CFAS Overview

• Accounting


  The process of identifying, measuring, and communicating economic information to permit informed judgment and decisions by users of information
• Three important activities in accounting

  1. Identifying

  2. Measuring

  3. Communicating
• Identifying


  The process of analyzing events and transactions to determine whether or not they will be recognized. Only accountable events are recognized.
• Measuring


  Involves assigning numbers, normally in monetary terms, to the economic transactions and events
• Communicating


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


  • External events
  • Internal events
• External events


  Events that involve an external party
• Types of external events


  • Exchange (reciprocal transfer)
  • Non-reciprocal transfer
  • External event other than transfer
• Internal events


  Events that do not involve an external party
• Types of internal events

  • Production
  • Casualty
• Measurement bases used in accounting

  • Historical cost
  • Fair value
  • Present value
  • Realizable value
  • Current cost
  • Inflation-adjusted costs
• Valuation by fact


  Measurement is unaffected by estimates
• Valuation by opinion


  Measurement is affected by estimates
• Basic purpose of accounting

  To provide information about economic activities intended to be useful in making economic decisions
• Types of accounting information classified as to users' needs

  • General purpose accounting information
  • Special purpose accounting information
• General purpose accounting information

  Designed to meet the common needs of most statement users, governed by the Philippine Financial Reporting Standards (PFRS)
• Special purpose accounting information

  Designed to meet the specific needs of particular statement users, provided by other types of accounting (e.g. managerial accounting, tax basis accounting)
• Basic accounting concepts


  • Double-entry system
  • Going concern
  • Separate entity
  • Stable monetary unit
  • Time Period
  • Materiality concept
  • Cost-benefit
  • Accrual Basis of accounting
  • Historical cost concept
  • Concept of Articulation
  • Full disclosure principle
  • Consistency concept
  • Matching
  • Residual equity theory
  • Fund theory
  • Realization
  • Prudence (Conservatism)
• Common branches of accounting

  • Financial accounting
  • Management accounting
  • Cost accounting
  • Auditing
  • Tax accounting
  • Government accounting
• Four sectors in the practice of accountancy

  • Practice of Public Accountancy
  • Practice in Commerce and Industry
  • Practice in Education/Academe
  • Practice in the Government
• Philippine Financial Reporting Standards (PFRSs)

  Standards adopted by the Financial and Sustainability Reporting Standards Council (FSRSC) from the International Financial Reporting Standards (IFRSs)
• Entities should follow a uniform set of generally acceptable reporting standards when preparing and presenting financial statements; otherwise, financial statements would be misleading
• The process of establishing financial accounting standards is a democratic process in that a majority of practicing accountants must agree with a standard before it becomes implemented
• Recognition


  The process of incorporating the effects of an accountable event in the statement of financial position or the statement of profit or loss and other comprehensive income through a journal entry
• Subscription of the entity's own equity instrument (i.e., contributions by owners) is not considered an exchange or reciprocal transfer event
• Payment of accounts payable is not considered a nonreciprocal transfer event
• External events


  Events involving an entity and another external party
• Measuring


  The accounting process of assigning numbers, commonly in monetary terms, to the economic transactions and events
• Basic purpose of accounting

  To provide quantitative financial information about economic activities intended to be useful in making economic decisions
• Types of accounting information

  • Quantitative
  • Financial information
  • Qualitative
• General purpose financial statements

  Statements that cater to the common needs of a wide range of external users
• External users


  Users who do not have the authority to demand financial reports tailored to their specific needs
• The primary objective of financial reporting is to provide information about economic resources, claims to these resources, and changes in them, information useful for investment and credit decisions, and information useful in predicting future cash flows