CH01: AP

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1. Accounting Accounting is a service activity. Its function 14. two types of 1. external transactions
Standards is to provide quantitative information, transactions 2. internal transactions
Council primarily financial in nature, about
15. external also known as exchange transactions are
economic entities, that is intended to be
transactions those economic events involving one
useful in making economic decision.
entity and another entity
2. American Accounting is the art of recording,
16. examples of 1. purchase of goods from a supplier
Institute of classifying and summarizing in a significant
external 2. Borrowing money from bank
Certified manner and in terms of money,
transactions 3. Sale of goods to a customer
puyblic transactions and events which are in part at
4. Payment of salaries to employees
Accountants least of a financial character and
5. payment of taxes to the government
interpreting the results thereof.
17. internal economic events involving the entity only.
3. American Accounting is the process of identifying,
transactions
Accounting measuring and communicating economic
These are economic activities that take
Association information to permit informed judgment
place entirely within the entity.
and decision by users of the information.
18. example of 1. production
4. important 1. accounting is about quantitative
internal 2. casualty loss
points made in information.
transactions
the definition 2. The information is likely to be financial in
of accounting nature. 19. production process by which resources are
3. The information should be useful in transformed into products
decision making 20. casualty sudden and unticipated loss from fire,
5. important Components of accounting flood, earthquake and other event
activities in the 1. Identify ordinarily termed as an act of god
accounting 2. Measuring 21. measuring Technical component.
process 3. Communicating
embodied in This accounting process is the assigning
accounting peso amounts to the accountable
definition economic transactions and events
6. the very to provide quantitative information to be 22. common it must be expressed in this form if
purpose of useful in making an economic decision financial accounting information is to be useful
accounting denominator
7. identifying The analytical component. This accounting 23. unintelligible if the financial statements without
process is the recognition or non- and monetary amounts
recognition of business activities as ijcomprehensible
accountable events
24. philippine peso unit of measuring accountable economic
8. TRUE not all business activities are accountable transactions
9. an event is it has an effect on assets, liabilities and 25. measurement 1. historical cost
accountable or equity bases 2. current value
quantifiable if:
26. historical cost is the original acquisition cost and the
10. economic it is a subject matter of accounting. most common measure of financial
activity transactions
the measurement of economic resources
27. current value includes fair value, value in use,
and economic obligations
fulfillment value and current cost
11. TRUE only economic activities are emphasized
28. communicating Formal component.
and recognized in accounting
12. sociological beyond the province of accounting It is the process of preparing and
and distributing accounting reports to
psychological potential users of accounting information.
matters
13. transactions economic activities of an entity
29. Identifying and if the information contained in the 41. essence of decision-usefulness
measuring are accounting records cannot be accounting
pointless communicated and some form to
42. investors interested in financial accounting information
potential users
and other necessary in making important and significant
30. communicating reason why accounting has been called users economic decisions.
process "universal language of business"
43. Republic Act Philippine Accountancy Act of 2004
31. implicit in 1. recording No. 9298
communicating 2. classifying A law regulating the practice of accountancy
process are the 3. summarizing in the Philippines
aspects of
44. law and accountancy as a perofession equivalent to
accounting
medicine
32. recording also known as journalizing
45. in order to a person must finish a degree in Bachelor of
qualify to science in accountancy and pass a very
process of systematically maintaining a
practice difficult government examination given by
record of all economic business
accountancy BOA
transactions after they have been
profession
identified and measured.
46. board of body authorized by law to promulgate rules
33. classifying sorting or grouping of similar and
accountancy and regulations affecting the practice of the
interrelated economic transactions into
accountancy profession in the Philippines
their perspective classes.
Responsible for preparing and grading the
it is accomplished by posting to ledger
Philippine CPA examination
34. ledger group of accounts which are categorized
47. computer offered twice a year, one in may and one in
into asset, liability, equity, revenue, and
based october, in authorized testing centers around
expense accounts
examination the country
35. summarizing preparation of financial statements
48. single shall be registered certified public
that includes SFP, IS, SCI, SOCE, SCF
practitioners accountants in the philippines
36. accounting as an it measures business activities, processes and
information information into reports and partnerships
system communicates the reports to decision for the
makers. practice of
public
step-by-step process accountancy
37. set of financial a key product of accounting information 49. certificate of shall be issued to certified public accountants
statements system accreditation in public practice only upon showing in
accordance with rules and regulations that
these are documents that report financial such registrant has acquired a minimum of
information about an entity to decision three years of meaningful experience in any
makers of the areas of practice including the taxation
38. financial reports tells how an entity is performing in terms 50. the the board of accountancy
of profit and loss and where it stands in certificate of
financial terms accreditation
is
39. overall objective provide quantitative financial information
promulgated
of accounting about a business that is useful to
by
statement users particularly owners and
creditors in making economic decisions 51. the the professional regulation commission
certificate of
40. accountant's to supply financial information so that the
accreditation
primary task statement users could make informed
is approved
judgement and better decision
by
52. the security and shall not register any corporation 61. banks and they frequently require an audit by an
exchange organized for the practice of public other lending independent CPA before granting a loan to
commision accountancy institutions the borrower
53. certified public required to register with BOA and PRC 62. creditors and they place considerable reliance on audited
accountants, firms for the practice of accountancy prospective FS on making economic decision
and partnerships of investors
CPA's including
63. Philippine the former "Interpretations Committee (IC)
partners and staff
Interpretations in august 2006
members therof,
Committee
54. professional upon favorable recommendation of (PIC) now
regulation BOA shall issue Certificate of replaced
commission Registration
64. Interpretations Accountings Standards Council in may
55. certificate of certificate to practice public Committee are 2000
registration accountancy which shall be valid for formed by
3 years and renewable every 3 years
65. role of PIC to prepare interpretations of PFRS for
upon payment of required fees
approval by the FRSC and to provide
56. three main areas in 1. public accounting timely guidance on financial reporting
accounting where 2. private accounting issues not specifically addressed in current
CPA's generally 3. government accounting PFRS
practice their
66. Philippine interpretations are intended to give
profession
Interpretations authoritative guidance on issues that are
57. public accounting practice of accountancy profession Committee likely to receive divergent or unacceptable
that composed of individual (PIC) treatment because the standards do not
practitioners, small accounting firms provide specific and clearcut rules and
and large multinational organizations guidelines
that render independent and expert
67. taxation services includes preparation of annual
financial services to the public
income tax returns and determination of tax
58. public accountants three kind of services consequences of certain proposed business
usually offer 1. auditing endeavors
2. taxation
68. client in tax in taxation, CPA not infrequently represents
3. management advisory services
investigation

in large multinational accounting firms 69. to offer the public accountant must be thoroughly
have separate division for each of taxation familiar with the tax laws and regulations
these services services and updated with changes in taxation law
effectively and court cases concerned with interpreting
59. auditing or external traditionally been the primary service
and efficiently taxation law
auditing offered by most public accounting
practitioners 70. management refer to services to clients on matters of
advisory accounting, finance, business policies,
the examination of financial statements services organization procedures, product costs,
by independent CPA for the purpose distribution and many other phases of
of expressing an opinion as to the business conduct and operations
fairness eith which the FS are 71. examples of 1. advice on installation of computer system
prepared. management 2. quality control
services 3. installation and modification of
the attest function of independent accounting system
CPAs 4. budgeting
60. Bureau of Internal requires audited financial statrments to 5. forward planning and forecasting
Revenue accompany the filing of annual 6. design and modification of retirement
income tax return plans
7. advice on mergers nd consolidations
72. CPA accounting staff, chief accountant, internal 83. CPD credit units refers to the CPD credit hours
employment auditor and controller required for the renewal of
position in CPA license and accreditation
business of a CPA to practice the
entities accoubtancy profession every
3 yrs.
73. controller highest accounting officer in an entity
84. under new BOA resolution, 120 credit units
74. private Includes maintaining the records, producing
All CPAs regardless of
accounting the financial reports, preparing the budgets,
area or sector or practice
and controlling and allocating the resources
are required to comply
of the entity
how many CPD credit
75. major to Assists management in planning and units?
objective of controlling the entity's operations
85. Continuing Professional 1. renewal of CPA license
the private
Development is required 2. accreditation of CPA to
accountant
for practice the accountancy
76. responsibility determination of the various taxes the entity profession.
of private is obliged to pay
accountant mandatory for CPA.
77. government Encompasses process of analyzing, 86. required CPD credit units 15 CPD credit units
accounting classifying, summarizing, and communicating for the renewal of CPA
all transactions involving the receipt and license
disposition of government funds and
87. required CPD credit units 120 CPD credit units
property and interpreting the results thereof
for the accreditation of a
78. focus of custody of and administration of public funds CPA to practice the
government accountancy profession
accounting
88. what will happen to the the excess credit units shall
79. branches of 1. Bureau of internal revenue excess credit units earned? not be carried over to the next
government 2. Commission on audit three year period, except
where Cpas 3. Department of budget and management Credit units earned for
are 4. security and exchange commission masteral and doctoral degrees
employed 5. bangko sentral ng pilipinas
89. exemption from CPD a CPA shall be permanently
80. Republic Act the law mandating and strengthening the exempted from CPD
No. 10912 continuing professional development requirements upon reaching
program for all regulated professions, the age of 65 years old..
including the accounting profession.
81. all CPAs shall the requirements, rules and regulations on however, this is applied only
abide by Continuing Professional Development to be to the renewal of CPA license
promulgated by BOA, subject to the and not for the purpose of
approval of the PRC in coordination with the accreditation to practice
accredited national professional organization accountancy profession
of CPAs or any duly accredited educational 90. Accounting in a broad it embraces auditing.
institutions. sense
82. Continuing refers to the inculcation and acquisition of 91. auditing in a broad sense it is one of the areas of
Professional advanced knowledge, skill, proficiency, and accounting specialization.
Development ethical and koral values after the initial
92. Accounting in a limited it is essentially constructive in
(CPD) registration of CPA for assimilation into
sense nature.
professional practice and lifelong learning.

it ceases when FS are already

it raises and enhances the technical skill and
prepared.
competence of the CPA
93. auditing in a it is analytical. 100. Generally encompass the conventions, rules and
limited Accepted procedures necessary to define what is
sense the work of an auditor begins when the work Accounting accepted accounting practice
of accountant ends. Principles (GAAP)
conventional, they become generally
94. auditor he will begin to perform their job when FS are
accepted by agreement often tacit
prepared.
agreement rather than by formal
derivation from a set of postulates and
he examines the FS to ascertain whether they
basic concepts
are in conformity with generally accepted
accounting principles.
principles have developed on the basis
95. accounting accounting is conceptual and is concerned of experience, reason, custom, usage
vs with the why, reason or justification for any and practical necessity.
bookkeeping action adopted.
Represent the rules, procedures, practice
bookkeeping is procedural and largely and standards followed in the
concerned with development and preparation and presentation of financial
maintenance of accounting records and is statements
concerned in the how of accounting
96. bookkeeping a procedural element of accounting as like laws that must be followed in
arithmetic is a procedural element of financial reporting
mathematics 101. political process process of establishing GAAP which
97. accountancy both refer to the entire field of accounting incorporates political actions of various
vs theory and practice interested user groups as well as
accounting professional judgement, logic and
accountancy refers to the profession of research.
accounting practice 102. overall purpose to identify proper accounting practices
of accounting for the preparation and presentation of
accounting is used in referenced only to a standards FS
particular field of accountancy such as public
103. accounting this create a common understanding
accounting, private accounting and
standards between preparers and users of FS
government accounting
particularly the measurement of assets
98. financial primarily concerned with the recording of and liabilities
accounting business transactions and the eventual
104. why a set of to ensure comparability and uniformity
preparation of FS
high-quality in FS based on the same Financial
accounting information
focuses on general purpose reports known as
standards is
FS intended for internal and external users
necessity
area of accounting that emphasizes reporting 105. in philippines the the creation of accounting standards
to creditors and investors. development of council (ASC)
GAAP is
99. managerial accumulation and preparation of financial
formalized
accounting reports for internal users only
initially through
area of accounting that emphasizes 106. Financial the former "Accounting Standards
developing accounting information for use Reporting Council (ASC)" replaced last January
within an entity Standards 2006
Council now
replaced
107. Financial accounting standard setting body created 115. 3 1. PAS
Reporting by PRC upon the recommendation of the pronouncements 2. PFRS
Standards BOA to assist the BOA in carrying out its of FRSC 3. PIC
Council (FRSC) powers and functions provided under R.A.
116. Philippine FRSC in August 2006
No. 9298
Interpretations
108. main function to establish and improve accounting Committee was
of FRSC standards that will be generally accepted formed by
in the philippines
117. counterpart of International Financial Reporting
109. accounting highest heirarchy of generally accepted in PIC in the United Interpretations Committee (IFRIC)
standards the philippines Kingdom
promulgated
118. the International the former "Standing Interpretations
by FRSC
Financial Committee (SIC)"
constitute the
Reporting
110. approved Statement of Financial Accounting Interpretations
statements of Standards (SFAS) Committee
ASC previously (IFRIC) already
known as replaced
111. approved Philippine Accounting Standards (PAS) and 119. International an independent private sector body
statement of Philippine Financial Reporting Standards Accounting with the objective of achieving
FRSC are now (PFRS) Standards uniformity in the accounting principles
known as Committee (IASC) which are used by business and other
organizations for financial reporting
112. FRSC os 15 members
around the world
composed of
how many specifically, 120. International June 1973 through an agreement made
members? 1 chairman who has been or is presently a Accounting by the professional accountancy bodies
senior accounting practitioner Standards from:
Committee is
14 representatives formed in Australia
Canada
113. 14 1 BOA
France
representatives 1 SEC
Geemany
in FRSC are 1 BSP
Japan
1 BIR
Mexico
1 COA
Netherlands
1 major organization of preparers and
United Kingdom
users of FS- Financial Executivez Institute
Ireland
of the Philippines (FINEX)
United States of America
Accredited National Professional 121. IASC London, United Kingdom
Organization of CPAs: headquartered in
122. IASC from over 100 countries.
2 Public practice
subsequently
2 Commerce and Industry
expanded to by year 2000 the membership included
2 Academe or Education
include 143 bodies in 104 countries represnting
2 Government
representatives over 2 million accountants.
114. term of 3 years renewable for another term
chairman and
members of any member of ASC should not be
FRSC disqualified from being appointed to the
FRSC
123. Objectives of IASC 1. to Formulate and publish in the
public interest accounting
standards to be observed in the
presentation of FS and to promote
their Worlwide acceptance and
observance
2. to Work for the improvement
and harmonization of regulations,
accounting standards, and
procedures relating to the
presentation of financial
statements.
124. International the former "International
Accounting Standards Accounting Standards Committee
Board (IASB) now (IASC)"
replaced
132. at present, the financial has adopted in their entirely all
reporting standards International Accounting
council (FRSC) Standards (IAS) and International
Financial Reporting Standards
(IFRS)
133. International Financial is a global phenomenon intended
Reporting Standards to bring about greater
(IFRS) transparency and a higher degree
of comparability in financial
reporting.
134. the move toward IFRS both of which will benefit the
investors and are essential to
achieve the goal of one uniform
and globally accepted financial
reporting standards.
135. the philippines is fully IFRS effective January 2005 from
compliant with USA GAAP to IFRS

125. International International Financial Reporting 136. the following factors 1. support of international
Accounting Standards Standards (IFRS) are considered in accounting standards by
Board (IASB) publishes deciding to move philippine organizations, such as
standards in a series totally to international the philippine SEC, BOA and
of pronouncements accounting standards: PICPA
called
2. increasing internalization of
126. IASB adopted the the IASC
business which has heightened
standards issued by
interest in a common language
127. Pronouncements of International Accounting Standards for financial reporting
the IASC or the (IAS)
approve statements 3. improvement of international
of IASC continue to accounting standards or removal
be designated or of free choices of accounting
known as treatments
128. IASB standard-setting include the correct order:
4. increasing recognition of
process
international accounting
research, discussion paper,
standards by the worldbank,
exposure draft and accounting
asian development bank and
standard
world trade organization.
129. IASB's Objective to raise the quality and consistency
137. The Financial Reporting Philippine Financial Reporting
of financial reporting and to have a
Standards Council Standards (PFRS)
platform of high quality and
issues standards in a
observance
series if
130. In developing standards issued by other standard pronouncements called
accounting standards setting bodies such as the USA
that will be generally Financial Standards Board (FASB)
accepted in the and the (IASB) are considered
philippines
131. in past years most of American accounting standards
the philippine
standards issued are
based on
138. the PFRS collectively include all of 1. PFRS which correspond to the IFRS
the following: the PFRS are numbered the same as their counterpart in IFRS

2. PAS which correspond to IAS

the PAS are numbered the same as their counterpart in IAS

3. Philippine Interpretations which correspond to interpretations of IFRIC and the SIC and
interpretations developed by the PIC