Importance of Accounting

1. Why is accounting often referred to as the language of business?
- Accounting is referred as the language of business as it communicates various information in the form of
financial statements and reports to the interested parties such as the owners, investors, management, and
employees.
2. What does the term generally accepted accounting principles mean?
- The Principles of GAAP Generally accepted accounting principles, or GAAP for short, are the
accounting rules used to prepare and standardize the reporting of financial statements, such as balance
sheets, income statements and cashflow statements, for publicly traded companies and many private
companies in the United States.
3. What constitutes the practice of accountancy in the Philippines?
- Republic Act No. 9298 (also known as the Philippine Accountancy Act of 2004) states in Section 4
Scope of Practice, that the practice of accountancy shall include, but not limited to, the following:
Practice of Public Accountancy - shall constitute in a person, be it his/her individual capacity, or

as a partner or as a staff member in an accounting or auditing firm, holding out himself/herself as
one skilled in the knowledge, science and practice of accounting, and as a qualified person to
render professional services as a certified public accountant; or offering or rendering, or both, to
more than one client on a fee basis or otherwise, services such as the audit or verification of
financial transaction and accounting records; or the preparation, signing, or certification for clients
of reports of audit, balance sheet, and other financial, accounting and related schedules, exhibits,
statements or reports which are to be used for publication or for credit purposes, or to be filed with
a court or government agency, or to be used for any other purpose; or the design, installation, and
revision of accounting system; or the preparation of income tax returns when related to accounting
procedures; or when he/she represents clients before government agencies on tax and other matters
related to accounting or renders professional assistance in matters relating to accounting
procedures and the recording and presentation of financial facts or data.
4. State the qualification of members of the Professional Regulatory Board.
- A member of the Board shall, at the time of his/her appointment, possess the following
qualifications:
1. Must be a natural-born citizen and a resident of the Philippines.
2. Must be a duly registered Certified Public Accountant with at least ten (10) years of work
experience in any scope of practice of accountancy.
3. Must be a good moral character and must not have been convicted of crimes involving moral
turpitude.
4. Must not have any pecuniary interest, directly or indirectly, in any school, college, university or
institution conferring an academic degree necessary for admission to the practice of accountancy
or where review classes in preparation for the licensure examination are being offered or
conducted, nor shall he/she be a member of the faculty or administration thereof at a time of his/her
appointment to the Board.
5. State the qualifications of applications for the CPA examinations.
- Any person applying for examination shall establish the following requisites to the satisfaction
of the Board that he/she:
1. Is a Filipino citizen.
2. Is of good moral character.
3. Is a holder of the degree of Bachelor of Science in Accountancy conferred by the school, college,
academy or institute duly recognized and/or accredited by the CHED or other authorized
government offices.
4. Has not been convicted of any criminal offence involving moral turpitude.
6. What is PICPA? What are its objectives?
- The Philippine Institute of Certified Accountants or PICPA is the accredited professional

organization (APO) of CPAs by the Professional Regulation Commission (PRC) and has been
awarded twice as PRC most outstanding APO from among other professional organizations.
PICPA was founded in November 1929 by a group of illustrious pioneers in the accounting
profession: Enrique Caguiat, Santiago de la Cruz, Francisco Dalupan, Jaime Hernandez, Felipe
Ollada, Ramon del Rosario, Antonio Sanchez, Jose Torres, Artemio Tulio, Clemente Uson and
Jesus Zulueta. W. W. Larkin, holder of CPA Certificate No. 1, was its first president.
The group set forth the following objectives:
 To promote and maintain high professional and ethical standards among accountants;
 To advance the science of accounting;
 To develop and improve accountancy education;
 To encourage cordial relations among accountants, and
 To protect the Certificate of Certified Public Accountant granted by the Republic of the
Philippines.
7. What does the IASB do?
- The International Accounting Standards Board (IASB) is an independent body of the

International Financial Reporting Standards (IFRS) Foundation, which is a non-profit organization
for the accounting profession. They are responsible for the publication, development, and
clarification of the IFRS Standards.
8. Differentiate IFRS and IAS.
- IAS stands for International Accounting Standards, and these were published between 1973 and
2001 by the International Accounting Standards Committee. On the other hand, IFRS stands for
International Financial Reporting Standards and these were published after 2001 by the
International Accounting Standards Board. Their difference is that the IAS does not contain rules
regarding identifying, measuring, presenting and disclosing of all non-current assets for sale, while
the IFRS is new and contains rules regarding identifying, measuring, presenting and disclosing of
all non-current assets for sale.
9. What is the objective of the financial statements?
- The primary objective of financial statements are to provide financial information about the
company that can help the stakeholders and other users to take economic decisions including past
performance and current position assessment, predict and judge company’s growth and predict its
situation on bankruptcy or any kind of failure.
10. Discuss the underlying assumptions.

- There are four basic financial accounting assumptions. The first one is the separate entity
assumption. It assumes that the business is an entity and is separate and distinct from its owners,
therefore the finances of the business and its owners are not merged. The next one is the going
concern assumption. This assumption presumes that the business is going to be operating for the
foreseeable future, in which it is believed that the business’s goal is to operate for a much longer
time rather than to liquidate its assets. The third one is the stable monetary unit assumption. It
presuppose that money itself is treated as a unit of measurement, and that all transactions or
economic events recorded in the accounts of a business can be expressed and measured in
monetary terms by a currency. Lastly, the fixed time period assumption. The fixed time period
assumption is the information prepared and reported periodically. It allows company activities to
be divided into informal time periods so it can produce financial information which individuals
can use to make decisions.
References:
https://www.iedunote.com/accounting-language-of-business
https://www.legalzoom.com/articles/general-accepted-accounting-principles-or-gaap-what-does-
it-mean
https://lawphil.net/statutes/repacts/ra2004/ra_9298_2004.html
http://www.picpa.com.ph/content.html?article=History&page=About
https://www.topaccountingdegrees.org/faq/what-is-the-iasb/
https://askanydifference.com/difference-between-ias-and-ifrs/
https://www.wallstreetmojo.com/objectives-of-financial-statements/
http://www.quickmba.com/accounting/fin/concepts/
https://www.nerdwallet.com/article/small-business/what-is-the-going-concern-
assumption#:~:text=What%20is%20the%20going%20concern%20principle%3F,-
The%20going%20concern&text=The%20going%20concern%20principle%20assumes,that%20i
n%20its%20financial%20statements
https://debitoor.com/dictionary/monetary-unit-principle
https://study.com/academy/lesson/time-period-assumption-in-accounting-definition-
examples.html

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1. Why is accounting often referred to as the language of business?

2. What does the term generally accepted accounting principles mean?

3. What constitutes the practice of accountancy in the Philippines?

Practice of Public Accountancy - shall constitute in a person, be it his/her individual capacity, or

1. Must be a natural-born citizen and a resident of the Philippines.

5. State the qualifications of applications for the CPA examinations.

2. Is of good moral character.

6. What is PICPA? What are its objectives?

- The Philippine Institute of Certified Accountants or PICPA is the accredited professional

The group set forth the following objectives:

7. What does the IASB do?

- The International Accounting Standards Board (IASB) is an independent body of the

8. Differentiate IFRS and IAS.

9. What is the objective of the financial statements?

10. Discuss the underlying assumptions.

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