CFAS

1. Define Accounting.
Accounting Standards Council:

The function of accounting is to provide quantitative information, primarily
financial in nature, about economic entities, that is intended to be useful in
making economic decisions
American Institute of Certified Public Accountants:
Accounting is an art of recording, classifying, and summarizing in a significant
manner and in terms of money, transactions and events which are in part at least
of a financial character and interpreting the results thereof.
American Accounting Association:
Accounting is the process of identifying, measuring, and communicating
economic information to permit informed judgement and decision by users of the
information.
2. Important points made in the definition of accounting.
Accounting is about quantitative information

The information is financial in nature
The information should be useful in decision making
3. Explain “identifying” as a component of accounting.
This accounting process is the recognition and non-recognition of business

activities as “accountable” events
An event is accountable or quantifiable when it influences assets,

liabilities, and capital. An event should be expressed in terms of a unit of
measure.
Sociological and psychological matters are beyond the province of
accounting.
4. Define transactions.
Transactions are economic activities of an entity which may be classified as

external and internal
5. Distinguish external transactions and internal transactions.
External transaction or exchange transactions are those economic events

involving one entity and another entity.
Internal transactions are economic events involving the entity only. These events
take place entirely within the entity or organization.
Production and casualty loss are examples of internal transactions.
6. When is a transaction accountable or quantifiable?
An event is accountable or quantifiable when it affects the assets, liabilities, and

capital of an entity. An event should be expressed in terms of unit of measure.
7. Explain “measuring” as a component of accounting.
This accounting process is the assigning of peso amounts to the accountable

economic transactions and events.
If an accounting information is to be useful, it must be expressed in terms

of common financial denominator.
The Philippine peso is the unit of measuring accountable economic
transactions.
8. What are the measurement bases used in accounting?
a. Historical cost - this is identified as the original acquisition cost.

b. Current cost/value - identified as replacement cost or the current purchase
price. It includes fair value, value in use, and fulfillment value.
c. Realizable value – identified as current selling price or the amount that
could currently be obtained by selling the asset in an orderly disposal.
d. Present value – is the discounted value of the fixture net cash inflows that
the asset is expected to generate in the normal course of the business.
9. Explain “communicating” as a component of accounting.
This process involves the preparation and distribution of accounting reports to

potential users of accounting information.
The communicating process is the reason why accounting has been called
the “universal language of business.
10. Explain recording, classifying, and summarizing in relation to the communicating

component of accounting.
Recording or journalizing is the process of systematically maintaining a record of all

economic business transactions after they have been identified and measured.
Classifying is the sorting or grouping of similar and interrelated economic transaction
into their respective classes. This is accomplished by posting in the ledger.
Summarizing is the preparation of financial statements which include the statement

of financial position, statement of financial performance or income statement,
statement of comprehensive income, statement of changes in equity and statement
of cash flows.
11. Explain why accounting has been called as the “universal language of business”.
12. Explain accounting as an information system.
Accounting is an information system that measures business activities, processes

information into reports and communicates the reports to decision makers.
Financial reports tell how well an entity is performing in terms of profit and loss and
where it stands in financial terms
13. What is the overall objective of accounting?
The overall objective of accounting is to provide quantitative information about a

business that is useful to statement users particularly owners and creditors in
making economic decisions.
14. Describe the accountancy profession.
In order to qualify to practice the accountancy profession, a person must finish a

degree in Bachelor of Science in Accountancy and pass a very difficult government
examination given by the Board of Accountancy.
15. What is R.A. No. 9298?
Republic Act No. 9298 is the law regulating tge practice if accountancy in the
Philippines. This law is known as the Philippine Accountancy Act of 2004.
16. What do you understand by the Board of Accountancy?
The Board of Accountancy is the body authorized by law to promulgate rules and
regulations affecting the practice of the accountancy profession in the Philippines.
The BOA is responsible for preparing and grading the Philippine CPA examination.
17. Explain the limitation of the practice of public accountancy.

A certificate of accreditation shall be issued to certified public accountants in public
practice only upon showing in accordance with rules and regulations promulgated by
the Board of Accountancy and approved by the Professional Regulation Commission
that such registrant has acquired a minimum of three years of meaningful
experience in any of the areas of public practice including taxation.
18. Explain the accreditation to practice of accountancy.
The PRC upon favorable recommendation of the BOA shall issue the Certificate of
Registration to practice public accountancy which shall be valid for 3 years and
renewable every 3 years upon payment of required fees.
19. What are the three main areas in the practice of the accountancy profession.
Public Accounting
Private Accounting
Government Accounting
20. Explain public accounting.
The field of public accounting or public accountancy is composed of individual

practitioners, small accounting firms and large multinational organizations that
render independent and expert financial services to the public.

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1. Define Accounting.

Accounting Standards Council:

Accounting is about quantitative information

3. Explain “identifying” as a component of accounting.

This accounting process is the recognition and non-recognition of business

An event is accountable or quantifiable when it influences assets,

Transactions are economic activities of an entity which may be classified as

5. Distinguish external transactions and internal transactions.

External transaction or exchange transactions are those economic events

Production and casualty loss are examples of internal transactions.

6. When is a transaction accountable or quantifiable?

An event is accountable or quantifiable when it affects the assets, liabilities, and

7. Explain “measuring” as a component of accounting.

This accounting process is the assigning of peso amounts to the accountable

If an accounting information is to be useful, it must be expressed in terms

8. What are the measurement bases used in accounting?

a. Historical cost - this is identified as the original acquisition cost.

9. Explain “communicating” as a component of accounting.

This process involves the preparation and distribution of accounting reports to

10. Explain recording, classifying, and summarizing in relation to the communicating

Recording or journalizing is the process of systematically maintaining a record of all

Summarizing is the preparation of financial statements which include the statement

Accounting is an information system that measures business activities, processes

13. What is the overall objective of accounting?

The overall objective of accounting is to provide quantitative information about a

14. Describe the accountancy profession.

In order to qualify to practice the accountancy profession, a person must finish a

15. What is R.A. No. 9298?

16. What do you understand by the Board of Accountancy?

17. Explain the limitation of the practice of public accountancy.

18. Explain the accreditation to practice of accountancy.

20. Explain public accounting.

The field of public accounting or public accountancy is composed of individual

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