IASC- accounting is a service activity.

Its function is to provide quantitative information primarily

financial in nature that is intended to be useful in making economic decisions.

AICPA- accounting is the ART of recording, classifying, process)

AAA(statement of basic accounting theory)- PROCESS of identifying, measuring.

communicating(lMC)

Identifying as the analytical component

Measuring as the technical component

Communicating as the formal component

In order to be identifiable, a certain event must be quantifiable or expressed in terms of a unit of

measure. It must have an effect on Assets. Liabilities , OE.

External transaction is also known as exchange transaction which involves 2 entities. Example
is payment of salaries to employees.

Internal transaction- production and casualty loss(unanticipated losses, act of god)

Accounting is the language of business because of the communication process. I l.

Classifying- is accomplished by posting to the ledger

Summarizing- preparation of FS.

Accountants primary task is to supply financial information to statement users so that they could
make informed judgment and better decisions.

Rep. Act 9298- Philippine accountancy act of 2004 regulates the practice of accountancy in the
Philippines

BOA- body authorized by law to promulgate rules and regulations affecting the practice of the
accountancy profession

Certificate of registration shall be issued if the registrant has acquired a minimum of 3 years of
meaningful experience in any areas of public practice Including taxation. It will be valid for 3
years. renewable every 3 years upon payment of required fees.

Management advisory services- business conduct and operations

Controller is the highest accounting officer

Accounting is essentially constructive in nature

Auditor examines FS to ascertain whether they are in conformity with GAAP.

GAAP a social process.

Development of GAAP is formalized initially through the creation of ASC. The accounting
standards promulgated by the ASC constitute the GAAP.

SFAS is now known as PAS and PFRS

Accounting standards-proper accounting practice. It creates common understanding.

FRSC replaces ASC

FRSC is the accounting standard setting body created by PRC upon recommendation of BOA to
assist the BOA in carrying out its powers and functions provided under RA 9298. Main function
is to establish and improve accounting standards that will be generally accepted in the Phil.

FRSC is composed of 15 members with a chairman who had been or is presently a senior
accounting practitioner. 2 members from Public practice, commerce and industry, academe,
government.

The counterpart of PIC is the IFRIC in UK

IASC- improvement. harmonization and worldwide acceptance and observance of accounting

standards 30. IASB replaces IASC. It is a global phenomenon intended to bring about great
transparency and a higher degree of comparability in financial reporting: one uniform and
globally accepted financial reporting standard 3 1 . Accounting assumptions- serve as the
foundation or bedrock of accounting to avoid misunderstanding.
Known as postulates.

Accounting/fiscal period- 12months

Fiscal period could either be calendar or natural. If ​calendar​, ends on dec. 31. if ​natural​, ends
on any month when the business is at the lowest or experiencing slack season.

Monetary Unit has 2 aspects, quantifiability and stability of peso(current replacement cost is
ignored).
Sometimes. it is not necessarily valid that peso is stable since there may be instances wherein
there is a considerable gap between historical and current replacement cost. Entity should
therefore choose whether cost model or revaluation model they will apply to their entire class of
PPE.

Framework for FS is promulgated by the IASB

Framework is the underlying theory for the development of accounting standards and revision of
previously issued accounting standards. Assists FRSC , preparers of FS, users and auditors

Framework excludes special-purpose report such as prospectuses and tax computation

FS largely portray the financial effects of past events and do not necessarily provide
nonfinancial information. It shows the result of the stewardship of management or the
accountability of management for the resources entrusted to it.

Management has the primary responsibility for the preparation of FS.

Capacity for adaption or financial flexibility- using the entity's available cash for unexpected
requirements and investment opportunities. It is may be accomplished through raising cash at a
short notice through borrowing, sale of securities, disposal of assets disrupting normal
operations

Accounting concepts:
a. Entity theory = A=L+C (income statement)
b. Proprietary = A-L=C (statement of FP)
c. Residual equity = A-L-preference/OS=C
d. Fund Theory = Fund= Cash inflows-cash outflows (custody and administration of funds)

Financial reporting— provision of financial information about an entity to external users. Not just
financial statements but also other means of communicating information. It includes
non-financial information.

Financial reporting objectives:

● provide information useful in investment. credit. and similar decision
● cash flow prospects
● resources and claims to those resources and changes in them.

Four principal qualitative characteristics:

● relevance
● reliability
● understandability
● comparability
relevance and reliability relate to content and are primary qualities,

understandability and comparability relate to presentation and are secondary characteristics,

Relevance is affected by its nature and materiality. It helps users fonn predictions and
confirmations or revision to their expectation.

Ingredients of relevance are:

● Predictive value
● feedback value
● Timeliness

Reliability ingredients:
● Faithful representation-actual effects of transaction should be properly accounted for and
reported
● Substance over form-
● Neutrality
● Conservatism or prudence
● Completeness- Standard of adequate disclosure(notes to FS)

Understandability- Users are assumed to have a reasonable knowledge ofthe economic

activities and accounting and a willingness to study the information with reasonable diligence

Accounting constraints:
● Timeliness
● Cost-benefit
● Materiality

Balance between relevance and reliability

Materiality- doctrine of convenience. quantitative threshold

An example of trade-off between relevance and reliability is when entity reports quoted equity
instruments at

Information is relevant but not reliable. On the other hand, if entity reports an instrument at cost,
information is reliable but may not be relevant.

Installment method- revenue is recognized at the point of collection. Revenue is determined by

multiplying the gross profit by amount of collection

Immediate recognition of expense- reflects conservatism or prudence. Revenue expenditure

Financial performance is determined using 2 approaches:
● capital maintenance- net income occurs if capital is maintained(single entry)
● transaction approach- traditional preparation of income statement

2 concepts of capital maintenance:

● financial capital- based on historical host

● physical capital-current cost