Professional Documents
Culture Documents
Acc102.2 Reviewer
Acc102.2 Reviewer
Acc102.2 Reviewer
along with the running balance of each entity should be disclosed in the financial
particular account. statements.
• Materiality – financial reporting is only concerned
Fundamental concepts with information that is significant enough to affect
evaluations and decisions.
• Entity Concept – each entity should be evaluated
separately. ACCOUNTANCY ACT OF 2004
• Periodicity Concept – dividing the entity’s life into
meaningful reporting periods. Users obtain timely • R.A. no. 9298, known as the Philippine Accountancy
information as the basis of decision-making. Act of 2004, was signed into law by President Gloria
Calendar year – starts on January 1 and ends Macapagal-Arroyo on May 13, 2004.
on December 31. • This is an act the regulates the practice of
Fiscal year – the first day is any time of the accountancy in the Philippines.
year but has a complete 12-month period.
Scope of Practice
Natural business year – a 12-month period that
ends on any month when the business is at its • Practice of Public Accountancy
lowest or experiencing slack season. • Practice in Commerce and Industry
• Stable Monetary Concept – ignoring effects of • Practice in Education/Academe
inflation in the accounting records. • Practice in Government
• Going Concern – financial statements are normally
prepared on the assumption that the reporting entity ACCOUNTING STANDARDS IN THE PHILIPPINES
is a going concern and will continue in operation for
the foreseeable future. • On Nov. 18, 1981, the Philippine Institute of Certified
Public Accountants (PICPA) created the Accounting
Criteria for GENERAL ACCEPATNCE OF AN ACCOUNTING Standard Council (ASC) to establish and improve
accounting standards that will be generally
PRINCIPLE
accepted in the Philippines.
• GAAP, which means Generally Accepted Accounting
Principles, encompasses the conventions, rules, and CORE COMPETENCIES FRAMEWORK FOR ACCOUNTANTS
procedures necessary to define accepted accounting 1. Knowledge
practice at a particular time. • General knowledge
• The general acceptance of an accounting principle - Competency in the English language
usually depends on how well it meets 3 criteria: (the lingua franca of business).
1. Relevance – results in information that is
- Adaptability to Western business
meaningful and useful.
practices.
2. Objectivity – the resulting information is not
- Level of trainability and good
influenced by personal bias or judgment.
capabilities in dealing with foreign
3. Feasibility – to the extent that it can be
partners.
implemented without undue complexity or
cost. • Organizational and Business Knowledge
- Administrative capability and
Basic Principles efficiency.
• Objectivity Principle – accounting records and - Decision modeling
statements are based on the most reliable data - Risk analysis
available so that they will be as accurate and as - Measurement
useful as possible. - Industry and sector perspective
• Historical Cost – states that acquired assets should • Information Technology Knowledge
be recorded at their actual cost and not what - IT concepts for business concepts.
management thinks they are worth. - Sound knowledge of internal control
• Revenue Recognition Principle – revenue is to be
in computer-based systems.
recorded in the accounting period when goods are
- Developments standards and
delivered or services are performed or rendered.
practices for business systems.
• Expense Recognition Principle – expenses should be
- Management of the adoption
recognized in the accounting period in which goods
- Implementation and use of IT,
and services are used up to produce revenue and
evaluation of computer business
not when the entity pays for those goods or services.
• Adequate Disclosure - requires all relevant systems.
information that would affect the users - Managing the security of information
understanding and assessment of the accounting • Accounting Knowledge
ACC102: BASIC FINANCIAL ACCOUNTING & REPORTING
2. Skills • Education/academe
• Intellectual
BRANCHES OF ACCOUNTING
- Analysis
- Problem-solving • Auditing – external audit is the independent
- Strategic/critical thinking examination to ensure the fairness and reliability of
• Interpersonal the reports that management submits to users
- Being a team player. outside the business entity.
- Persuasion, confidence and • Bookkeeping – is the recording of all financial
diplomacy. transactions undertaken by a business (or an
- Discreteness, open mind, and individual).
patience. • Cost Bookkeeping, Costing and Cost Accounting
- Capability for work and ability to Cost bookkeeping is the process that involves
respond well to pressure. the recording of cost data in a book of
• Communication accounts.
- Verbally and/or in writing explain Cost and Cost Accounting deals with the
financial/statistical/administrative collection, allocation, and control of the
matters/policy, etc. cost of producing specific goods and
- Ask clear, concise, and relevant services.
questions to obtain desired • Financial Accounting – is focused on the recording of
information to perform a task. business transactions and the periodic preparation
3. Values of reports on financial position and results of
• Professional Ethics operations.
- Professionalism of being a CPA. • Financial Management – setting financial objectives,
• Moral values making plans based on those objectives, obtaining
- To be able to discern between what is the finance needed to achieve the plans, and
morally right or wrong. generally safeguarding financial resources.
• Management Accounting – incorporates cost
Professional account accounting data and adapts them for specific
• Defined as an individual who holds a valid certificate decisions. A management accounting system
issued by the Board of Accountancy (i.e. CPA), incorporates all types of financial and non-financial
whether he/she be in public practice, industry, information from a wide range of sources.
commerce, the public sector, or education. • Taxation – preparation of tax returns and
consideration of the tax consequences.
Fundamental principles
• Government Accounting – concerned with the
• Integrity – a professional accountant should be identification of the sources and uses of resources
straightforward and honest in all professional and consistent with the provisions of city, municipal,
business relationships. provincial, and national laws.
• Objectivity – a professional accountant should not
allow bias, conflict of interest, or undue influence of 2: the accounting equation and the Double-Entry
others to override professional or business System
judgments.
• Professional Competence and Due Care – a
Information system
professional accountant has a continuing duty to
maintain professional knowledge and skills. • Is a collection of people, procedures, software,
• Confidentiality – a professional accountant should hardware, and data that together provide
respect the confidentiality of information acquired. information essential to running an organization.
• Professional Behavior – a professional accountant • Combination of personnel, records, and procedures
should comply with relevant laws and regulations that a business uses to meet its need for financial
and should avoid any action that discrete the performance.
profession.
Parts of an Information system
Career opportunities
1. People – are competent end users to increase their
• Public practice productivity.
• Commerce and industry 2. Procedures – manuals and guidelines on how to use
• Government service hardware and software.
ACC102: BASIC FINANCIAL ACCOUNTING & REPORTING
3. Software - aka programs --- instructions that tell the Current assets – are items that your
computer how to process data. business uses in its day-to-day operations
• System software – background software that and has owned for less than 1 year.
helps a computer manage its internal Non-current assets - also known as
resources. fixed assets; these are assets that your
• Application software – performs useful works business holds for longer than 1 year and
on general-purpose problems. uses as a source of long-term revenue
4. Hardware – consists of input devices, the system generation.
unit, secondary storage, output devices, and
communication devices.
What is Liability?
• Input devices – translate data and programs • A present obligation of the entity to transfer an
that humans can understand into a form that economic resource as a result of past events.
computer processes. • An obligation is a duty of responsibility that the
• System unit entity has no practical ability to avoid.
CPU – controls and manipulates data Current liabilities – debts that are expected
to produce information. to be paid in less than 1 year.
Memory (primary storage) – Non-current liabilities - debts that are
temporarily holds data, program expected to be paid more than 1 year.
instructions, and processed data.
What is an owner’s equity?
• Secondary storage – stores data and
programs. • Equity is the residual interest in the assets of the
• Output devices - outputs processed enterprise after deducting all its liabilities,
information from the CPU.
• Communications devices – send and receive What is revenue/income?
data from one computer to another.
• Increases in assets, or decreases in liabilities, that
• Data – is the raw material for data
result in increases in equity, other than those
processing.
relating to distributions to holders equity of claims.
ledger