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Accounting Standards Council ( ASC)-Accounting is a service activity. Its function isto provide quantitative information, primarilyfinancial in nature, about economic entities,that is intended to be useful in makingeconomic decision.

Committee on Accounting Terminology of theAmerican Institute of Certified PublicAccountants-Accounting is the art of recording, classifyingand summarizing in significant manner in termsof money, transactions and events which are inpart at least of a financial character andinterpreting the results there of.

American Accounting Association (AAA)-Accounting is the process of identifying,measuring and communication economicinformation to permit informed judgment anddecision by users of the information.

1. Quantitative information2. Financial in nature3. Useful in decision making

Accounting is an information system measuresbusiness activities-reportsReports-decision makers.

Personal Planning Car PaymentsEducation expense Income taxes Loans

Key Product = Financial Statements- Income Statement- Statement of Cash Flow- Statement of Financial Position- Statement of Changes in Owners Equity - Statement of Comprehensive Income

AAA definition- very purpose is to providequantitative information to be useful in makingeconomic decision

COMPONENTIdentifying- analytical componentMeasuring- technical componentCommunicating- formal component

Identifying- recognition or non recognition ofbusiness activities

Not accountable- cannot be quantifies orexpressed in terms of a unit of measure ( death,hiring, entering contract)

Accountable- affect assets , liabilities andequity.

Economic activities- measure economicresources and obligation reffered asTRANSACTIONS

External Transactions- economic eventsinvolving one entity to another entity

Internal Transaction- involving entity only(production and casualty loss)

Production - which resources are transformedinto productsCasualty - sudden and unanticipated loss fromflood, fire, earthquake.. act of God

Measuring- assigning of peso amounts-Common financial denominator (Philippinepeso)Based on Historical Cost, Current Cost,

Realizable Value and Present Value

Historical Cost most common measure offinancial transaction

Communicating- preparing and distributingaccounting reports to potential users (investors,owners, managers, creditors and others)

UNIVESAL LANGUAGE OF BUSINESS

Recording- journalizing ( maintaining record oftrans after they have been identifies andmeasured)

Classifying- sorting or group (posting to ledger)Ledger- group of accountsAssets, Liabilities, Equity, Revenue and Expenses

Summarizing- preparation of FS = 5

Basic Objective of Accounting-Provide quantitative financial informationuseful to users particularly owners and creditorsin making decision

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Continuing professional education ( CPE)-BOA and PRC in coordination of accreditednational professional org of CPA or any dulyaccredited educational institutions.

Accounting versus AuditingAccounting- constructs FSAuditing examines FS if it follows the GAAP

Accounting versus BookkeepingAccounting- conceptual, making decision bymanagement. WHYBookkeeping - procedural , development andmaintaining records. HOW

Accounting versus AccountancyAccountancy- work by accountantAccounting- reference of field ex public acctng-activity maintaining bus records doing of FS

Financial Accounting versus Managerial

AccountingFA- recording of business transactions anpreparation of FS. Focus on general purposereports know as FINANCIAL STATEMENTintended for internal and external users.-develop report for the use of creditors andinvestors

MA- needed by management for planning,controlling and evaluating operation-develop accounting info for the use within

entity.

Generally Accepted Accounting Principles (GAAP)- rules, procedures, practice andstandards followed in the preparation andpresentation of FS.-convention by agreement ( basis of exp,reason, custom, usage and practical necessity)-social process ( professional judgment, logic,research)-Like Law

Accounting Standards Council-highest hierarchy

Approved statement are previously calledStatements of Financial Accounting Standardsor SFAS

Philippine Accounting Standards ( PAS)Philippine Financial Reporting Standards (PFRS)IFRS-PFRSIAS-PAS

Purpose of Accounting Standards - to identifyproper accounting practices for the preparationand presentation of Financial Statements

Financial Reporting Standards Council ( FRSC)-created by PRC upon recommendation of BOAto assists BOA in carrying out its powers andfunctions provided under RA No. 9298

FRSC replace ASCMain function is to establish and improved

accounting standards that will generallyaccepted in the Philippines.

FRSC- 15 members = 1 chairman , 14 mem-Board of Accountancy

-Securities and Exchange Commission-Bangko Sentral ng Pilipinas-Bureau of Internal Revenue-Commission on Audit-Major organization of prepares and users of FS-Accredited national professional organizationof CPA

2 Public Accounting 2 Private Accounting 2 Government Accounting 2 Academe or education

TERM- 3 years renewableUng ASC pwde din sa FRSC

Philippine Interpretations Committee or PIC-formed by FRSC in AUGUST 2006 replacedInterpretations Committee or IC formed by AScon May 2000

Prepare interpretation of PFRS for approval ofFRSC-interpretations are intended to giveauthoritative guidance dun sa mga issuing wlngclear rules and guidance

Counter part is IFRIC in United Kingdom thatreplace the Standing Interpretations Committeeor SIC

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Special Purpose Financial reports- computationfor taxation prospectuses are outside theconceptual framework

Users of Financial InformationPrimary usersOther users

Primary users- reports are primarily directed

Existing and potential investors- risk inherent inand return provided by their investmentsShareholders- ability to pay dividends

Lenders and other creditors- whether theirloans , interest there on and other amountsowing to them will be paid when due

Other Users- reports are not directed to them

Employees - stability and profitability of entity.

Customers - continuance of entity especiallywhen they have long term involvementGovernment and their agencies - determinetaxation polices. Allocation of resourcesPublic - about the trend and range of itsactivities. Number of people they employ

Financial Reporting- provide info to externalusers

Fs and also include financial highlights, financial

figures, significant ratios

Objective of Financial Reporting- providefinancial information about the reporting entitythat is useful to existing and potential investors,lenders and other creditors in making decisionabout providing resources to the entity.

It is directed to primary users- provideresources to entity.

Info that meets the needs of primary user alsomeet the needs of other users

Financial position- compromises its a, l and e ata particular moment in time

Economic resources- assetsClaims- liabilitiesLiquidity- availability of cash in near future

Solvency- availability of cash over long term

Changes in economic resources and claimsresults from financial performance

Financial performance- level of income earnedby entity through efficient and effective use ofits resources

-also known as RESULTS of OPERATIONSportrayed in INCOME STATEMENT andSTATEMENT OF COMPREHENSIVE INCOME

Depict