ACCOUNTING

- Process of identifying, measuring and communicating economic info to permit informed

judgment and decisions by users. (AAA)
- Involve analysis and interpreting.

4 PHASES

1. Recording
- Routine and mechanical process of writing down business transaction.

2. Classifying
- Grouping similar transactions

3. Summarizing
- Completion of financial statements

4. Interpreting
- Analytical and interpretive works

BOOKKEEPING

- Systematically/ chronological manner

CAREER OPPURTUNITIES

1. Public Accounting 2. Government Accounting

- public practitioner - Rendered services to government
- Association of CPAs in Public Practice - Government Association of CPA (GACPA)
(ACPAPP)
3. Private Accounting 4. Accounting Education
- Private firms - Academe or teaching
- Association of CPAs in Commerce - Association of CPAs in Education (ACPAE)
(ACPACI)

CODE OF ETHICS OF CPA IN PHIL

1. Professional Competence & Due Care (maintaining knowledge)

2. Objectivity (unbiased)
3. Confidentiality
4. Integrity (straightforward & honest)
CORE COMPENTENCIES FRAMEWORK FOR ACCOUNTANTS

1. Knowledge
a. General Knowledge
b. Organizational & Business Knowledge
c. IT Knowledge
d. Accounting Knowledge
2. Skills
a. Intellectual (logical & critical thinking)
b. Interpersonal (team player/to work in groups)
c. Communication (listening skills & communicate efficiently)
3. Values
a. Professional Ethics (highest standard)
b. Moral Values

THE ACCOUNTANCY LAW OF 2004

- Signed on May 13, 2004 by Pres. Gloria Macapagal Arroyo
- Phil. Accountancy Law of 2004
- repealed as Presidential decree no. 692, the revised accounting law
- enacted on May 5, 1975 by Pres. Ferdinand Marcos

It follows:

- Sec. 5 - The Board of Accountancy & Its Composition

6 members of PRC pointed by the Pres.

- Sec. 14 – Admission Requirements to the CPA Board Exam

Filipino citizen, good moral, holder of BSA, no criminal offenses

- Sec. 15 – Scope of the Board Exam

FROM TO
1. Theory of Accounts 1. FAR
2. Practical Accountancy Problem I 2. Advanced FAR
3. Practical Accountancy Problem II 3. Management Advisory Services
4. Management Service 4. Auditing
5. Auditing Theory 5. Taxation
6. Auditing Problems 6. Regulatory Framework for Business
7. Business Law & Taxation Transactions

- Sec. 16 – Rating in the Licensure Exam

- Sec. 17 – Reports of Rating
- Sec. 18 – Failing Candidates to Take Refresher Course
ACCRONYMS

1. PRC – PROFESSIONAL REGULATORU COMMISSION

2. PICPA – PHIL. INSTITUTE OF CPA
3. SEC – SECURITIES & EXCHANGE COMMISSION
4. ASC – ACCOUNTING STANDARD COUNCIL
5. BOA – BOARD OF AACOUNTING
6. GAAP – GENERALLY ACCEPTED ACCOUNTING PRINCIPLE
7. COA – COMMISSION ON AUDIT
8. BIR - BUREAU OF INTERNAL REVENUE
9. PFRS – PHIL. FINANCIAL REPORTING STANDARD
10. IFRS – INTERNATIONAL FINANCIAL REPORTING STANDARD
11. IAS – INTERNATIONAL ACCOUNTIN STANDARD
12. PAS – PHIL. ACCOIUNTING STANDARD
13. IFAC – INTERNATIONAL FEDERATION OF ACCOUNTING
14. CDA – COOPERATIVE DEVELOPMENT AUTHORITY

ACCOUNT BALANCE = Dr – Cr/ Cr – Dr

IN-BALANCE/CLOSE ACCOUNT

- Equal balance of dr and cr

Step 1
JOURNALIZING

Step 9
REVERSING Step 2 POSTING
ENTRIES

Step 8 POST-
Step 3 TRIAL
CLOSING TRIAL

ACCOUNTING
BALANCE
BALANCE

CYCLE
Step 4
Step 7 CLOSING
ADJUSTMENT
ENTRIES
ENTRIES

Step 6
Step 5
FINANCIAL
WORKSHEET
STATEMENTS
JOURNAL

A. GENERAL JOURNAL
- Book of original entry

B. SPECIAL JOURNAL
- specific transactions

1. Sales Journal – sales of merchandise

2. Purchase Journal – purchase
3. Cash receipt journal – cash collection
4. Cash disbursement journal – cash payments

LEDGER

A. GENERAL LEDGER
- Book of final entry
- Group of accounts

B. SUBSIDIARY LEGDER
- Provide list of different parties involved in a transaction.

FOOTING

- Adding vertically each 2 columns of their balaEnce.

CROSS-FOOTING

- Horizontally

2 FORMS OF TRIAL BALANCE

1. TRIAL BALANCE OF BALANCES

- Listing all the dr and cr balances, after footing is done.

2. TRIAL BALANCE OF TOTAL

- Both dr and cr entries in the general ledger.

ERRORS IN TRIAL BALANCE

1. Omission
- Not posted, written or forgotten.
2. Error
- Wrong amount, side or charging
ADJUSTING ENTRIES

- Prepared at the end of an accounting period.

TYPES ADJUSTING ENTRIES

1. Accruals
- to recognized revenue or expense regardless when it is collected, paid or not.

a. Accrued Income b. Accrued Expense

- Earned but not yet collected, - Incurred but not yet paid, accounts
accounts receivable. payable.

Accrued _____ Income xxx _______ Expense xxx

______ Income xxx _______ Payable xxx
# #

2. Deferrals
a. Pre-collected Income
- already collected but not yet earned.

i. Income Method ii. Liability Method

Cash xxx Cash xxx
Income xxx Unearned Income xxx
# #
Adjusted: Adjusted:
Income xxx Unearned Income xxx
Unearned Income xxx Income xxx

b. Prepayments of Expense
- Expense that paid but not yet incurred.

i. Expense Method ii. Asset Method

Insurance expense xxx Prepaid Expense
Cash xxx Cash
# #
Adjustment: Adjustment:
Prepaid Expense xxx Insurance Expense xxx
Insurance Expense xxx Prepaid Expense xxx

3. Provision for Depreciation of Property and Equipment or Fixed Asset

- The portion of PPE should be allocated on the no. of years and chargeable against expense
2 Types of Depreciation

Physical Depreciation Functional / Economic

 - due to frequent use, passage of time, - obsolesce or inadequacy to perform
wind, sunshine, and etc. of PPE efficiently.

(3) factors of computing Depreciation Expense, Straight-line Method

I. Acquisition Cost
- Amount paid or incurred in purchasing the PPE.

II. Scrap Value

- Salvage value/ residual value, estimated value of the PPE at the end of the period.

III. Estimated Economic/Useful Life

- Estimated length of time of usefulness

DEPRECIATION EXPENSE PPE – ACC. DEPRECIATION

= =
ACQUISITION COST – SCRAP VALUE CARRYING AMOUNT

USEFUL LIFE

4. Provision for Estimated Uncollectible Accounts (BAD DEBTS)

a. Allowance Method
- (%) based on entity experiences, provision

Worthless Accounts
- Hopeless, written-off

b. Direct Write-off Method

- Directly charging the uncollectible acc. expense

5. Unused Supplies Inventory Adjustment

6. Adjustment on Inventories
- Typical in merchandising and manufacturing concern.

CLOSING ENTRIES

- Closing all the nominal or temporary account at the end of the accounting period.

1. Revenue Account 2. Expense Account

Income xxx Income & Summary xxx
Income & Summary xxx Expense xxx
3. Drawing 4. Income & Summary
 Capital xxx Income & Summary xxx
Drawing xxx Capital xxx

POST- CLOSING TRIAL BALANCE

- A trial balance of real/permanent account after closing the nominal/temporary accounts

- To be carry on in the next accounting period.

REVERSING ENTRY

- Prepared at the beginning of the accounting period.

- Adjustment entries including
1. All accruals
2. Deferrals
a. Pre-collection (Income)
b. Prepayment (Expense)

- Rule: All SFP/real account that is normal balance are the only subject for reversing entry.