Reference: Rafael M. Lopez, Jr.

Fundamentals of Accounting, Revised 2022-2023

Chapter 1 – The Accounting Profession and its development

Why do we have to study accounting?

- Universal existence. Accounting is not only for business. In everything we do, we
actually practice accounting. Whether we are in school, home or everywhere,
accounting has been always part of daily struggle for survival.
- Language of business. The language we often hear in business conversation. It is a way
in the business to set goals, measure the results and evaluate the performance.
The Accountancy Profession and its development
- One of the modest profession but less expensive.
- It has existed way back in 1923, with registered 43 CPAs.
- Armand Fabella of Jose Rizal College, the first holder of the first CPA certificate
- Highest mortality rate as it requires board examinations
- The accountancy profession demands a quality of high standards performance at all
times to the public it served.
- Accountant may serve as government service, in commerce and industry, in the
academe or in the public service
What is an Accountant?
A Certified Public Accountant is a holder of Bachelor of Science in Accountancy (BSA), who
has taken and passed the Certified Public Accountant Licensure Examination (CPALE)

The course in BS in Accountancy replaces all business courses majoring in the subjects of
accounting under the old curriculum.

What are the career opportunities of an Accountant?

1. Public Accounting – CPAs are in the public practice. Accountant become member of
Association of CPAs in Public Practice (ACPAPP) sector.
2. Government Accounting – CPAs are employed or rendered services in the government
agencies. Member of Government Association of CPAs (GACPA)
3. Private Accounting – CPAs gain employment in private companies and organizations.
Member of Association of CPAs in Commerce and Industry (ACPACI)
4. Academe – CPAs rendered services in educational institutions as professors in
Accounting subjects. Member of Association of CPAs in Education (ACPAE)

Code of Professional Ethics for CPAs in the Philippines

The code of ethics for professional Accountants in the Philippines was recently adopted
from the revised Code of Ethics for Professional Accountants developed by international
Federation of Accountants (IFAC) which took effect on June 30, 2008. Approved by the Board of
Directors of Philippine Institute of Certified Public Accountants (PICPA) and the Board of
Accountancy and finally approved by Professional Regulation Commission

What is International Federation of Accountants (IFAC)?

- International body representing all the major accounting bodies across the world. Its
mission is to develop, adopt and implement with high quality standards and guidance,
contributing to the development of strong professional accounting organizations and
accounting firms and to high practice of by professional accountants worldwide.
Being member of IFAC, it is committed to observe the following principles:
1. Integrity – Accountant should be straightforward and honest in performing professional
services. Implies fair dealing and truthfulness.
2. Objectivity – Accountant is fair and should not allow bias, conflict of interest or under
influence of others to override professional judgments.
3. Professional competence and Due Care - Accountant should perform professional services
with due care, competence and diligence, maintained professional knowledge and skills.
 4. Confidentiality – Accountant should respect the confidentiality of information acquired
during the course of performing professional services and should not disclose such
information without authority, unless there is legal or professional duty to disclose.

5. Professional Behavior – Accountant should act in a manner consistent with the good
reputation of the profession and refrain from any conduct which might bring discredit to
the profession.

Core Competencies Framework for Accountants

1. Knowledge. Accountant must cover:

General knowledge – Gaining understanding of the different cultures in the world and
developing an international perspective.

Organizational and business knowledge - In addition to the core knowledge in

economics, quantitative methods and business statistics, organization behavior, marketing
and operations management, the CPA must be conversant of international business and
have understanding of how the global business system works.

Information Technology knowledge – Conversant with IT concepts for business systems

and should have sound knowledge on internal control in computer based systems.
Accounting knowledge - core knowledge in accounting and related areas and must
include proficiency in international accounting and auditing standards, cost management
and latest concepts in management accounting, recent tax laws, business and commercial
laws.

2. Skills – It should include:

Intellectual – Ability to carry out abstract logical thinking and understanding critical
thinking. Accountant must demonstrate analysis, problem solving and strategic/critical
thinking.

Interpersonal – Developing the ability of the CPAs to work in groups abd being a team
player

Communication – Active listening skills and the ability to communicate effectively one’s
point of view both orally and in writing.

3. Values – must concentrate on:

Professional ethics – to work in accordance with the highest standards of professionalism

Moral values - able to discern what is morally right or wrong.

The Accountancy Law of 2004

- Republic Act (RA) 9298 otherwise known as Philippine Accountancy Act of 2004, which
repealed the Presidential Decree No. 692.
- RA 9298 signed by President Gloria Macapagal-Arroyo on May 13, 2004.
Salient features of the Law
- The Board of Accountancy (BOA), under the supervision of PRC shall be composed of a
Chairman and six (6) members to be appointed by the President of the Philippines.
- The BOA shall elect a vice-chairman from among its members for a term of one (1) year.
- Any person applying for CPALE shall establish the following requisites:
1. Is a Filipino Citizen
2. Has a good moral character
3. Is a holder of the degree of BS in Accountancy conferred by school, accredited
CHED; and
 4. Has not been convicted of any criminal offense involving moral turpitude

- The CPALE shall cover the following subjects

Before May 2016 Starting May 2016
1. Theory of Accounts Financial Accounting and
Reporting
2. Practical Accounting Advance Financial
Problems I Accounting and Reporting
3. Practical Accounting Management Services
Problems II
4. Management Advisory Auditing
Service
5. Auditing Theory Taxation
6. Auditing Problems Regulatory Framework for
business transactions
7. Business Law and
Taxation

- Rating of CPALE. To pass the exam, examinee must obtain a general average of 75%,
with no grades lower than 65% in any given subject. In the event that a candidate
obtains a rating of 75% and above in at least majority of subjects, he/she shall receive a
conditional credit for the subjects passed
- Any candidate who fails in 2 complete CPALE shall be disqualified from taking another
set of examination unless he/she submits evidence to the satisfaction of the Board that
he/she enrolled in and completed at least 24 units of the subject given in the CPALE
- The examination in which the candidate was conditioned together with the removal
examination on the subject in
which he/she failed shall be counted as one complete examination.

The birth of the Philippine Accounting Standards (PAS)

Accounting Standards Council (ASC) was created by PICPA on November 18, 1981. It is the
standard setting body which is tasked to establish and improve the Generally Accepted
Accounting Principles (GAAP)

The approved statements and the relative interpretations of the ASC are known as Statement of
Financial Accounting Standards (SFAS).

ASC is composed of 8 members, with 4 members nominated by PICPA and 1 each from SEC,
BSP, PRC-BOA and Financial Executive Institute of the Philippines. Term is 2 years which can
be renewed.

Under Sec. 9 of the IRR of RA 9298, created the new accounting standards-setting body known
as the Philippine Financial Reporting Standards Council (FFRSC). Then SFAS are now known as
PAS.

PFRSC is composed of 15 members, with chairman who has been or is presently a senior
accounting practitioner and 14 representatives - 1 each from the BOA, SEC, BSP, BIR, COA,
Major organization of preparers and users of FS accredited National professional organization of
CPAs, and 2 representatives from Public practice, Commerce and industry, academe and
government.

The chairman and members have the term of 3 years renewable for another term.
International Accounting Standards Board (IASB) replaces the International Accounting
Standards Council (IASC)
IASC approved the International Accounting Standards (IAS), but with the creation of IASB, it
has come out the new standards know
as International Financial Reporting Standards (IFRS). PFRSC adopted IFRS and called it as
Philippines Financial Reporting Standard Council (PFRS)

Government sector adopts international accounting standards and called it as Philippine Public
Sector Accounting Standards (PPSAS), after the creation of Philippine Public Sector Accounting
Standards Board (PPSASB
Exercises
Identification of Acronyms

1. PRC
2. ACPAPP
3. GACPA
4. ACPAE
5. ACPACI
6. PICPA
7. BSA
8. CPD
9. SEC
10. BSP
11. BIR
12. DBM
13. DTI
14. LGU
15. DPWH
16. CHED
17. ASC
18. SFAS
19. GAAP
20. BOA
21. COA
22. FASB
23. GOCC
24. PFRS
25. PAS
26. IAS
27. IASC
28. IASB
29. IFRS
30. CPA
31. SSS
32. GSIS
33. HDMF
34. PFRS
35. ADB
36. PPSAS
37. IFAC
True of False
1. Accountancy is not only one of the modest, less expensive but also most prestigious
profession in the country today
2. It was in 1923 that accountancy profession was first recognized through the passing of the
Accountancy Law.
3. Until today, the accountancy profession maintains the highest mortality rate among
courses that require board examinations
4. Accountancy is the first among the professions here in the Philippines to be included
under WTO policy liberalizations of services
5. Accountancy is considered a profession because it has a body of principles, assumptions
and a set of ethical standards
6. Republic Act 7160, known as the Local Government Code of 1991 created cities, provinces
and municipalities as local government units
7. The Board of Accountancy employs strictness, whereby before a CPA can engage into
public practice, he/she has to obtain accreditation with PRC-BOA
8. All CPAs employed in the government agencies are considered as public practitioners
9. The knowledge of accounting is important and beneficial to those who are engaged in
business only.
10. A CPA who is teaching in the subjects of taxation in an college or university is not
considered to be in the practice of profession.
11. A CPA is not allowed by law to engage in any lawful business activity if he is a public
practitioner
12. RA 9298 known as Philippine Accountancy Act of 2004 repealed P.D. 692 formerly
known as the Revised Accountancy Law
13. The Board of Accountancy shall be composed of a chairman and 6 members to be
appointed by the President of the Philippines
14. The purpose of the CPA board examination is to test the overall knowledge and
competence of the candidates
15. Under the new accountancy law, the PRC, subject to the approval of the BOA may
revise or exclude any of the subjects in their syllabi and add new ones as the need arises.
16. To be qualified as having passed the CPA board exam the candidate must obtain a
general average of 75% and above with no grades lower than 65% in any given subject
17. A conditional candidate shall automatically become CPA two years after without
taking examinations on the remaining subjects that he/she failed.
18. Any candidate who failed in 2 complete CPA board shall be disqualified from taking
another set of examination unless he/she has enrolled and completed at least 24 units of
subject given in the licensure examination.
19. The Philippine Financial Reporting Standards Council is the new standard setting-
body which is tasked to establish and improve the GAAP
20. The objective of international accounting standard is to achieve uniformity in the
accounting principles which are used by business and other organizations for financial
reporting around the world.