1. Statement of Financial Position - B. Marketing Manager – 4pcs and marketing progress report about assets and C. Finance Manager – financial resources liabilities D. Sales Manager – selling operation 2. Income Statement – performance E. Personnel Manager – human resource 3. Statement of Cash Flows – cash report Accounting – a service activity 4. Statements of Changes in Owner’s Equity - Process of recording, – progress report about wealth classifying, summarizing Fr. Luca Pacioli – wrote the book Summa de transactions, and interpreting Aritmetica results Tenedor de Libro – bookkeeper in the Philippines Stakeholder – users of financial statements Bookkeeping – gathering financial data Types of Accounting Areas Accounting - preparation of reports A. Internal reports (Managerial) – or Sources of Capital managerial reports for management use 1. Primary Source – owner or investor B. Financial reports (Financial) – or called 2. Secondary Source – relative, bank, general purpose financial statements. friend, or cooperative Source of information for stakeholders 3. Micro Finance Programs C. Tax Accounting (Tax) – determination of Risk – the element of uncertainty in an outcome taxes and preparation of various tax Forms of Businesses returns 1. Sole Proprietorship – managed by one D. Special reports (Government) – prepared person for certain regulatory bodies 2. Partnership – owned by two or more Accounting Information System can be persons called partners classified into two: 3. Corporation – separate legal entity from 1. Measurement System – processing phase the owners that involves analysing, measuring, - Managed by Board of Directors recording, classifying, and summarizing Types of Business Operation 2. Communication System – reporting and 1. Service communicating phase involves 2. Merchandising presentation of formal reports 3. Manufacturing AIS Principles Types of Business Activities 1. Control – must have good internal control 1. Financing - start-up capital and 2. Cost-Benefit – advantages must outweigh withdrawals its cost 2. Operating – earning of income and 3. Relevance – must be useful incurring expenses 4. Compatibility – fit the characteristics 3. Investing – acquisition of properties and 5. Flexibility – should allow for changes disposal of properties Career Opportunities Management involves four processes: 1. Public Accounting – open to firms and 1. Planning – determining the goals and individual CPAs creating activities a. Auditor – make an independent 2. Organizing - creating divisions and examination or review if the financial assigning tasks records of the firm. Assurance 3. Directing – overseeing the daily operation services for quality information. 4. Controlling – guarding and guiding. Ensuring the activities. b. Tax Consultant – skilled in preparing 4. Management Accounting – assist them in tax returns in giving advice concerning planning, directing and controlling tax consequences 5. Auditing – independent verification and c. Management Consultant – advices examination of the accounting records management on many delicate issues for the purpose of giving credibility 2. Industry Accounting (Private Accounting) 6. Fund Accounting – use of public or a. Bookkeeper – person with knowledge community to bring service to people of accounting who does the routine 7. Tax Accounting – tax matters work 8. Forensic Accounting – fraud examiner in b. Controller – overall in-charge of all cases involving illegal transactions accounting activities and functions as Professional Regulatory Bodies the chief accounting officer (CAO) A. Professional Regulation Commission (PRC) c. Internal Auditor – who assists in – regulating and licensing the practice of maintenance of the organization’s profession internal control B. Board of Accountancy (BOA-BOARD) – d. Budget Officer – prepares plan and Republic Act 3105 under jurisdiction of forecasts of the company’s future PRC and tasked to set up and promulgate operation. professional standards and ethics e. Chief Information Officer (CIO) – in C. Philippine Institute of Certified Public charge of the information and Accountants (PICPA) – PRC Accreditation communication technology department No. 15 having the authority of setting up whose function is to oversee the and implementing rules to the accounting electronic data processing operation profession. f. Tax Officer – handles tax plans, Philippine Financial Reporting prepares tax returns and advises Standards (PFRS) management on the effect of taxes on Philippine Accounting Standards is various plans and projects (PAS) 3. Government and Not for Profit Interpretations Accounting D. Securities and Exchange Commission 4. Research and Education (SEC) – C.A. 83 tasked to safeguard a. Researcher – investigates and makes a public interest study in relating to accounting E. Bangko Sentral ng Pilipinas (BSP) – theories or business concepts regulated operations of all banks and b. Accounting Professor – develops financing institutions to maintain peso competent students and prepares stability them for CPA board exam F. Bureau of Internal Revenue (BIR) – Accounting Areas exacts tax and license compliance from 1. Bookkeeping – routine activity of people recording, classifying and summarizing Accountancy Act of 2004 has the following for business transactions its objectives: 2. Financial Accounting – involves 1. Standardization and regularization of preparation and interpretation of accounting education financial statements 2. Examination for registration of certifies 3. Cost Accounting – details of materials, public accountants and labor and overhead to produce and sell a 3. Supervision, control and regulation of the product or service practice of accountancy in the Philippines Assets – are economic resources owned by the B. Business Entity Concept – assumes business business as separate and distinct from ts Liabilities – obligation to do or to pay owner Equity – residual right or interest of the owner C. Exchange Price of Cost Principle – should Double entry bookkeeping r Venetian Model – be recorded on the amount agreed upon business should have a dual effect for every a. PAS 16 par. 15-16 deals with received there is equal value parted recognition and measurement of Statement of Financial Position (formerly called property and equipment at as Balance Sheet before PAS 1 was revised in acquisition date 2007) – shows the balances of each account and D. Measurement in terms of money – the grand total shows a balance between the recorded using only one unit of assets measurement Accounting Framework – set of accounting E. Accrual Assumption – PAS 1 par. 27-28 standards and operating guidelines requires that financial statements should Four Qualitative Attributes be prepared under accrual basis. Should 1. Understandability – have reasonable be recognized base on the occurrence of knowledge; terminologies must be clear; the transaction and presentation must be orderly F. Objectivity – assets acquired must be 2. Relevance – quality information will make verifiable and substantiated by a difference documents, invoices, vouchers or official a. Materiality – will depend whether receipts the item will influence the user’s G. Reporting period – PAS 1 par. 36-37 decision provides that the basic accounting period b. Timeliness –must be promptly or is one year within interim reports within the period prepared for shorter periods of time 3. Reliability – objective and free from such as monthly, quarterly or semi- material errors or misstatements annually. a. Faithful representation – Accrual Concept represent what they purport to be A. Realization of Revenue Principle – b. Substance over form – substance revenue is recognized when it is earned of contract is not consistent with regardless of collection the legal form B. Recognition of Expense Principle – c. Neutrality – information should be expense is recognized when incurred useful to all users regardless of whether cash is paid or not d. Prudence – exercise caution when Income – represents inflow of cash or other it is marked by uncertainty assets coming from a client or customer for e. Completeness – all information service rendered or for merchandise sold should be provided Gain – income which may arise but 4. Comparability – helps one identify not really form the normal course changes taking place between two or more of business periods Service Income – common for all Accounting Principles (GAAP) servicers A. Going Concern Principle – it is expected Sales – is the revenue title used by that the business will continue to exist the merchandising and indefinitely manufacturing PAS 1 define income as an increase in economic Classification of Assets and Liabilities benefits during the period that results in Current Assets – expected to be realized increase in equity. into cash, or sold, or consumed within the PAS 1 defines expenses as a decrease in operating cycle economic benefit during the accounting period Non-current Assets – are in the form of results in a decrease in equity plant, property and equipment Matching Principle – expense is recognized when Current Liabilities – debts or obligations revenue is recognized because it is impossible to reasonably expected to be liquidated in earn without incurring expense the normal course Cash Concept – recognize only when cash is Non-current Liabilities – long term collected liabilities PAS 15 (Revenue Recognition Standard) gives PAS 1.68 – defines it as the time between the guideline for recognition of revenue from acquisition of assets, their processing and contracts with customers. realization in cash or cash equivalent Statement of Comprehensive Income (PAS 1.81) Invoice – issued when service or merchandise is – requires an entity to present income and given to a customer or client expenses either in Official Receipt – issued when cash is received Single Statement by the entity Two Statements – starts with profit and Cash or Check Voucher – a document used when loss plus other comprehensive income cash is paid or issued PAS 1.10 – states however that an entity may use Check – negotiable instrument used as a titles for the statements other than those used substitute for cash in this Standard Promissory Note – written promise to pay a PAS 1 revised 2007 describes the financial certain sum of money at a future date statements as fundamentally related Statement of Account – bill represented to a Statement of Cash Flows IAS No. 7 revised customer of service rendered or merchandise 2007 – requires the preparation of this for which payment is demandable (like a statement for a certain period of time summary) 1. Evaluating cash stewardship Chart of Accounts – listing of account title which 2. Guide in planning future cash flows guides the bookkeeper in the recording of the 3. Assessing the ability of generating cash transactions flows General ledger which is also called the book of Report Form – all the elements are in one column final entry Account Form – following the position of the Posting – process of transferring the debits and elements in the accounting equation credits from the journal entry to the ledger PFRS Framework 102 – under financial concept Normal Balances: of capital, capital is synonymous with net assets Debit Credit or net worth Assets Liabilities PFRS Framework 104 – under financial concept Drawings Capital of capital maintenance, profit is earned only Expenses Income when the financial net assets at the end of the Locating Errors: year is more than the financial net assets at the Difference of ten – error in addition start of the year but not as a result of Difference is divisible by two – wrong contribution of or distribution to the owner side of posting Difference is divisible or multiple of nine – error is transposition or transplacement Transposition – order of numbers is interchange Transplacement – decimal point is misplaced Subsidiary Ledger or customer’s card and creditor’s card – keep track of each customer and supplier Payroll Sheet – document shows the take home pay of employees and workers from which a voucher. A tabular form prepared by the Accounting Department to determine the take home pay of employees and workers. Payroll – represents compensation paid to employees and workers