Accounting and Its Business
Accounting and Its Business
About 5,000 years ago- People wanted to The treatise described double-entry bookkeeping
account for their property so it could be legally that for every credit entered into a ledger, there
proven as their own. must be a debit, a concept created by Florentine
merchantsand hailed by Goethe as “one of the
Accounting- It was the first form of primitive
most beautiful discoveries of the human spirit.”
written language.
PRACTICE OF ACCOUNTANCY
Societies- They (societies) began to develop their
own written languages and began recording them REPUBLIC ACT 9298- It is known as the
on stones. Philippine Accountancy Act of 2004 was signed
into law by President Gloria Macapagal-Arroyo on
Year 1494- It is the year formal accounting was
May 13, 2004.
invented in the paper “Summa de Arithmetica,
Geometria, Proportioni et Proportionalita”.
Characteristics of the Profession of Accountancy Accounting:
-It qualifies as a profession because it possesses 1. It opens doors in every kind of business
the following attributes: 2. It can give you the foundation you need to
go on and become a CPA.
a) All members of the accountancy 3. It can prepare you to become a partner in
profession are Certified Public an accounting firm, to pursue career in
Accountants (CPAs), which means that finance, law or corporate management, to
they have passed the CPA Licensure work in government, or even to become
Examinations given by the Professional an entrepreneur. In fact, no matter what
Regulatory Board of Accountancy (BOA). you decide to do, having an accounting
b) CPAs have their own body of language. background can open doors wide."
They use terminology peculiar to the
profession Practice of Public Accountancy
c) CPAs adhere to a Code of Ethics. his code
upholds the CPA's responsibility to serve 1. shall constitute in a person, be it his
the public with competence and integrity, individual capacity, or as a partner or as a
by relying on the financial statements staff member in an accounting or auditing
they audit. firm, holding out himself as one skilled in
d) Like other professions, CPAs are the knowledge, science and practice of
members of a national organization accounting, and as a qualified person to
whose role is to ensure the continued render professional services as a certified
improvement of the accountancy public accountant (CPA); or offering or
profession to meet the demands of the rendering, or both, to more than one
times. client on a fee basis or otherwise, services
such as:
Career Opportunities of Accountancy The audit or verification of financial
transaction and accounting records
1. It is potentially a lucrative field, ideally
the preparation, signing, or certification
suited to those who are self-motivated,
for clients of reports of audit, balance
team-oriented, good communicators, with
sheet, and other financial, accounting and
high integrity and sees the big picture but
related schedules, exhibits, statements or
has an eye for the details.
reports which are to be used for
2. A high level of business and professional
publication or for credit purposes, or to
ethics are expected from CPAs for they
be filed with a court or government
have access to sensitive financial
agency, or to be used for any other
information and to large sums of money.
purpose
American Institute of Certified Public Accountants The design, installation, and revision of
accounting system
1. It dubbed accounting as the “one degree The preparation of income tax returns
with 360 degrees of possibilities." when related to accounting procedures
2. It added that "You may already have an When he represents clients before
idea about what you want to do for a government agencies on tax and other
career. Then again, maybe you're not so matters related to accounting
sure. Either way, there's one degree that 2. Accountants who render services on a fee
gives you the education to succeed at just basis and staff accountants employed by
about anything in the business world. It's them are engaged in public practice.
an accounting degree.
3. They offer their professional services to Advanced positions: Chief Financial
the public. Officer, Chief Information Officer.
4. Their work includes auditing, taxation
and management advisory services. Practice in Education/Academe
5. Some public accountants pool their
1. Involve teaching of accounting, auditing,
talents and work together in a single firm.
management advisory services, finance,
Most public accounting firms are called
business law, taxation, and other
CPA firms since most of their professional
technically related subjects.
employees are CPAs.
2. The primary goal of accounting education
6. The top partners in these large
is "to produce competent professional
accounting firms earn about the same
accountants capable of making a positive
amount as the top executives of other
contribution over their lifetimes to the
large businesses.
profession and society in which they work."
7. Public accounting is the frequently
3. This sector is being challenged to focus
traveled career path because it offers
accounting education from the “transfer
excellent opportunities to gain multi-
of knowledge" approach to the more
faceted business experience.
effective "learning to learn" approach.
8. It is normal to hear of managers,
4. Other CPAs from the other sectors are
executives and even supervisors
encouraged to do part-time teaching to be
becoming a large corporation's chief
able to impart their workplace
executive or financial officer.
experiences.
9. Sample Entry-level jobs: Audit Staff, Tax
Staff, Management Services/Consulting Practice of Government
Staff; Middle-level positions: Audit
Manager, Tax Manager, Consulting 1. shall constitute in a person who
Manager; Advanced positions: Partner, holds, or is appointed to, a position in
Senior Partner, Senior an accounting professional group in
Consultant/Financial Advisor. government or in a government—
owned and/or —controlled
Practice in Commerce and Industry corporation, including those
performing proprietary functions,
1. shall constitute in a person involved in
where decision making requires
decision making requiring professional
professional knowledge in the science
knowledge in the science of accounting,
of accounting, or where a civil service
or when such employment or position
eligibility as a certified public
requires' that the holder thereof must be
accountant is a prerequisite.
a certified public accountant.
2. Accountants may be hired by the
2. Accountants employed in this area vary
following: Congress of the
widely in their scope of activities and
Philippines, Commission on Audit
responsibilities. Sample Entry-level jobs:
(COA), Department of Finance,
Financial Accounting and Reporting Staff,
Department of Budget and
Management Accounting Staff, Tax
Management, Bangko Sentral ng
Accounting Staff, Internal Audit Staff,
Pilipinas (BSP), Bureau of Internal
Financial Analyst, Budget Analyst, Credit
Revenue (BIR), Bureau of Treasury
Analyst, Cost Accountant; Middle-level
(BTr) and the local government units
positions: Comptroller, Senior
(e.g. provincial, city or municipal
Information Systems Auditor, Senior
governments).
Fraud Examiner, Senior Forensic Auditor;
BRANCHES OF ACCOUNTING: interpretation and
communication of information
Bookkeeping used by management to plan,
1. It is a mechanical task involving evaluate and control within an
the collection of basic financial entity and to assure appropriate
data. use of and accountability for its
2. Its procedures usually end when resources (Chartered Institute of
the basic data have been entered Management Accountants (CIMA)
in the books of accounts and the 3. It is an integral part of the
accuracy of each entry has been management process. It
tested. At that stage, the measures, analyzes and reports
accounting function takes over. financial and non-financial
3. Accounting tends to be used as a information which is then used
generic term covering almost by management for planning, and
anything to do with the collection decision-making. Examples of
and use of basic financial data. non-financial information are as
4. It is a routine operation, while follows: percentage of defects,
accounting requires the ability to number of customer complaints,
examine a problem using both warranty claims, budgeted hours,
financial and non-financial data. employee satisfaction, customer
Financial Accounting satisfaction, product or service
1. Focused on the recording of quality and reputation.
business transactions and the
periodic preparation of reports MANAGEMENT ACCOUNTING VS. FINANCIAL
on results of operations, changes ACCOUNTING
in equity, financial position and
cash flows. MANEGERIAL FINANCIAL
2. It is the more specific term ACCOUNTING ACCOUNTING
applied to the preparation and Output Internal reports Financial statements
subsequent publication of
Primary Users Internal users External Users
general-purpose financial
(like managers) (like stockholders,
statements. government
Management Accounting agencies)
1. Management accounting is a Restrictions No Mandatory rules Must follow GAAP
profession that involves for preparing when preparing
partnering in management reports Financial Statements
decision-making, devising Type of Financial and Non- Financial
planning and performance Information Financial Information;
Information; objective
management systems, and
subjective information
providing expertise in financial
information possible
reporting and control to assist Time Orientation Emphasis on the Historical
management in the formulation future (planning and orientation; past;
and implementation of an decision-making); retrospective
organization's strategy (Institute prospective
of Management accountant (IMA) Degree of Based on very Information about
2. It is the process of identification, Aggregation detailed the overall firm
measurement, accumulation, information; parts/ performance, more
segmented aggregate
analysis, preparation,
Timing of Reports As required Monthly, Quarterly,
Annually
COST ACCOUNTING owners' or stockholders'
interests.
1. It is the collection, allocation, and 3. It is not a totally independent
control of the costs to produce or
area in business administration.
supply a product or service.
2. Important to control current It draws on a much wider range
operations of disciplines such as
3. It can be viewed as the intersection accounting, economics,
between managerial and financial marketing, production, human
accounting. Both managerial and resources and mathematics,
financial accounting use the particularly, quantitative
"production cost" data accumulated
methods.
using the cost accounting system of
the entity.
GOVERNMENT ACCOUNTING
FINANCIAL MANAGEMENT
1. Definition and Objectives. According to
1. It can be defined as the Sec. 109 of Presidential Decree 1445,
management of the finances of an government accounting encompasses the
organization to achieve the processes of analyzing, recording,
financial objectives of the entity. classifying, summarizing and
The widely accepted objective of communicating all transactions involving
the entity is to maximize the the receipt and disposition of government
value of the firm for its owners, funds and property, and interpreting the
that is, to maximize shareholder results thereof.
wealth. 2. Shall aim to:
2. Its decisions cover investment produce information concerning
decisions, financing decisions, past operations and present
distributing profits back to conditions;
investors, and risk management. provide a basis for guidance for
The functions of financial future operation
management include: provide for control of the acts of
a) Raising capital to public bodies and officers in the
support the receipt, disposition and
organization's utilization of funds and property
operations and Report on the financial position
investments. and the results of operations of
b) Managing the day-to-day government agencies for the
cash flows. information of all persons
c) Selecting the best concerned.
projects to invest in. 3. New Government Accounting System
d) Managing the entity’s (NGAS). It is a simplified set of accounting
exposure to risk. concepts, guidelines and procedures
e) Developing a governance designed to ensure correct, complete and
structure capable of timely recording of government financial
ensuring that managers transactions, and production of accurate
act ethically and in the and relevant financial reports.
4. Accounting Responsibility. It emanates from TAXATION
the Constitution, laws, policies, rules and
1. Taxes. They are the lifeblood of the
regulations.
government and their prompt and certain
a) The Commission of Audit (COA) is an availability are an imperious need
independent constitutional commission (Commissioner vs. Pineda, 21 SCRA 105).
that keeps the general accounts of the 2. It is the process or means by which the
government, promulgates accounting sovereign, through its lawmaking body,
rules and regulations, and submits to the raises income to defray the necessary
President and Congress an annual report expenses of the government.
of the government. 3. It, as a power of the State, is inherent in
b) The Department of Budget and sovereignty. This inherent power gives the
Management (DBM) shall be responsible government the right to tax citizens and
for the formulation and implementation properties within its jurisdiction.
of the National Budget with the goal of 4. Tax accounting. It includes the
attaining our national socio-economic preparation of the relevant tax returns
plans and objectives. and the consideration of the tax
c) The Bureau of Treasury (BTr) is the consequences of proposed business
principal custodian of all national transactions or alternative courses of
government funds. Also, it maintains action.
accounts of financial transactions of all 5. Accountants with this specialization aim
national government agencies and to comply with existing tax statutes but
instrumentalities. are also in constant legal search for ways
to minimize tax payments.
5. National Budget is the government's estimate of 6. If tax experts attempt to reduce their
its income and expenditure. clients' tax liabilities strictly in
accordance with the law, this is known as
6. General Appropriations Act (GAA) The GAA is 'tax avoidance'. Tax avoidance is a
the approved national budget for the year. perfectly exercise, but tax evasion (the
non-declaration of sources of income on
AUDITNG
which tax might be due) is a very serious
1. It is a systematic process of objectively offense.
obtaining and evaluating evidence regarding
ACCOUNTANCY REASERCH
assertions about economic actions and events to
ascertain the degree of correspondence between 1. It is the systematic process of collecting
those assertions and established criteria and and analyzing information to increase
communicating the results to interested users. one's understanding of the functions of a
professional accountant and to the
2. An external audit is the independent
solution of problems besetting the
examination that ensures the fairness and
practice of the profession.
completeness of the financial statements that
2. It can be classified into functional
management submits to users outside the
classification and sectoral classification.
business entity.
Functional areas of the profession
3. External auditors. They are appointed from
namely:
outside the entity. The external auditor's job is to
protect the interests of the users of the financial Financial Management
statements. Accounting, Auditing and
Assurance, Tax, and other
Functional Areas (such as fraud
prevention and investigation,
corporate governance, internal
auditing, risk management,
sustainability reporting, and the
like).
FORENSIC ACCOUNTING
INTERNATIONAL ACCOUNTING