GNIVERSITY OF CALOOG camarin Campus inition of Accounting ecouRbIDG ~ Is 9 Service activity, feat nature about economic ans foc counting Standards ¢ ~ Accounting vs. Auditi Accountin entiall the other hand, 9 construc auditing is analytical mity. with applicable fr WLUFe. Accountin, uditor exa mines the * Accounting vs. Bookkee; 8 seeping rae eand,'s Procedural and largely cone Soncemed with de ds while accounting is concept and is fra any action adopted velopment a concerned the accounting standar: Upon recommendation of thy , former dards setting body crea re Board of Ac > Undertying Assumption The new Conceptual Framework for Financial Reporting mentiors ont Soe nce Geing Concern. However, impiicit ie SScounting are the basic assumes assum sumptions of ace Soe Fancern assumption ~ means that in the absence of evidence to the co “scounting entity ts viewsd'a continuing in omerniee’ indefinitely Implicit assumptions 1." Ascounting Entity assumption - the enti TOY eRatRKE fram the owners, managers, ard Smployees who constitute the entity, wu mot iy ‘ x 2. Time period a: vat "the indefinite tite fe of an entity if subdivi usually of equal length for the Pe PSring fformance, and cash flow”. ~ pend anf’ Gop means that the assets liabilties, equity! nore oy SE. Init Of measure which is the peso in the Philippines. s fal Ay oedley Fhe @. Present and potential investors” b. Lenders and other creditors | Other-users on financial position, pe: 3. Monetary unit assumption should be stated in terms of a ur a. Employees” - Customers.”sedeats with = comprehensive setat-concents used in fini reporting, particularly tn the preparation and presentation of general purpose maricial statements. it is an attempt to provide an overall theoretical foundation for accounting which wil standard-setters, preparers and users of of statements, ~~ " Scope of Conceptual ework’ (COgeR) B-Objective of Financial Reporting” b. Qualitative characteristics ma c. Elements of Financial Statements = oe d. Concepts of Capital and Capital maintenance . Reporting Entity guide nancial information in the preparation anc presentation + Objective of Financial Reporting iT Fovide financial information about the reporting entity that is useful to “and potential investors, lenders and other creditors in making decisions about providing resources to the entity. These decisions are: * Buying, selling or holding equity or debt instruments — * Providing or setting loans or other forms of credit + Exercising rights to vote on, or otherwise infludnce, management's action that affects the use of the entity’s resources a Specific Objectives: 2. To provide information useful in making decisions about providing resources to the entity, b. To provide information useful in assessing the prospects of future net cash flows to the entity. . To provide information about entity resourcos, claims and changes in resources and claims. 7Flnanacial nettormance of an entity.shall be measured in accordance with accrual accounting. ‘Accrual accounting - depicts the effects of transactions and other events and circumstances on ‘an entity's economic resources and claims in the periods in which those effects occur even if the resulting cash receipts and payments occur in a different period. Quali qualities or attrib tive Characteristics putes that thake financial accounting information useful to the users. “4, Fundamental Qualitative Characteristics ~ relate to the content br substance of financial ‘information. ~ 1a, Relevance ~ Capacity of the information tobe useful (Predictive Value and Confirmatory peter, information is material if its omission or misstatement could influence the ‘economic decision that the users make on the basis of the financial information about an entity. (Factors: Size and Nature) 'b. Faithful representation ~ means that financial reports represent economic phenomena or mms in words and numbers. (Completeness, Neutrality**, and Free from error). It ss "affected by the level of measurement uncertating***) bst = inherent part of Faitht ie exercise of prudence, which is the exercise of caution ainty does not prevent information from being useful. ESTIMATES financial reporting and they do not undermine the usefulness of the if the estimates are properly determined and the uncertainties arece the be not by qnancing Qualitative Characteristics ~ relate to the presentation or form enmemation of the financial a. Verifiability ~ means thet different knowledgeable and independent otservers could rerct Zonsensus, although not necessarily complete agreement, that a particular depiction i a faithful representation, It helps assure users that information represents the economic» phenomenon or transaction it purports to represent. Comparability ~ means the ability to bring together for the purpose of noting points of Tikeness and difference *Consistency ~ implicit in the characteristic of comparability. It requires that “the accounting methods and practices should be applied on a uniform basis from period to period Understandability ~ requires that financial information must be comprehensible or intelligible if it is to be most useful. Timeliness — means that financial information must be available or communicated early enough when a decision is to be made. - constraint - is a consideration of the cost incurred in generating financiat-information against Danefitto.be obtained from having the information. (Cost-benefit principle) Reporting Entity ‘The reporting entity is an entity that is required, or chooses, to prepare financial statements; it can ‘a single entity or portion of an entity or can comprise more than one entity. A reporting entity Is. necessarily e legal entity. Determining the appropriate boundary of 4 reporting entity is driven the information needs of the primary users of the reporting entity's financial statements + Elements of Financial Statements 1. pee? ci b. Tability ~ present obligation of the entity to transfer a ac 4k ob ve Definition of Terms ‘Asset - a present economic resource controlled by the entity as a result of past event il econamic-rasource as a result of ‘past events ‘Osh or 6fher aqash a: Equity. residual interest in the assets of the entity after deducting all of its liabilities. Income — increase in economic benefit during the accounting period in the form of an inflow or increase in asset or_ decrease in liability that results in increase in equity, ottier. than contribution from equity participants. (Revenue and Gain) e. Expense - decrease | jenefit during the accounting period in the form of Gutflow or decrease in asset OF increase in liability that results in decrease in equity, other than distribution to equity participants. (Expense and Loss) CS a. 2. Recognition of Elements ~ Recognition = is'a term which means the reporting of an asset, liability, income or expense on the face of the financial statements of an entity. a. Asset recognition principle - An asset is recognized when it is probable that future Economic benefits will low to the entity and the asset has a cost or value that can be ‘measured reliably. ». Liability recognition principle — A liability is recognized when it is probable that an f resources em nom *Gulfoh af resources embadvina aconomis benefits wil be required for the settlement of a ee ation can be measured reliably. quantifiotle - qyéneunye—. ere TSCORNItion y, © prone Talure-e nomen arisen and that the Ws, 4. Expense recognig) HEcrease In tutareee Jailty.bas occured coh 1 © Matching pr, , Aiiay 9 Princip, revenue shalt , ef all be fa Abirony * Sause and effort ste Feoanized,giteet is ste; ic an, re ee allocating tenn’. Prepayments defi deocty ). Fone ents, et Df elements cpsntity derecognizes aN asset when n when igtihen It loses cont 01 of deretognizes-a, ability when it No longer-has'a pi a Pbligation f Fecognized liability,” Wwawalan ka nay Lontaf 09 ‘ent of elements ent = process of determining the Monetary smoy Financial statemente are to b * recognized and carried sn the income statement a. Historical co. cut flects the price of the transaction that gave ; heat edulvalent paid ona fa Given to acquire ed element of value of the considerr aN asset at the time of Acquisition, b. Current value ~ reflocss me ertions at the measurment date, Current value includ, * Current cost — Smount Of cash ot cash ec auWvalent that would have paid’ the same or Bent value (tor liabilities) AMOuNt of cash Piained by selling the asset ir an orderly cash inflows that the item ip expected to generate in the normal course of business, * Fair Value ~ price that would be received to sell an Mee bald to transfer a liability in an orderly transaction between market Participants at the me ‘asurement date, ss in ely, capita Prnararaintenance Of an entity is determined using two approaches, namely, apital Maintenance and transaction approach. PP ed from Capital Maintenance A, roach ~ means that net income occurs only after the capital use Fearn ate a onsdey unite ms oy) : er eretial and the amount of the increase in net asse' caning piety f current PhysiceLeanirat zs aes pico of the entity expressed in terms of c © Physical capita! - is eq cost,1d IndustryPa Government — Person who hol Perea ramen cr Is appointed to, a position in an accounting professional group in governmert functions, Where decent (oF controlled corporation, including those performing proprersry n Making requires professional knowledge in the science of accounting. Regulation of the Accounting Profession to RA9298 provides clarifications Republic Act 9298 or the Philig ippine Accountancy Act of 2004 (IRR epee ioenret peti the implementation of the Philippine Accountancy Act of 2004 i Is ar : \dard-setting bodies codaipiethistoreetane toc aetcemnert Standards established by stan ing ‘Self-regulation through a system of quality contro! 5 aoe pelelueaeoeNSt Violators of the laws, rules and regulations affecting the accounting tions th Description a is adeneyadmunister. implements and enforces regulatory 5 vernment with respect to the ‘of the Philippine Go. tion and licensing of the various professions under its in the state auditing. defined by the jis agency is to maintain price ‘and sustainable economic taxes, provide quality ax laws in an impartial pines shall appoint tlin any school, college, university © ion to the practice of accountancy ination are being offered or is appointment. ;