PARTCORP101

PART I. ACCOUNTING PROFESSION the Commission from a list of five (5) nominees for
1. What is Republic Act No. 9298? each position submitted by the accredited national
professional organization of certified public
AN ACT REGULATING THE PRACTICE OF accountant. The Board shall elect a vice-chairman
ACCOUNTANCY IN THE PHILIPPINES, from among each members for a term of one (1)
REPEALING FOR THE PURPOSE year. The chairman shall preside in all meetings of
PRESIDENTIAL DECREE NO. 692, OTHERWISE the Boards and in the event of a vacancy in the
KNOWN AS THE REVISED ACCOUNTANCY office of the chairman, the vice-chairman shall
LAW, APPROPRIATING FUNDS THEREFOR AND assume such duties and responsibilities until such
FOR OTHER PURPOSES. time as a chairman is appointed.

Be it enacted by the Senate and House of 4. What are the four qualifications of Applicant for CPA
Representatives of the Philippine Congress Licensure Examinations?
Assembled; This act shall be known as the
"Philippine Accountancy Act of 2004" Section 14. Qualifications of Applicant for
Examinations. - Any person applying for
Declaration of Policy. - The State recognizes the examination shall establish the following requisites
importance of accountants in nation building and to the satisfaction of the Board that he/she:
development. Hence, it shall develop and nurture - is a Filipino citizen;
competent, virtuous, productive and well-rounded - is of good moral character;
professional accountants whose standard of - is a holder of the degree of Bachelor of Science
practice and service shall be excellent, qualitative, in Accountancy conferred by the school,
world class and globally competitive though college, academy or institute duly recognized
inviolable, honest, effective, and credible licensure and/or accredited by the CHED or other
examinations and though regulatory measures, authorized government offices; and
programs and activities that foster their professional - has not been convicted of any criminal offence
growth and development. involving moral turpitude.

2. What is the role of the Professional Regulation 5. According to Republic Act No. 9298, what are the
Commission (PRC)? (in relation into accounting four Scope of Practices? Give brief description of
profession) each.

In fulfillment of its legal mandate, the PRC performs Section 4. Scope of Practice. - The practice of accountancy
two important functions, which are: 1) to conduct shall include, but not limited to, the following:
and administer licensure examinations to aspiring
professionals, and 2) to regulate and supervise the (a) Practice of Public Accountancy - shall constitute a
practice of the professions exercised in partnership person, be it his/her individual capacity, or as a staff member
with the forty-three (43) Professional Regulatory in an accounting or auditing firm, holding out himself/herself
Boards (PRBs) in the fields of health, business, as one skilled in the knowledge, science and practice of
education, social sciences, engineering and accounting, and as a qualified person to render professional
technology. The PRBs govern their respective services as a certified public accountant; or offering or
professions’ practice and ethical standards and rendering, or both or more than one client on a fee basis or
accredit the professional organization representing otherwise, services as such as the audit or verification of
the professionals. financial transaction and accounting records; or the
preparation, signing, or certification for clients of reports of
3. What is the role of the Professional Regulatory audit, balance sheet, and other financial, accounting and
Board of Accountancy (BOA)? (in relation into related schedules, exhibits, statement of reports which are to
accounting profession) be used for publication or for credit purposes, or to be filed
with a court or government agency, or to be used for any
Section 5. The Professional Regulatory Board of other purposes; or to design, installation, and revision of
Accountancy and its Composition. - The accounting system; or the preparation of income tax returns
Professional Regulatory Board of Accountancy, when related to accounting procedures; or when he/she
hereinafter referred to as Board, under the represent clients before government agencies on tax and
supervision and administrative control of the other matters relating to accounting or render professional
Professional Regulation Commission, hereinafter assistance in matters relating to accounting procedures and
referred to as the Commission, shall be composed the recording and presentation of financial facts or data.
of a Chairman and six (6) members to be appointed
by the President of the Philippines from a list of three (b) Practice in Commerce and Industry - shall constitute in a
(3) recommendees for each position and ranked by person involved in decision making requiring professional
Batangas Eastern Colleges Prof. NRVC - Page 1|4
 PARTCORP101
knowledge in the science of accounting, or when such also requires that for all transactions, the amounts
employment or position requires that the holder thereof must entered as debits must be equal to the amounts
be a certified public accountant. entered as credits.

(c) Practice in Education/Academe - shall constitute in a Example of a Double-Entry System

person in an educational institution which involve teaching of To illustrate double entry, let's assume that a Gerald
accounting, auditing, management advisory services, fiancé, Anderson Co. borrows $10,000 from Kim Chui Bank
business law, taxation and other technically related subject: (KCB). The GAC's Cash account must be increased
Provided, That members of the Integrated Bar of the by $10,000 and a liability account must be increased
Philippines may be allowed to teach business law and by $10,000. To increase an asset, a debit entry is
taxation subjects. required. To increase a liability, a credit entry is
required. Hence, the account Cash will be debited
(d) Practice in Government - shall constitute in a person who for $10,000 and the liability Loans Payable will be
holds, or is appointed to, a position in an accounting credited for $10,000.
professional group in government or in an government-
owned and/or controlled corporation, including those Double Entry Keeps the Accounting Equation in
performing proprietary functions, where decision making Balance
requires professional knowledge in the science of Double entry also means that the accounting
accounting, or where a civil service eligibility as a certified equation
public accountant is a prerequisite.
Source:https://www.lawphil.net/statutes/repacts/ra2004/ra_ assets = liabilities + owner's equity
9298_2004.html
will always be in balance. In our example, the
PART II. ACCOUNTING AS DEFINED AND accounting equation remained in balance because
BACKGROUND both assets and liabilities were each increased by
1. Who is Luca Pacioli? (his relation into accounting $10,000.
profession)
Fra Luca Bartolomeo de Pacioli (sometimes Paccioli 2. What is accounting as defined by the following?
or Paciolo; c. 1447 – 19 June 1517) [3] was an a. American Institute of Certified Public
Italian mathematician, Franciscan friar, collaborator Accountants (AICPA)
with Leonardo da Vinci, and an early contributor to “The art of recording, classifying, and
the field now known as accounting. He is referred to summarizing in a significant manner and in
as "The Father of Accounting and Bookkeeping" in terms of money, transactions and events which
Europe and he was the second person to publish a are, in part at least of financial character, and
work on the double-entry system of book-keeping interpreting the results thereof.”
on the continent. [4][a] He was also called Luca di
Borgo after his birthplace, Borgo Sansepolcro, b. American Accounting Association (AAA)
Tuscany. “Accounting refers to the process of identifying,
measuring and communicating economic
Pacioli dramatically affected the practice of information to permit informed judgments and
accounting by describing the double-entry decisions by users of the information.”
accounting method used in parts of Italy. This
revolutionized how businesses oversaw their c. Accounting Standards Council (ASC)
operations, enabling improved efficiency and Accounting is a service activity. Its function is to
profitability. The Summa's section on accounting provide quantitative information, primarily
was used internationally as an accounting textbook financial in nature, about economic entities, that
up to the mid-16th century. The essentials of is intended to be useful in making economic
double-entry accounting have for the most part decision.
remain unchanged for over 500 years. "Accounting
practitioners in public accounting, industry, and not- 3. Define the following:
for-profit organizations, as well as investors, lending a. Asset
institutions, business firms, and all other users for Asset is a resource controlled by the entity as a
financial information are indebted to Luca Pacioli for result of past events and from which future
his monumental role in the development of economic benefits are expected to flow to the
accounting." entity (IASB Framework)

Definition of Double-Entry System It is worth noting that the framework defines

The double-entry system of accounting or asset in terms of control rather than ownership.
bookkeeping means that for every business While control is generally evidenced through
transaction, amounts must be recorded in a ownership, this may not always be the case.
minimum of two accounts. The double-entry system Therefore, an asset may be recognized in the
Batangas Eastern Colleges Prof. NRVC - Page 2|4
 PARTCORP101
financial statement of the entity even if of equity. Equity can be negative if liabilities
ownership of the asset belongs to someone exceed assets.
else. For instance, if a machine is leased to a
company for the entire duration of its useful life, d. Expense
the machine may be recognized in its An expense is the reduction in value of an asset
Statement of Financial Position (Balance as it is used to generate revenue. If the
Sheet) since the entity has control over the underlying asset is to be used over a long
economic benefits that would be derived from period of time, the expense takes the form of
the use of the asset. This illustrates the use of depreciation, and is charged ratably over the
Substance Over Form whereby the economic useful life of the asset. If the expense is for an
substance of the transaction takes precedence immediately consumed item, such as a salary,
over the legal aspects of a transaction in order then it is usually charged to expense as
to present a true and fair view. incurred.

Apart from meeting the above definition, the e. Loss

Framework has advised the following is an unrecoverable and unanticipated
recognition criteria that ought to be met before decrease in a resource or asset outside of
an asset is recognized in the financial normal business operations.
statements.
f. Revenue
The inflow of economic benefits to entity is Revenue, also called a sale, is an increase in
probable. equity related to the sale of a product or service
The cost/value can be measured reliably. that earned income. In other words, revenue is
income earned by the company from its
b. Liability business activities. There are many different
International Financial Reporting Standards types of revenues including product sales,
(IFRS) Framework: “A liability is a present consulting fees and other services, rent, and
obligation of the enterprise arising from past even commission based fees. Any type of
events, the settlement of which is expected to income that is earned from business operations
result in an outflow from the enterprise of is considered to be a revenue.
resources embodying economic benefits.
g. Gain
Current liabilities are often loosely defined as Gains result from the sale of an asset (other
liabilities that must be paid within one year. For than inventory). A gain is measured by the
firms having operating cycles longer than one- proceeds from the sale minus the amount
year, current liabilities are defined as those shown on the company's books. Since the gain
which must be paid during that longer operating is outside of the main activity of a business, it is
cycle. reported as a nonoperating or other revenue on
the company's income statement.
Long-term liabilities are reasonably expected
not to be liquidated or paid off within a year. Revenue refers to the amount of money
They usually include issued long-term bonds, received by the regular business activities of the
notes payables, long-term leases, pension company, i.e. selling goods or services. Profits
obligations, and long-term product warranties. are the excess revenues after costs and
expenses have been paid for a period. Gains,
Contingent liabilities can be current or long-term on the other hand, come from an increase in the
and usually deal with legal actions or litigation value of a given asset.
claims against the entity or claims, such as
penalties or fees, an organization encounters h. Stakeholders
throughout the course of business. A stakeholder is any person or entity that has
an interest in the success or failure of a
c. Capital business or project. Stakeholders can have a
the difference between the value of the assets significant impact on decisions regarding the
and the value of the liabilities of something operations and finances of an organization.
owned. It is governed by the following equation:
External stakeholders are entities not within a
equity = assets - liabilities business itself but who care about or are
affected by its performance (e.g., consumers,
For example, if Baby owns a car worth $15,000 regulators, investors, suppliers).
(an asset), but owes $5,000 on a loan against
that car (a liability), the car represents $10,000
Batangas Eastern Colleges Prof. NRVC - Page 3|4
 PARTCORP101
Internal stakeholders are entities within a Equit Rev Exp
business (e.g., employees, managers, the Asset Liability y enue ense
board of directors, investors). Acco Not Com Serv
unts es mon ice Rent
i. Users of the financial information Ca Sup Equip Paya Pay Stoc Rev Exp
1. Investors sh plies ment ble able k enue ense
2. Lenders – whether their loans and interest
will be paid when due Exercise 3. On December 31, Hirap Perocayanin Co.’s
3. Suppliers and other trade creditors – accounting records showed the following information:
whether amounts owing to them will be paid Cash 49,500
when due Accounts Receivable 125,000
4. Employees – remuneration, retirement Supplies 1,500
benefits and employment opportunities. Prepaid Insurance 12,000
5. Customers – about the continuance of an Equipment 70,000
Building 420,000
entity, especially when they have a long-
Land 111,500
term involvement or dependability
Accounts Payable 80,000
6. Government and their agencies – for
Notes Payable 170,000
regulation or taxation purposes.
Common Stock 410,000
7. Public – they are interested in information
Retained Earnings 65,000
about the trends and recent developments Dividends 20,000
in the propensity of the entity and the range Service Revenue 174,000
of its activities. Interest Revenue 1,000
Salaries Expense 52,000
PART III. ACCOUNTING PROCESS/ CYCLE Advertising Expense 17,000
- Refers to the procedures or series of steps Insurance Expense 5,000
undertaken to come up with the information Utilities Expense 13,750
reported in the financial statements. Interest Expense 2,750
- Divided into two: Recording phase (collecting
information or data) and Summarizing phase Prepare the Income Statement for year ended December
(preparation of the report) 31, Balance Sheet as of December 31 and Statement of
Changes in Equity.
EXERCISES:

Exercise 1. Applying Basic Accounting Equation Exercise 4. Key takeaways

Nagzi Zimula Palang Co. reports the following assets and a. In one word, describe the discussion for today?
liabilities. Compute the totals that would appear in the Why?
company’s basic accounting equation (Assets = Liabilities + b. In what way could you possibly use accounting in
Stockholders’ Equity (Capital Stock)). your life? Explain briefly.
Cash………………………….$55,000
Accounts Payable……………25,000 Exercise 5.
Office Supplies………………. 1, 500 What are you thankful for as of this moment?
Loan Payable…………………..7,000
Accounts Receivable………….10,000
--- See you next meeting! 😊 ---
Exercise 2. Ituy Kakayanin Co. had the following
transactions during January:
Jan 1 Issued $100,000 in stock to owners in exchange for “Successful and unsuccessful people do not vary greatly in
cash to start the business. their abilities. They vary in their desires to reach their
Jan 5 Borrowed $50,000 from the Kaitna Anumanyari Bank potential.” – John Maxwell
by signing a notes payable.
Jan 10 Purchase equipment by paying cash for $25,000. “There are no shortcuts to any place worth going.” –
Jan 15 Paid January rent of $2,400 for the office space (hint: Beverly Sills
since this is for January, record as rent expense)
Jan 18 Performed services for customers and received cash “Failure is the opportunity to begin again more intelligently.”
immediately for $8,000. – Henry Ford
Jan 20 Purchased $2,000 in supplies on account.
“Our greatest weakness lies in giving up. The most certain
Prepare a transaction analysis for the January transactions. way to succeed is always to try just one more time.” –
Remember to prove the accounting equation at the end. Thomas A. Edison

Batangas Eastern Colleges Prof. NRVC - Page 4|4