ACCOUNTANCY IN THE PHILIPPINES

RA 9298
PHILIPPINE ACCOUNTANCY ACT OF 2004

Scope of Practice
 Practice of Public Practice
 Practice of Commerce and Industry
 Practice of Education/Academe
 Practice of Government

PRC- Board of Accountancy

1 chairperson and 6 members
The Certified Public Accountant
 A Filipino citizen
 Is of good moral character
 Holder of a BSA degree conferred by a school, college or institution accredited by CHED or other
authorized government office
 Not been convicted of any criminal offense involving moral turpitude

Rating in the Examination

PASSED
 General average of 75%
 No grade below 65%
CONDITIONAL credit for subjects passed
 Obtain at least 75% on the majority of the subjects
 Examination for remaining subjects within 2 years

PROFFESIONALORGANIZATIONS
Philippine Institute of Certified Public Accountants (PICPA)

Core Competency Framework for entry to the Accountancy profession

1. Knowledge
 General Knowledge
 Organizational an Business Knowledge
 Information Knowledge
 Accounting Knowledge
2. Skills
 Intellectual
 Interpersonal
 Communication
3. Values
 Professional Ethics
 Moral Values

CODE OF ETHICS FOR PROFESSIONAL ACOUNTANTS IN THE PHILIPPINES

(BASED ON THE REVISED CODE OF ETHICS FOR PROFESSIONAL ACOUNTANTS IN DEVELOPED
BY IPAC)
 Part A-Fundamental Principles
 Part B-Applies to professional accountants in public service
  Part C- Applies to professional accountants in business

FUNDAMENTAL PRINCIPLES
 INTEGRITY
Straight forward and honest
 OBJECTIVITY
Not allow bias, conflict of interest, undue influence to override judgment
 PROFESSIONAL COMPETENCE AND DUE CARE
Maintain knowledge and skills to ensure competent professional service
 CONFIDENTIALITY
Not disclose information without authorization
 PROFESSIONAL BEHAVIOR
Comply with relevant laws and avoid actions that discredit the profession

BRANCHES OF ACCOUNTING
 AUDITING
 BOOK KEEPING
 COST BOOK KEEPING, COSTING AND COST ACCOUNTING
 FINANCIAL ACCOUNTING
 FINANCIAL MANAGEMENT
 MANAGEMENT ACCOUNTING
 TAXATION
 GOVERNMENT ACCOUNTING

WHAT IS REQUIREDE TO STUDY ACCOUNTING?

 Analytical Ability
 Stored Knowledge in Arithmetic
 Right mindset
 Hard work and prayer

ACCOUNTING AND ITS ENVIRONMENT

DEFINITION
 Accounting is the process of identifying, measuring, and communicating economic information to
permit informed judgment and decision by users of information.
IMPORTANCE OF ACCOUNTING IN BUSINESS
 Accounting transforms financial data into useful reports for user of the information in their decision
making
FUNDAMENTAL BUSINESS MODEL
 Since accounting deals with business transactions, it is helpful to know how business works
TYPES OF BUSINESS
Generally there are 3 types:
1. Service
2. Merchandising
3. Manufacturing
The range of products and service the business offers can also be summarized in seven broad categories:
 Service
 Trader
 Manufacturer
 Raw Materials
 Infrastructure
  Financial
 Insurance

FORMS OF BUSINESS ORGANIZATION

 Sole Proprietorship
 Partnership
 Corporation

OTHER FORMS OF BUSINESS ORGANIZATION

 Micro
 Small
 Large
 Medium
Form of business Assets before financing Number of employees
Micro 3 million or less Not more than 9 workers
Small Above 3 million to 15 million 10-99 workers
Medium Above 15 million to 100 million 100-199 workers

ACTIVITIES IN BUSINESS ORGANIZATION

 FINANCING
 INVESTING
 OPERATING

PHASES OF ACCOUNTING

FUNDAMENTAL CONCEPTS THAT UNDERLIE THE ACCOUNTING PROCESS

 ENTITY CONCEPT- The entity is separate from the other entities and individuals
 PERIODICITY CONCEPT- Life of entity is divided into equal time periods for reporting purposes.
Annual (12 mos.), Semi-annual, Quarterly, Monthly.
 STABLE MONETARY CONCEPT- Unit of measure to use in the financial statement is the Philippine
peso.

FINANCIAL STATEMENTS AND ITS NATURE

 A financial statement is a means by which the information accumulated and processed in the accounting
cycle is periodically communicated to the users for the use of decision making.
A complete set of financial Statement contains the following:
 A Statement of Comprehensive Income for the period
 A Statement of Changes in Owner’s Equity
 A Statement of Financial Position as at the end of the period
 A Statement of Cash Flows for the period
 Notes, comprising a summary of significant policies and other explanatory information
 A Statement of Financial Position as at the beginning of the earliest comparative period
A Statement of Comprehensive Income for the period
 This statement shows that the financial performance of the enterprise for a given period of time

A Statement of Changes in Owner’s Equity

 The statement of changes in equity summarizes the changes that occurred in owner’s equity. Changes in
an enterprise’s equity between two periods reflect the increase nor decrease in the equity/net assets
during the period

A Statement of Financial Position as at the end of the period

 This statement shows the financial condition or position of an entity by listing the assets, liabilities, and
owner’s equity as at a specific date

A Statement of Cash Flows for the period

 This statement shows cash inflows and cash outflows during the period

USERS OF FINACIAL STATEMENTS

 EXTENAL USERS are individual and others that have current or potential interest in the reporting
entity but are not involved in the management of the entity. Examples are creditors, employees, potential
investors, suppliers, customers, labor unions , government agencies, trade associations and the public
 INTERNAL USERS includes board of directors, Chief Executive Officers, Chief Financial Officers,
Vice Presidents, Plant Managers and the supervisors.

BASIC PRINCIPLES
 Objectivity Principle
 Historical Cost
 Revenue Recognition Principle
 Expense Recognition Principle
 Adequate Disclosure
 Materiality
 Consistency Principle

ELEMENTS OF A FINANCIAL STATEMENT

 Asset
 Liability
 Owner’s Equity
 Income
 Expense

ASSET
 Valuable resources owned by the entity
 Asset is a resource controlled by the entity as a result of past events and from which future economic
benefits are expected to flow to the enterprise
Classification of Assets
 Current
o Intends to use or consume the asset in its normal operations
o It holds assets primarily for the purpose of trading
o It expects to realize assets/convert assets to cash within 12 months after operating period
o It is cash or cash equivalent
 Non-current
 o All other assets not included in the current asset
 Contra Asset Accounts

LIABILITIES
 Obligations of an entity to outside parties
 A present obligation of the enterprise arising from past events, the settlement of which will result to an
outflow of economic benefits
Classification of Liabilities
 Current
o It expects to be settled/ paid in the normal operation
o It holds liabilities primarily for the purpose of trading
o Liabilities is due or to be settled within 12 months
o The entity does not have an unconditional right to defer/extend/prolong payment for at least 12
months after reporting period
 Non-current
o All other assets not included in the current asset

OWNER’S EQUITY
 The residual interest of the entity
 Can be computed as ASSETS minus LIABILITIES (A-L=OE)
 Capital, Withdrawal (for personal use)

INCOME
 Increases in economic benefits during the period as a result of the operation of the entity
 Also includes Revenues and gains

EXPENSES
 Decreases in economic benefits during the period as a result of the operation of entity or to acquire
revenue/income
 Expenses decrease in owner’s equity

THE ACCOUNT AND THE CHART OF ACCOUNTS

 The basic summary device of accounting is an account

CHART OF ACCOUNTS
 A chart of accounts is a listing of all the accounts and their account numbers in the ledger
 A chart of accounts of each business entity varies depending on the nature of the transactions of the
entity
ASSET LIABILITY OWNER’S INCOME EXPENSES
EQUITY
Cash Accounts payable Capital Repair revenue Utilities expense
Accounts receivable Notes payable withdrawal Service income Salaries expense
Supplies Unearned revenue Interest income Rent expense
Prepaid insurance Interest payable Rent income Depreciation
expense
Equipment Bonds payable Sales Taxes and license
Inventory Mortgage payable Interest expense
Notes Receivable Supplies expense
Prepaid rent
Land, Building