Introduction to Accounting

Chapter 1
CHAPTER OUTLINE

 History of Accounting
 Accounting Variations Among Countries
 Harmonization of Accounting Standards
HISTORY OF ACCOUNTING

 Accounting, as a language of business, is as old as civilization. It has evolved in

response to economic and social needs of men. It started with a simple recording of
repetitive exchanges.
 As the business accumulated wealth and resources, record-keeping and documents
were used as proofs of transactions and events. These records of transactions and
events were used not only as evidences but also as tools to track the repetitious and
voluminous business transactions, to conduct inventory and evaluate the progress of
business.
 Accounting played a vital role when money, banking and credit were invented. These
were important components in the rise of great civilizations of the ancient world.
THE CRADLE OF CIVILIZATION

 Around 3600 BC, record-keeping was already common from Mesopotamia, China, and
India to Central and South America The oldest evidence of this practice was the “clay
tablet” of Mesopotamia, 90% of which dealt with commercial transactions, accounts
payable and receivables. Tithes to ruling theocratic class were faithfully recorded in
many occasions as to both quantity and value.
 Simple accounting is mentioned in the New Testament. For example, Matthew 25:19
states, “After a long time, the lord of those servants came to settle accounts with them.”
The Quran also mentions simple accounting for trade and credit arrangements (Sura 2
Al Baqarah: 282).
EVOLVEMENT OF DOUBLE-ENTRY SYSTEM

 The early history of double-entry bookkeeping cannot be traced with much accuracy.
The earliest known examples of this technique are the mercantile books of Freris
Bonis of Montauban, dated 1339.
 However, the evolution of double-entry accounting system has an Italian influence in
the 13th to 15th century.
 In Genoa, the oldest double-entry books entitled “Massari (Treasury Officials) Legers
of Commune of Genoa” were written in 1340. These books were known as a perfect
double-entry form because separate pages were used for debit and credit.
 Under the present system, this is simplified into the T-Account and expanded into the
Ledger.
EXAMPLE OF A T-ACCOUNT

Cash
Debit Credit
1/1 20,000 1/5 10,000
1/8 15,000 1/12 3,000
 EXAMPLE OF A LEDGER
GENERAL LEDGER
Account: Accounts Receivable Account No. 120
Date Item PR Dr. Date Item PR Cr.
2020 2020
1/1 Beginning balance 50,000 1/15 Collections GJ-02 100,000
1/2 Sales on Account GJ-01 200,000
 In Florence, there were double-entry records wherein debits were written over
credits. It is also in Florence that manuscripts of “Partnership and Association
Contracts” reflecting how partners’ capital, division of profit and losses, and
dissolution of partnership were computed.
 In the present system, the Florentine Method is observed in the Journal Entries with
double-entry bookkeeping.
DOUBLE-ENTRY BOOKKEEPING

 The double-entry bookkeeping system is based on the dual aspect concept which says
that in every business transaction, two effects of recording are to be made – the value
received (debit) and the value parted with (credit).
 The basic principle of bookkeeping is the principle of balance. It is a principle that
distinguishes double entry bookkeeping from mere record keeping.
 Double entry means that at least two entries are made in recording each transaction
or operation. This system causes on entry to balance with the other and thereby
provides a means of proof. If each transaction is so recorded that one entry may be
checked against another entry for the purpose of proof, and then the aggregate of all
entries may be proven.
 AN EXAMPLE OF DOUBLE-ENTRY BOOKKEEPING

GENERAL JOURNAL
Date Page Number 01
2020 Descriptions PR Debit Credit
1/13 Cash 200,000
Cruz, Capital 200,000
To record initial investment of the owner
 The transaction regarding the initial investment of the owner is recorded twice in the
general journal – one is Cash (debit side) which represents the value received by the
business, and the other is Capital (credit side), the corresponding reciprocal value
parted with or the obligation of the business to hold in trust the investment of the
owner.
 Venice of Northern Italy had key influence in the use of the double-entry system in
1400s.
 In 1494, Luca Pacioli (1447-1517), an Italian monk and mathematician, wrote Summa
de Arithmetica, the first book that was published containing a detailed chapter of
double-entry bookkeeping which enabled others to study and use it.
 In this book, Pacioli introduced three important books of records, namely:
a. Memorandum Book – for all information on a transaction;
b. Journal Book – for the original entry; and
c. Ledger Book – for the final entry (posting, the center of accounting system).
 Through the Venetian Method, the double-entry accounting became known to the
world and became the standard not only for the Italians but also for the Dutch,
German, and English authors of accounting books. The present Ledger Posting is the
modern adaption of the Venetian Method.
 For this reason, Luca Pacioli is known as the “Father of Modern Accounting” even if he
was neither an accountant nor a merchant.
SUBSEQUENT DEVELOPMENTS

 French Revolution (1700s). The thorough study of accounting and development of

accounting theory began in this period. Social upheaval affecting government,
finances, laws, customs and business, had greatly influenced this development.
 Industrial Revolution (1760-1830). Mass production and great importance of fixed
assets were given attention during this period.
 Global Industrial Economy (1900s). This resulted in rapid changes to accounting
practice and reporting, and participative promulgation of accounting standards.
Notable accounting practices were developed such as (1) mergers, acquisitions and
growth of multinational corporations, and (2) internal and external reporting and
control systems.
 International Business Transactions and International Relationships of Government
(2000s). To facilitate accounting work, the development of computer-assisted
accounting practice and reporting developed rapidly and dominant to date.
 With the globalization of business and diverse accounting practice, efforts have been
made to harmonize international accounting and reporting standards across
countries.
 Summary: The 10,000 years of accounting history started with simple “stone tokens”
or “clay tablets” system to count wealth. With the rapid growth of industrialization,
mergers and consolidations, and globalization of businesses, accounting dynamically
developed from manual to electronically assisted information system including the
integration of computer systems and the internet as of today.
FLORENTINE VS. VENETIAN APPROACH TO
REPORTING
 In the 14th century, Amatino Manucci, the inventor of double-entry bookkeeping and
a partner of a merchant partnership called Giovanni Farolife & Company in Florence,
introduced the Florentine Approach (this method is now shown in the journal
entries).
 This method records each transaction resulting in at least one account being debited
and at least one account being credited, with the total debits of the transaction equal
to the total credits. The financial records that Manucci kept for the firm are the
oldest extant examples of the double-entry system. The Venetian Approach (now,
our ledger postings) of double-entry system is perhaps the most famous. Merchants
kept their accounts in bilateral form (alla veneziana), with debits recorded on the
left side of the page across form credits. They point to a highly evolved system using
several books, carefully cross-indexed and coordinated to form a coherent whole.
 The Venetian Method was introduced in the extant books of the merchant Andrea
Bargarigo (1418-1449). Luca Pacioli (1445-1517), the father of modern accounting,
published this method in his book Summa de Arithmetica in 1494.
 Pacioli described the uses of three books: memorandum, ledger, and journal. Each
transaction was first noted in the memorandum book, then listed in debit and credit
form in the journal, and then posted in the ledger.
SAVARY COMMERCIAL CODE
(HISTORICAL COST METHOD OF ACCOUNTING)

 Jacques Savary (1622-1690), came from a noble French family devoted to trade and to
the publication of works on commercial matters of lasting and widespread authority.
He had a wide experience in and out of royal service, and was known as the chief
architect of the Commercial Code of France in 1673 (called Code of Savary) which
generally uses historical cost as the basis of valuation. He published his book entitled
“The Perfect Merchant” containing 1,700 pages describing accounting in Chapters 4 to
10 of Book Four.
NAPOLEONIC COMMERCIAL CODE
(FAIR VALUE METHOD OF ACCOUNTING)
 Napoleon Bonaparte’s codification of France’s Civil Law named “Code of Napoleon”
was enforced on March 21, 1804.
 Three years later (1807), the Code of Commerce was enacted as a supplement to the
Code Napoleon. It regulated commercial transactions, the laws of business,
bankruptcies, and the court’s jurisdiction and procedures dealing with these
subjects.
 The Code of Commerce in 1807 does not provide for any rule of valuation but gives
in notes and example of inventory in which it is said that the assets must be carried
at their market value on the day of inventory and not on the basis of historical cost.
SCHMALENBACH AND THE CHART OF
ACCOUNTS (PRICE LEVEL ACCOUNTING)
 Chart of accounts have played a vital role in the development of accountancy in
Poland since the World War II.
 Eugen Schmalenbach (1873-1955), a writer and professor at Cologne believed that
the firm’s chart of accounts is not mere carrier of balances.
 He believed that Chart of Accounts contains relevant dynamic information that can be
prepared promptly and regularly to quickly respond to the external and internal
factors affecting the economic flight of an enterprise. Schmalenbach utilized “price
level accounting” or “uniform chart of accounts.” Price, as the basis of value, helped
decentralize management to compare the firm’s performance and financial condition
with others in the same sector of economy. Price seemed to be available as control and
corrective for investment decisions in planned or free economies.
 He also advocated that traditional accounting policies should be changed in keeping
with relevant and reliable information that creates challenges, satisfaction, and
ingenuity of accountants.
SAVARY, NAPOLEONIC, AND
SCHMALENBACH VALUATION
 In the history of accounting, there were several origins of valuation methods on how
to measure the worth of economic transactions.
 Jacques Savary (1622-1690), in his Commercial Code of France (1673), used
historical cost as basis of valuation.
 Napoleon Bonaparte (1769-1821) Commercial Code (1804) and its supplement Code
de Commerce of France (1807), exemplified that assets must be carried at their
market value (current/fair value or replacement cost) and not on historical cost.
 Eugen Schmalenbach (1873-1955) utilized price level accounting as the basis of
valuation. It means that the financial statements are restated in terms of general
purchasing power using the general price index.
  To illustrate the three kinds of valuation, assume that A Co. purchased a portion of
land in year 2017 for P100,000. In 2020, an independent appraiser valued the land for
a market value of P250,000. The price index from 2017 to 2020 is 3.0.
 The land item in the Statement of Financial Position of A Co. will be reported as
follows:
If the land is reported by:
Using: Savary Bonaparte Schmalenbach
Historical cost P100,000
Market value P250,000
Price level P300,000
 The use of historical cost is based on the principle of stability of monetary unit. The
accounting data should be verified and only the actual purchase price should be
recorded in the financial report to avoid distortion.
 The fair value accounting is not an inflation accounting. It is used primarily to show
the present value of the item in the financial report. Accountants argue that a move to
fair value accounting will provide information that is relevant to investors.
 The price level accounting is synonymous with inflation accounting. Generally, this
accounting model converts historical cost into price level adjusted cost using general
or specific price indexes to reflect the effect of inflation in the financial report.
THE INDUSTRIAL REVOLUTION AND THE
SHARE-ISSUING COMPANY
 The Industrial Revolution was a period in the late 18th and early 19th centuries when
major changes in agriculture, manufacturing, and transportation had a profound
effect on socio-economic and cultural conditions in Britain and subsequently spread
throughout the world.
 This period was marked by the use of powered all-metal machine tools for mass
production, the development of steam-powered ships, railways, and later in the 19 th
century the invention of the internal combustion engine and electrical power
generation. The resultant great strides in economic progress greatly affected
accounting practice.
Some accounting practices introduced during the Industrial Revolution are as follows:
 Depreciation, allocation of overhead, inventory accounting;
 Evolution of accounting for business organization such as sole proprietorship,
partnership, share companies, and stock exchange listed corporations; and
 Increased government regulations on financial reporting and new tax accounting
systems and procedures.
THE ARRIVAL OF INCOME TAXATION AND THE
CONFLICT WITH FINANCIAL ACCOUNTING
 In AD 10, Emperor Wang Mang (45 BC – AD 23 of Xin Dynasty) of China instituted the
first known income tax at a flat rate of 10% of profits.
 In 1798, a graduated income tax system from 8.33% to 10% was first implemented in
Britain by William Pitt the Younger in his budget to pay for weapons and equipment in
preparation for the Napoleonic wars.
 The first United States income tax was imposed in July 1861 with a rate of 3% of all
income over 600 dollars.
 The first Income Tax Law in the Philippines was made on March 1, 1913. At present,
the Philippine Government implements a graduated tax rate from 5% to 32% on net
taxable income of individual taxpayers. Starting 2009, the Philippine income tax rate
on the net taxable income of corporations would be 30%.
 The arrival of the income tax laws was another major event in accounting history.
Lawyers naturally thought that since income tax returns were legal documents, they
would have exclusive rights to prepare them. Accountants argued that since the bulk
of the work in preparing Income Tax Returns (ITRs) involved accounting calculations,
thus, it is more properly classified as accounting work.
 US law firms in the 1920s were slow to include income tax preparations into their
business skills. Public accountants saw a new lucrative opportunity and jumped into
tax work with expertise. By the time the lawyers challenged the accountants for
practicing law without a license, income tax preparations had been so thoroughly
identified with accountants, so much so that the lawyers lost their case.
 With the infusion of CPAs in taxation, a specialized field of accounting called Tax
Accounting was born. Here, the accountant provides services regarding tax
computation, tax planning, and tax consultancy to legally minimize tax payments of
clients.
 Also several conflicts of taxation and accounting are remedied through the
preparation of ITRs for tax reporting purposes and preparation of financial
statements for accounting reporting purposes, and the preparation of a reconciliation
of the two reports.
THE RISE OF THE GROUP OF COMPANIES AND
THE NEED FOR CONSOLIDATED ACCOUNTS
 Since the end of World War II, there has been a rapid growth of domestic and
multinational corporations in various countries.
 With the global trend of businesses, business enterprises expand not only by building
new facilities, but most of all by business combination or grouping or combining
previously separate business entities.
 Business combination may be a merger or a consolidation. There is merger when
one company takes over all the operations of another business entity resulting in the
latter’s dissolution.
 A consolidation occurs when a new corporation is formed to take over the assets and
operations of two or more separate business entities and those previously separate
entities are dissolved.
 This method of expansion is more economical, involves lesser risk, and makes the
business advantageous in terms of available resources, talents and expertise, and
physical and geographical operations.
 Accounting for business combination is one of the most important and interesting
topics in accounting theory and practice. It involves financial transactions of
enormous magnitudes – those involving business empires, fortunes, executive
geniuses, and management fiascos.
 It is believed to be the most complex and controversial areas of accounting because
each one is unique and must be evaluated in terms of its economic substance,
irrespective of its legal form.
 Accountants prepare financial reports for these business combinations in
consolidated financial reports derived from consolidated accounts. These
consolidated accounts are almost always what matter to investors in evaluating their
profit and loss, financial condition, and share in the business as well as dividends.
INTERNATIONALIZATION OF MARKETS
AND REPORTING
 Nowadays, investors seek investment opportunities all over the world. Similarly,
companies seek capital at the lowest price anywhere.
 As economies worldwide continue to globalize, the traditional borders associated
with business operations are disappearing, and businesses everywhere feel the need
to operate globally to remain competitive.
 Financial markets, multinational businesses, labor markets, and overall capital flows
ignore geographic constraints and transcend national boundaries.
 With the presence of international financial markets, some firms are raising capital
and trading in international market with the intention of increasing the firm’s
liquidity.
 For example, Amex shares are now traded in Singapore, while NASDAQ and London
shares are available in Hong Kong Stock Exchange. Merger among some of the world’s
largest stock exchanges is continuously happening (such as Euronext, the combination
of the stock exchanges in Paris, Amsterdam, Brussels, and Lisbon).
 Investment and financial management decisions are complicated by the fact that
different countries have different currencies, tax regimes, and levels of political and
economical risk.
 Financial managers must account for all these factors when deciding which activities
to finance, how best to finance those activities, how best to manage the firm’s financial
resources, and how best to protect the firm from political and economic risks
(including global tax and foreign exchange risk).
 Governments and regulators are also catching up with these market and business
trends. There is a clear trend toward inter-dependency and interrelationships among
regulators across jurisdictions, and national policies are being crafted with an open
eye toward global consequences.
 It is not surprising that accounting regulatory bodies require accounting practitioners
to keep abreast with the new knowledge, interpretation, and practice of International
Accounting and Auditing Standards.
 This is to assure transparency and reliability and obtain greater confidence on
accounting information to be used by global investors for more rational investment
decisions.
BENEFITS OF GLOBAL ACCOUNTING
STANDARDS
The most cited benefits for a single set of global accounting standards are as follows:
 Easier access to foreign capital markets
 Increased credibility of domestic capital markets to foreign capital providers and
potential foreign merger partners
 Increased credibility to potential lenders of financial statements from companies in
less-developed countries
 Lower cost of capital to companies
 Comparability of financial data across borders
 Greater transparency
 Greater understandability – a common financial language
 Greater cost benefits – use of only one set of books
 Reduced national standard-setting costs
 Ease of regulation of securities markets – regulatory acceptability of financial
information provided by market participants
 Continuation of local implementation guidance for local circumstances
 Lower susceptibility to political pressures than national standards
 Portability of knowledge and education across national boundaries
 Consistency with the concept of a single global profession credential
ACCOUNTING VARIATIONS AMONG
COUNTRIES
 Differences of Accounting Practices. Accounting is a product of the complex
interaction of environmental, socio-cultural, legal, political, educational, and economic
conditions in a particular country.
 It is thus no surprise that although historical developments had a uniform effect on
accounting systems throughout the world, there have been at least as many
accounting systems as there are countries, and no two systems are exactly alike.
 These accounting variations may due to the following factors:
 Political and economic ties with other countries
 Status of the accounting profession
 Existence of a conceptual framework (language, terminologies, valuation, currency,
and recognition principles used)
 Quality of accounting education
 Type of reporting regimes
 Type of business entity
 Type of capital market
 Type of legal system
 Level of enforcement
 Level of inflation
 People and users of accounting information are not exactly alike. One basis of
comparison is between a macro-user oriented and micro-user oriented accounting
system.
 In macro-user oriented systems, government agencies – particularly tax and economic
planning agencies – are the principal users of accounting reports. In micro-user
oriented systems, a diverse set of capital providers is perceived to be the most
important user group of accounting reports.
 The complexity of conducting international business operations across national
borders – each with a different set of business operations across national borders,
each with a different set of business regulations and often different accounting
methods – presents an intimidating challenge for accountants and the professional
bodies that establish accounting and auditing rules.
 For multinational enterprises, the diversity of applicable accounting auditing, auditing
and tax rules may affect the enterprise’s ability to prepare reliable financial
information.
 Other international accounting and reporting matters, such as inflation accounting
adjustments, deferred tax accounting, and translation of foreign subsidiaries’ financial
statements, also arguably create disadvantages for some companies, and the
persistence of these differences puts pressure on standard setters to work harder to
achieve a uniform set of accounting standards.
LINKAGE OF TAX LAWS & ACCOUNTING
PRINCIPLES REQUIREMENTS
 Oftentimes, government regulations on taxation are in conflict with accounting
standards. There are temporary and permanent differences that result in the
discrepancy in the amount of financial accounting income from taxable income.
 For example, some incomes (such as gain on life insurance and unrealized gain on
trading securities) are reported in accounting but excluded in the income tax returns
because by their nature, tax laws exempt them from taxation.
 Some expenses (such as allowance provision for uncollectible accounts, product
warranty, and representation expense) are recognized in the preparation of financial
statements but disallowed or limited in the preparation of income tax returns.
 A corporation is permitted to adopt one accounting method for income tax purposes
and another method for financial reporting purposes.
 An important event in the historical development of this matter occurred in 1994,
when the Committee on Accounting Procedure issued A.R.B. No. 23 providing that the
amount of income tax expense for the year shown in the statement of comprehensive
income may not necessarily be the amount currently payable for income taxes.
 As a rule, in the ITR preparation, the tax law must be observed; but for accounting
purposes, the applicable accounting standards must be followed in the preparation of
financial reports. Consequently, accountants are faced with new tax accounting
systems and procedures. They usually make a reconciliation of the accounting and tax
reports.
DEGREE OF DEVELOPMENT OF THE
CAPITAL MARKETS
 Differences in the degree of development of the capital markets in different countries
and their effect on the development and use of generally accepted international
principles of accounting affect a country’s disclosure requirements and financial
reporting level.
 These include whether the market is predominantly equity-oriented or debt-oriented,
the level of sophistication of financial instruments, and the level of globalization of
capital markets.
 A capital market is known to be equity-oriented when companies turn to the stock
market as their main source of capital. This situation is predominantly applicable in
the United States and Canada.
 When companies depend on bank financing as their primary source of capital, the
market is known to be debt-oriented. Germany, Japan and Switzerland’s companies
belong to this group.
 The equity or debt orientation of companies has a significant impact on the financial
reporting both in substance and in form.
 The level of sophistication and globalization of capital markets impact financial
reporting because accounting has to keep up with finance in terms of drafting
accounting rules for new financial instruments.
 The globalization of capital markets has also heightened the need to address
harmonization of financial reporting requirements. The accounting variations among
countries and the need of an ever-changing economy demand for the
internationalization of accounting and auditing practices.
HARMONIZATION OF ACCOUNTING
STANDARDS
 With the globalization of business and diverse accounting practice, efforts have been
made to harmonize accounting standards across countries. This has resulted in the
creation of the International Accounting Standards Committee (IASC) in 1973. In
2001, the International Accounting Standard Board (IASB) succeeded the IASC.
 The main objective of the IASB is to develop a uniform set of high quality,
understandable, and enforceable global accounting standards. Its purpose is to
achieve a higher degree of comparability and transparency of financial reporting to
help the world’s capital markets and other users make economic decisions.
 The accounting standards promulgated by the IASC are called International
Accounting Standards (IAS) but those promulgated by the IASB are termed
International Financial Reporting Standards (IFRS). Currently, the IFRS consists of the
following:
 International Financial Reporting Standards (IFRS)
 International Accounting Standards (IAS)
 Interpretations of IFRS and IAS
 In 2002, the European Union (EU) required all publicly traded EU companies to adopt
IFRS starting 2005. Other non-European countries also changed their national
accounting standards to IFRS. Countries like the United States, Japan, Singapore,
Taiwan, Thailand and others retained some of their national standards but converged
them closely with IFRS.
 The Philippines decided to adopt the accounting standards issued by the IASC and the
IASB, with the following appropriate terms:
 Philippine Financial Reporting Standards (PFRS) corresponding to IFRS;
 Philippine Accounting Standards (PAS) corresponding to IAS; and
 Interpretations of the PFRS/PAS corresponding to interpretations of IFRS/IAS.
 As of 2007, at least 119 countries have already adopted the IFRS. The IASB projects
that in 2011, there would be at least 150 countries adopting the IFRS.
THE FINANCIAL REPORTING STANDARDS
COUNCIL (FRSC)
 On November 18, 1981, the Philippine Institute of Public Accountants (PICPA), the
national professional body of CPAs in the Philippines, created the Accounting
Standard Council (ASC) as the accounting standard body in the Philippines, to
establish and improve accounting standards that will be generally accepted in the
Philippines.
 Basically, the accounting standards in the Philippines called “Statement of Financial
Accounting Standards” (SFAS) were US-based, until the gradual adoption of IAS and
IFRS in the Philippines starting in 1997.
 The decision to fully adopt the IAS was due to the following reasons:
 Increasing globalization of businesses;
 Recognition of IAS by the global financial institutions such as World Bank, World
Trade Organization and Asian Development Bank; and
 Complete support by the Philippine Regulatory Agencies.
 In 2004, the Philippine Regulation Commission (PRC) created the Financial
Reporting Standard Council (FRSC), replacing the ASC. The FRSC was created to
assist the Board of Accountancy (BOA) to carry out its powers and functions provided
under Republic Act No. 9298, the Philippine Accountancy Act of 2004.
 The approved accounting standards of the FRSC are known as the “Philippine
Financial Reporting Standards” (PFRS) and “Philippine Accounting Standards” (PAS)
which fully took effect on January 1, 2005.
PHILIPPINE REGULATORY AGENCIES

The following Philippine agencies regulate the financial reports and professional
activities of CPAs:
1. Bureau of Internal Revenue (BIR) – to ensure compliance of National Taxes
(Income Taxes and Business Taxes) and license requirements of all businesses.
2. Local Government Units (LGU) – to ensure payment of local business taxes and
other local taxes such as community tax, real property tax and professional tax.
3. Security and Exchange Commission (SEC) – to keep an eye on the operation of all
kinds of corporation (profit or nonprofit).
4. Bangko Sentral ng Pilipinas (BSP) – to regulate the operations of all banks and
business import and export activities.
5. Philippine Institute of Certified Public Accountant (PICPA) – to protect the
credibility of CPA Certificates and instill ideals of professionalism, ethics, and
competence among CPAs.
PROFESSIONAL ORGANIZATIONS OF CPAs
IN THE PHILIPPINES
 The accounting profession in the Philippines has grown rapidly since its formal
recognition with the passing of the first Accountancy Law (R.A. 3105) in 1923.
 This law formally recognized accounting as a profession by restricting its practice to
persons possessing a CPA certificate. It created the BOA, vesting it with the authority
to conduct CPA examinations, issue CPA certificates and regulate the practice of public
accounting in the Philippines.
 As early as November 1929, CPAs in the Philippines formed the profession’s national
organization called PICPA which is primarily formed to:
1. Protect and enhance the credibility of the CPA certificate
2. Maintain high standards in accounting education
3. Instill ideals of professionalism, ethics, and competence among accountants
4. Foster unity and harmony among its members
PICPA also functions as the policy-making body of the following accounting organizations
which function as its implementing arms:
 ACPAE – Association of CPAs in Education
 ACPACI – Association of CPAs in Commerce and Industry
 ACPAPP – Association of CPAs in Public Practice
 GACPA – Government Association of CPAs
The professional organizations of CPAs in the field of Management Accounting are as
follows:

 PAMA – Philippine Association of Management Accountants

This organization was established to provide its members with educational and
professional activities and knowledge regarding current practices and methods in
management advisory services.
 PIMA – Philippine Institute of Management Accounting

It is the PAMA’s implementing arm to propagate and professionalize Management

Accounting in the Philippines. PIMA directs the Certificate in Management Accounting
(CMA) Program.