Reporting Standards Council (former Accounting Standard Council)
• International Accounting Standards Board (FORMER IASC)