THE ACCOUNTANCY PROFESSION

THE PROFESSION
• The Republic Act No. 9298 (Philippine Accountancy Act of 2004)
Article 1 Sec 3 Objectives – This act shall provide for and govern:
(a) The standardization and regulation of accounting education;
(b) The examination for registration and certified public accountants; and
(c) The supervision, control and regulation of the practice of accountancy in the Philippines.

Article II Sec 5 The Professional Regulatory Board of Accountancy and its Composition
The Professional Regulatory Board of Accountancy, hereinafter referred to as the Board,
under the supervision and administrative control of the Professional Regulation Commission,
hereinafter referred to as the Commission, shall be composed of a chairman and six (6)
members to be appointed by the President of the Philippines from a list of three (3)
recommendees each position and ranked by the Commission, from list of five (5) nominees for
each position submitted by the accredited national professional organization of certified public
accountants The board shall elect a vice-chairman from among its members for a term of one
(1) year meetings of the board and in the event of a vacancy in the office of the chairman, the
vice chairman shall assume such duties and responsibilities until such time as a chairman is
appointed.

THE BOARD OF ACCOUNTANCY

- NOE G. QUINANOLA
- THELMA S. CIUDADANO
- GLORIA T. BAYSA
- SAMUEL B. PADILLA
- ARLYN S. VILLANUEVA
- GERVACIO I. PIATOR

The Certified Public Accountant Licensure Examination

Art II Sec 6 Qualification of members of the Professional Regulatory Board – A member of the
board shall, at the time of his/her appointment, possess the following qualifications:
(a) Must be a natural born citizen and a resident of the Philippines;
 (b) Must be a duly registered Certified Public Accountant with at least ten (10) years of
work experience in any scope of practice of accountancy;
(c) Must be a good moral character and must not have been convicted of crimes involving
moral turpitude; and
(d) Must not have any pecuniary interested, directly or indirectly, in any schools, college,
university or institution conferring an academic degree necessary for admission to the
practice of accountancy or where review classes in preparation for the licensure
examination, are being offered or conducted, nor shall he/she be a member of the
faculty or administration thereof at the time of his/her appointment to the Board.

Sec 7 Term of Office – The chairman and members of the board shall hold office for a term of
three years. Any vacancy occurring within the term or a member shall be filled up for the
unexpired portion of the term only. No person who has served two (2) successive complete
terms shall be eligible for reappointment until the lapse of one (1) year Appointment to fill-up
an expired term is not to be considered as a complete term.

Art III Sec 13 The Certified Public Accountant Examinations – All applicants for registration for
the practice of accountancy shall be required to undergo a licensure to be given by the Board in
such places and dates as the Commission may designate subject to compliance with the
requirements prescribed by the Commission in accordance with Republic Act No 8981.

Art III Sec 14 Qualifications of Applicants for Examinations – Any person applying for
examination shall establish the following requisites to the satisfaction of the Board that
he/she:
(a) is a Filipino citizen;
(b) is of good moral character;
(c) is a holder of the degree of Bachelor of Science in Accountancy conferred by a school,
college, academy or institute duly recognized and/or accredited by the CHED or other
authorized government offices; and
(d) has not been convicted of any criminal offense involving moral turpitude.

The Certified Public Accountant Licensure Examination

SEC 15 Scope of Examination – The licensure examination for certified public accountants shall
cover, but are not limited to the following subjects:
(a) Theory of Accounts
 (b) Business Law and Taxation
(c) Management Services
(d) Auditing Theory
(e) Auditing Problems
(f) Practical Accounting Problems I
(g) Practical Accounting Problems II

The Certified Public Accountant Licensure Examination

Effective May 2016:

The Certified Public Accountant Licensure Examination

SEC 16 Rating in the Licensure Examination – To be qualified as having passed the licensure
examination for accountants, a candidate must obtain a general average of seventy-five
percent (75%), with no grades lower than sixty-five percent (65%) in any given subject.
In the event a candidate obtains the rating of seventy-five percent (75%) and above in at least
a majority of subjects as provided for in this Act, he/she shall receive a conditional credit for
the subjects passed:
Provided, That a candidate shall take an examination in the remaining subjects within two (2)
years from the preceding examination:
Provided, further, That if the candidate fails to obtain at least a general average of seventy-
five percent (75%) and a rating of at least sixty-five percent (65%) in each of the subjects
reexamined, he/she shall be considered as failed in the entire examination
Main Sectors in the Practice of Accountancy Profession
 • Practice of Public Accountancy
- SGV
- DELOITTE/ NAVARRO AMPER AND CO.
- PWC/ ISLA LIPANA AND CO.
- KPMG
- BDO/ ALBA, ROMEO, AND CO., CPAs
- P & A THORTON
• Practice in Commerce and Industry
• Practice in Education/Academe
• Practice in the Government

Main Sectors in the Practice of Accountancy Profession

Public Accounting
The field of public accounting or public accountancy is composed of individual
practitioners, small accounting firms and large multinational organizations that render
independent and expert financial services to the public.

Services offered in Public Accounting

• Auditing- or external auditing is the examination of financial statements by independent
certified public accountant for the purpose of expressing an opinion as to the fairness
with which the financial statements are prepared.
• Taxation- includes the preparation of annual income tax returns and determination of
tax consequences of certain proposed business endeavors.
• Management Advisory Services- refer to services to clients on matters of accounting,
finance, business policies, organization procedures, product costs, distribution and many
other phases of business conduct and operations.
Continuing Professional Development (CPD)
All Certified Public Accountants shall abude by the requirements, rules and regulations
on continuing professional development t be promulgated by Board of Accountancy, subject to
the approval of the Professional Regulation Commission, in coordination with the accredited
professional organization of CPAs or any duly accredited educational institutions.
• Total CPD units for accreditation shall be 120 units for three years.
• Total CPD units for renewal shall be 15 units for three years.
Exemptions:
• Permanent exemption- 65 years old and above
• Temporary exemption- (a) CPAs practicing/studying abroad; (b)staying abroad; (c)out of
the country prior to the renewal of license
 INTRODUCING TO ACCOUNTING

GLOBAL SCALE

• GAAP is a common set of accepted accounting principles, standards, and procedures

that companies and their accountants must follow when they compile their financial
statements.
• IFRS is a set of international accounting standards, which state how particular types of
transactions and other events should be reported in financial statements.

Philippine Financial Reporting Standards (PFRS)

1. Philippine Financial Reporting Standards which correspond to the International Financial
Reporting Standards.
2. Philippine Accounting Standards (PAS) which correspond to the International Accounting
Standards (IAS).
3. Philippine Interpretations which correspond to Interpretations of the IFRIC and the
Standing Interpretations Committee and Interpretations developed by the Philippine
Interpretations Committee.
 CONCEPTUAL FRAMEWORK

Conceptual Framework is a summary of the terms and concepts that underlie the preparation
and presentation of financial statements for external users.
It provides an overall theoretical foundation for accounting which will guide standard-setters,
preparers and users of financial information in the preparation and presentation of statements.
It is concerned with general purpose financial statements, including the consolidated financial
statements.
Notes:
• Special purpose financial statements are outside the scope of Conceptual Framework.
• Conceptual Framework is not an IFRS.
• In case there is conflict, the requirements of IFRS shall prevail over the Conceptual
Framework.
Elements of Accounting:
Financial Position / Balance Sheet (Real or Permanent Accounts)
1. Asset - A resource controlled by the entity as a result of past events and from which
future economic benefits are expected to flow to the entity.
2. Liability - A present obligation of the entity arising from past events, the settlement of
which is expected to result in an outflow from the entity of resources embodying economic
benefits.
3. Equity - Equity is the residual interest in the assets of the entity after deducting all its
liabilities.
4. Income/Revenue - Income is increases in assets, or decreases in liabilities, that result
in increases in equity, other than those relating to contributions from holders of equity claims.
5. Expense - Expenses are decreases in assets, or increases in liabilities, that result in
decreases inequity, other than those relating to distributions to holders of equity claims.

T- ACCOUNT
JOURNAL ENTRY
 THE ACCOUNTING CYCLE

Forms of Business Organizations

According to Activity:

A. Service
B. Merchandising - reselling of goods previously purchased.
C. Manufacturing - involves transformation of goods from raw materials into finished
goods.

According to Organizational Structure:

A. Sole Proprietorship - owned by only one person known as the “Sole Proprietor”
B. Partnership - two or more persons bind themselves to contribute money, property, or
industry to a common fund, with the intention of dividing the profits among themselves.
C. Corporation - A corporation is an artificial being created by operation of law, having the
right of succession and the powers, attributes and properties expressly authorized by
law or incident to its existence.

ACCOUNTING
American Institute of Certified Public Accountants (AICPA)
“Accounting is the art of recording, classifying and summarizing in a significant manner and
terms of money, transactions and events, which are, in part at least, of a financial character and
interpreting the result thereof.”
American Accounting Association (AAA)
“Accounting refers to the process of identifying, measuring and communicating economic
information to permit informed judgments and decisions by users of the information”
USERS OF ACCOUNTING INFORMATION
Primary Users:
A. Investors and Creditors
B. Management
Secondary Users:
Any users except the above
Generally, financial information are needed to respond to the needs of service recipients and
resource providers for accountability and decision-making purposes.

FINANCIAL STATEMENTS
Components:
1. Income Statement / Profit or Loss/ Statement of Comprehensive Income
The section of the Financial Statements that presents the revenues and expenses, as
well as the result of the financial performance in the form of net income or net loss.
2. Balance Sheet / Statement of Financial Position
The section that presents the financial position of the business through assets, liabilities
and equity.
3. Statement of Changes in Owner’s Equity / Shareholders’ Equity / Partners’ Capital
The section of the Financial Statements that presents the movement in the capital or
equity account of the owner/s.
4. Statement of Cashflows
The section that shows how changes in balance sheet accounts and income affect cash
and cash equivalents, and breaks the analysis down to operating, investing, and financing
activities.
5. Notes to Financial Statement
The section of that presents the supporting information of the disclosures in the balance
sheet, income statement, changes in owner’s equity and cash flows. This also shows the
significant accounting policies used by the business and other events that require disclosures
for compliance.
 PHASES OF ACCOUNTING

RECORDING OR JOURNALIZING
1. Analyze transactions if subject for recording
2. Record transactions in the General Journal and/or Special Journals
3. Apply the rule of Debit and Credit in the recording under the ‘Double Entry Bookkeeping
System’
Tips:
1. The use of the following phrases usually will involve capital establishments or additional
investment entries:
“deposited under the name of the business”
“invested or transferred under the name of the business or to the business”
2. The following phrases usually signify accounts payable or accounts receivable
transactions:
“on account”/ “on credit”
“billed customers/clients”
3. Chart of accounts are generally provided for basic accounting purposes. They are always
arranged based on accounting elements in the order below:
i- ASSETS (current followed by non-current)
ii- LIABILITIES (current followed by non-current)
iii- CAPITAL
iv- REVENUE / INCOME
v- EXPENSES
4. In double entry bookkeeping system, debit SHOULD ALWAYS BE EQUAL to the credit.

CLASSFYING
This involves grouping of similar transactions based on the account titles used.
1. Perform posting of amounts of transactions from the general journal and/or special
journal to the general ledger (T-accounts).
 2. Make sure to correctly post the figures by maintaining the proper balance (debit or
credit).
3. After posting all transactions, calculate the outstanding balances or running balances of
all accounts.

SUMMARIZING PHASE
This involves preparation of reports based on the outstanding balances of accounts for the
period.
Commonly periodic reports prepared are the following:
1. Unadjusted Trial Balance / Preliminary Trial Balance
2. Financial Statements (Unadjusted Figures)
After adjusting entries:
1. Adjusted Trial Balance
2. Financial Statements (Adjusted Figures)
3. Other special reports that are requested by the Management or Stakeholders

INTERPRETATION PHASE
This phase usually includes the decision making of the management of business entities based
on the inspected Financial Statements or other Reports based on the accounting information.
Some decisions done in this phase are the following:
(a) Declaration of bonuses to employees
(b) Expansion of the business
(c) Disposal of a business unit or capital assets
(d) Implementation of changes in the business environment