This document provides an overview of accounting concepts and standards. It discusses:
1. GAAP and accounting standards bodies like FRSC, ASC, AAA, and AICPA that establish accounting principles and guidelines. FRSC now issues the Philippine Financial Reporting Standards (PFRS).
2. The accounting profession is guided by the Philippine Accountancy Act of 2004 and involves areas like public accounting, private accounting, and government accounting.
3. The conceptual framework issued by the IASB provides a guide for creating accounting standards and aims to enhance transparency, strengthen accountability, and contribute to economic efficiency for users of financial reports like investors, creditors, employees and the public.
4. Underlying assumptions of accounting include
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
0 ratings0% found this document useful (0 votes)
111 views3 pages
Conceptual Framework and Accounting Standards
This document provides an overview of accounting concepts and standards. It discusses:
1. GAAP and accounting standards bodies like FRSC, ASC, AAA, and AICPA that establish accounting principles and guidelines. FRSC now issues the Philippine Financial Reporting Standards (PFRS).
2. The accounting profession is guided by the Philippine Accountancy Act of 2004 and involves areas like public accounting, private accounting, and government accounting.
3. The conceptual framework issued by the IASB provides a guide for creating accounting standards and aims to enhance transparency, strengthen accountability, and contribute to economic efficiency for users of financial reports like investors, creditors, employees and the public.
4. Underlying assumptions of accounting include
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
You are on page 1/ 3
CONCEPTUAL FRAMEWORK AND ACCOUNTING GAAP (General Accepted Accounting Principles) – is
STANDARDS (ACCA102) the guide or standards in preparing the financial
statements. Lesson #1 (chapter 1) Represents the accounting rules, procedures, 08/12/2021 and practices to be followed when preparing DEFINITION OF ACCOUNTING and presenting financial statements. Formal GAAP – PAS (Philippine Accounting +FRSC – Financial Reporting Standard Council Standards – was issued by the Accounting +ASC – Accounting Standards Council Standard Council)/ PFRS (Philippine Financial Reporting Standards) +AAA – American Accounting Association +FRSC (Financial Reporting Standards Council) +AICPA – American Institute of Certified Public now is the one who issues the new formal GAAP Accountants known as the PFRS. Informal GAAP – practiced pero walang bagong FRSC ( former ASC) – “Accounting is a service activity” pronouncement. and its function is to provide quantitative information that will be useful in making economic decision. WHAT COMPOSES FRSC? (15 members)
AICPA – “Accounting is the art of recording, classifying, 1 member each:
and summarizing economic transactions” +Board of Accountancy (BOA) – the one who gives AAA – “Accounting is the process of identifying, the CPA licensure exam +Securities and Exchange Commission (SEC) measuring, and communicating economic information +Bangko Sentral ng Pilipinas (BSP) to permit informed judgement and decision by users of +Bureau of International Revenue (BIR) the information” +Commission on Audit (COA) Therefore, ACCOUNTING is a service activity where +Financial Executive Institute of the Philippines identifying, measuring, and communicating quantitative (FINEX) information to be useful in making economic decision = 2 members from accredited national AAA definition suits best. professional organization = PICAP (Philippine Quantitative information – it is summarized in the Institute of CPAs): financial statement: +Public Practice Statement of financial position (former balance +Commerce and Industry sheet) +Academe or Education +Government Statement of comprehensive income (former income statement since it the comprehensive Chairman = presently the senior accountant income of an entity is already included in this practitioner statement) Statement of cashflows (represents the outflow ACCOUNTANCY PROFESSION and inflow of cash of an entity) - Guided at present by the Republic Act No. 9298 Statement of changes in equity (optional) or also known as the Philippine Accountancy Act Notes of financial statement (includes of 2004 it is the law regulating the practice of supplementary notes of an entity) accounting in the PH. 3 main areas: +quantitative information is basically the financial 1. Public accounting – composed of individual statement and the entity must perform the practitioners, small accounting firms and large accounting cycle to provide quantitative multinational organizations. To be a public information. accountant you must become a CPA along with 3 years of meaningful experience and take 120 CPD units (from Republic Act No. 10912). Practices: AUTHORITATIVE STATUS + AUDITING – primary service offered by public accounting practitioners. + conceptual framework is NOT an accounting standard +TAXATION – includes the preparation of + conceptual framework will be used in the absence of a annual income tax returns and determination of standard or an interpretation that applies to a tax consequences of certain proposed business transaction. endeavors. + MANAGEMENT ADVISORY SERVICES – + nothing in the conceptual framework overrides any consultancy specific accounting standard.
2. Private accounting – non-CPAs can work as USERS OF FINANCIAL INFORMATION
private accountants. Assist management in planning and controlling the entity’s operations. + primary users – general purpose financial reports are Maintaining the records, producing financial primarily directed reports, preparing budget, to allocate entity’s Potential & existing investors – GPF helps them resources. determine whether they should buy, hold or sell. Concerned w the risk inherent and returned by their +Accounting staff investments. Provides resources to the entity. +Chief accountant +Internal auditor Lenders and other creditors – concerned whether their +Controller loans, interest and other amounts owing will be paid 3. Government accounting – involves government when due. funds and properties. Custody and administration of public funds. + secondary/ other users – may find GFP reports useful but are not directly to them primarily. 08/17/2021 Employees – concerned about the stability and profitability of the entity therefore the entity itself Chapter 2 needs the GFP not the employees. Conceptual framework – issued by the International Customers – interests in the continuance of an entity Accounting Standards Board (IASB). Summary of terms especially when they are dependent on the entity. and concepts and is a guide for them in creating the GAAP standards/ accounting standards. Government and their agencies – are interested in the allocation of resources and activities of the entity. + contribute to transparency – enhances quality of Taxation and regulation purposes. financial reporting Public – entity affects the public through the number + strengthen accountability ppl they employ and patronage of local suppliers. + contribute to economic efficiency – helps investors to Financial reporting can help in providing the trends and identify opportunities and risks range of activities. Specific objectives of financial reporting:
- Overall objective if to provide information that
is useful for decision making. To know what the purpose/goal of accounting.
+ to provide info useful in making decision abt providing
resources to the entity
+ to provide assessing cash flow prospects of entity
+ to provide entity resources, claims and change in
resource and claims 08/19/2021 money terms (quantifiablity). PH peso is reasonable unit of measure & its purchasing Chapter 4 power is stable (stability of the peso). UNDERLYING ASSUMPTIONS AND BASIC ACCOUNTING + monetary unit disregards inflation because PRINCIPLES they assume that pesos is stable.
UNDERLYING ASSUMPTIONS – basic notions or BASIC PRINCIPLES
fundamental premises on which the accounting process Objectivity principle – all business transactions is based. Foundation of accounting to understand the to be entered sa accounting records must have usefulness of financial statements and avoid verifiable evidence. misunderstanding. Historical cost – all properties/ services must be Explicit in the conceptual framework: recorded at its original acquisition cost. (old price will still be recorded) Going concern – Also known as “continuity + ex. ADNU purchased a land worth 30k assumption” wherein the financial statements therefore company initially reports 30k sa are prepared on the assumption na yung entity accounting records kaso by the end of next year continue pa rin to operate sa future. yung land has increased to 40k. Applying this + Assets = cost because it will benefit for the principle, it will continue to report the land as current and future period. 30k. + if there is evidence that entity will be Revenue recognition – income is recognized if terminated or experienced large losses the deliveries/services are performed. therefore GOING CONCERN IS ABANDONED. Companies recognize revenue in the accounting Implicit in the conceptual framework: period in wc it is EARNED. + ex. may laundry shop kami, nagpa laundry Entity concept/ Accounting entity/ Economic yung customer nung June 30 pero di pa niya entity concept – the entity is SEPARATE from kinukuha and nagbabayad until 1 st week ng July. the owners who constitutes the entity. Under revenue recognition, our laundry shop Meaning, the transactions of the entity shall not earned revenue in June nung pinerform ang be merged with transactions of the owners service rather nung July when we received the unless there is a sisterhood between entities yun cash. pwede iconsolidate financial statements. Expense recognition – expenses are recognized + ex. i have 3 businesses, therefore kailangan pag goods and services are used up to produce iba iba rin ang ipeprepare ko na financial revenue. statements each kasi each entity is an + ex. koryente kasi gagamit ka muna ng independent accounting entity. electricity bago ka magbayad ng bill. Time period/ Periodicity concept – entity’s life Adequate disclosure – requires that all relevant must be subdivided into equal time periods for info that will affect the user’s understanding reporting purposes. This allows the users to and assessment of the accounting entity be obtain timely info to serve as a basis on making disclosed sa FS. decisions about future activities. Materiality – only concerned with information + depends in the entity what accounting period significant enough to affect decision. to use, but if not stated then calendar period Consistency principle – uses the same must be used. accounting method from period to period to + calendar year – 12 month period that ends on achieve comparability over time. December 31 Accrual basis – records revenues as they are Stable monetary unit concept/ Monetary unit earned and records expenses as they are – this requires that companies must only incurred. include in the accounting records the transaction data that can be expressed in