Chapter 1 - The Accounting Profession

External Transactions

Exchange transaction s are those economic events involving one entity and another entity. Ex., Purchase and sale of goods.

Financial information

- A key product of this information system. The documents that report financial information about an entity to decision makers. - These reports tell us how well an entity is performing in terms of profit and loss and where it stands in financial terms.

PRC ( Philippine Regulation Commission)

- Branch of government that in charge in providing license through the passing of Board Exam. - Responsible for regulating different kinds of profession like medicine, accountancy, Engineering and others.

PICPA ( Philippine Institute of Certified Public Accountant )

- Group of CPA that is obligie to register as a member of this institution - fixing the problems about accounting profession and making a committee that will resolve the discrepancy about accounting standards. - Accredited National Professional Organisation of CPA's

Board of Accountancy

- Is the body authorized by the law to promulgate rules and regulations affecting the practice of the accountancy profession in the Philippines. - is responsible for preparing and grading the Philippines CPA examination - must create council that will create accounting standards (FRSC)

Republic Act. No. 9298

- Is the law regulating the practice if accountancy in the Philippines. - This law is also known as the " Philippine Accountancy Act of 2004" made by the regime of Arroyo

Accounting

- accounting is a service activity. - The accounting function is to provide quantitative information, primarily financial in nature, about economic entities, that is intended to be useful in making economic decision. ~ Accounting Standards Council.

Identifying

- as the analytical component - This accounting process is the recognition or nonrecognition of business activities as " accountable " events. - An event is accountable or quantifiable when it has an effect on assets, liability and equity.

Communicating

- as the formal component - is the process of preparing and distributing accounting reports to potential users of accounting information. - identifying and measuring are pointless if the information contained in the accounting records cannot be communicated in some form to potential users. - this process is the reason why accounting has been called the " universal language of business "

Measuring

- as the technical component - this accounting process is the assigning of peso amounts. - financial statements without monetary amounts would be largely unintelligible or incomprehensible - the measurement bases are historical cost, current cost, realizable value and present value - historical cost is the most common measure of financial transactions.

FRSC ( Financial Reporting Standard Council)

- authorative body that adapts the standards that is applicable in the Philippines from International Accounting Standard and new standards (PFRS) that will follow in Philippines.

BOA ( Board if Accountancy )/ PRBOA ( Philippine Refulatory Board Of Accountancy )

- in charge in regulating of Accountancy profession in the Philippines. - providing of professional ethical standards. - responsible for conducting of CPA lincense that focuses in accountants. - 7 members , 1 chairman and 1 vice chairman..and the president of the Philippines shall be the one to choose the members of BOA.

Classifying

- is the sorting or grouping if similar and interrelated economic transactions into their respective classes - it is accomplished by posting to ledger - ledger is a group of "accounts" which are systematically categorised into assets accounts, liability accounts, equity accounts, revenue accounts and expense accounts.

Overall objective of accounting

- is to provide quantitative financial information about a business that is useful to statement users particularly owners and creditors, in making economic decisions - an accountants primary task is to supply financial information so that the statement users could make informed judgement and better decisions. - the essence of accounting is decision usefulness.

PFRS ( Philippine Financial Reporting Standards )

- it is the new and old standards having a various rule that will apply in accounting.

Composition of FRSC

1- Board of Accountancy ( BOA ) 1- Securities and Exchange Commission ( SEC ) 1- Bangkok Sentral ng Pilipinas ( BSP ) 1- Bureau of Internal Revenue ( BIR ) 1- Commission on Audit ( COA ) 1- Financial Executives Institute of the Philippines ( FINEX ) 2 - Public Practice 2 - Commerce and Industry 2- Academe or Education 2 - Government

Important points of Accounting

1. Accounting is about quantitative information. 2. The information is likely to be financial in nature. 3. The information should be useful in decision making.

Two Kinds of Transactions

1. External Transactions 2. Internal Transactions

Formation of FRSC

1. PRC ( Philippine Regulation Commission) 2. BOA( Board of Accountancy)/ PRBOA(Professional Regulatory Board of Accountancy) 3. PICPA (Philippine Institute of Certified Public Accountant) 4. FRSC ( Financial Reporting Standard Council )

Process of communication

1. Recording/Journalizing 2. Classifying 3. Summarizing

Summarizing

Is the preparation of financial statements which include the statement of financial position, income statement, statement of comprehensive income, statement of changes in equity and statement of cash flows.

Recording/Journalizing

Is the process of systematically maintaining a record of all economic business transactions after they have been identified and measured.

Accounting as an Information system

That measures business activities, processes information into reports and communicates the reports to the decision makers.

Internal Transactions

These are economic events involving the entity only. Ex., Production and casualty.