FINANCIAL ACCOUNTING AND

REPORTING FOR SERVICE

PROVIDERS AND MERCHANDISERS

MODULE 2 Chapter 2

Financial Accounting for Service Providers and Merchandisers

Author Professor Zenaida Manuel
 Supporting
Supporting the
the Practice
Practice of
of
Accounting
Accounting

Professional Ethical
Values, Skills Accounting
Regulatory Standards and
and Areas and Bodies and The framework
Good
Knowledge Career Fields Associations governance

SUPPORTING THE PRACTICE OF THE ACCOUNTING PROFESSION

 a. Learning
describe how businesses are coping up with the current changes
Outcomes
taking place in the business environment.
b. discuss the attitude, skills and knowledge that a 21st- century
professional must possess.
c. discuss the innovations in the accounting curriculum by virtue of
Resolution No. 231-2017 dated March 28, 2017.
d. identify the different accounting career fields, services and
courses.
d. explain the roles of the regulatory bodies and professional
accounting associations.
e. discuss important provisions of the Accountancy Act of 2004
and the 2021 amended version.
f. explain the importance of the conceptual framework of
accounting
g. explain corporate governance, business ethics, and the code of
professional conduct.
 Businesses in the 21st century had been marked by an increase in
the use of technology to create new ideas marketed to consumers world
wide. As a result of this increase in computerized resources, businesses
have become highly competitive. But the pandemic of 2020 was
something else that caught everyone off guard. The drastic changes
brought about by the corona virus made firms very wary because of the
imposition of the lockdown, massive restriction on movements, strict
protocols, high death rates, cash strapped firms and drastic decrease in
consumers’ demands.
This chapter discusses how firms have accepted the changes in the
environment and worked on their strategies. Some business acted fast
and made the necessary changes in order to survive while others
remained complacent, indifferent to change and slowly collapsed.
The chapter includes career fields opened for students who want to
become professional accountants. By virtue of the Commission en-
banc Resolution no.231-2017 dated March 28,2017, four career fields
have been offered with the objective of developing accountants with
specialized skills and with more practical experience and mind.
HIGH TECHNOLOGY
Technological advances have greatly affected the way of doing and
where you are going. Instead of a road map, click GPS if you want to
reach a particular place. Use Zoom.us if you want to hold a conference
or seminar and even on line classes. WIFI connects you to the virtual
market, to view and talk to supplliers and customeers. Education has
also gone online with teachers and students meetng in a virtual
classroom.
GLOBAL E-COMMERCE
Foreign investors, foreign firms partnering with domestic firms, foreign
products- definitely all countries have gone global with e-commerce.
The world has become smaller thanks to high-power information
technology and international trade. Thru E-Commerce, information
transcends time and place in just one click- teleconference, investing,
marketing, selling of goods- from across countries. You don’t have to
leave your place to transact business- there is online banking, online
stock trading, and online shopping. Businesses are going digital, with
e- payment transactions using on-line payment, G cash and debit cards.
BUSINESS AND THE PANDEMIC
The COVID-19 crisis impacted violently on economic activities
because of the mass restrictions of movement and human interactions.
The result- closure of firms especially in the following sectors:
manufacturing, transportation, storage, construction, education, health
and social works, to name a few. More than 70% of these firms are
medium and small enterprises. The big companies were greatly affected,
too. Hanjin Equipment and Construction Company located at Subic
permanently closed, while Philippine Airlines filed for rehabilitation.
HOW DO BUSINESS FIRMS ADDRESS THESE CHALLENGES?
Those that survived were able to do so because of their speed,
adaptabiity, creativity, and resourcefulness. The challenge is to change:
invent, reinvent, retool, relearn, go digital. The keywords are
innovative and digital products.
Innovation and Digitalization. Invent new products- smart
watches are now used to read vital signs (heart rate, blood pressure and
sugar). Re-invent. What seems to be a problem, to a creative mind, has a
solution. Now we even have online classes, meetings, and conferences.
Online jobs has added fuel to the service industry sector which has
been quite busy because of the global market. Firms which could
hardly cope up with all activities, hence some of their activities were
delegated online such as medical transcriptions, business processing,
finance and management services, to name a few.
Online Businesses have cropped up to overcome the crisis brought
about by the corona virus. From the lockdown and social distancing,
the work from home idea came about- online classes, home orders and
deliveries, even telemedicine became an alternative to hospital and
doctor visitations. Laboratory examination from home also became the
norm. Another good news is that the online orders generated new
demand for electricity and gas, internet connections, and real estate
services. The business environment in the power and energy, ICT, and
real estate sectors became more favorable as they benefited from the
stay-at-home orders and deliveries.
Online Education- The pandemic has forced all schools to adopt the
virtual learning mode. Online learning procedures and policies became
part of the schools’ curricula, learning and teaching interaction mode
were altered, improvement in the teaching strategies to make these
more productive, maintaining a balance between going synchronous or
asynchronous, and building of more essential 21st-century skills were
also required.

QUALITIES OF A GLOBALLY COMPETITIVE

PROFESSIONAL
A business college graduate must no longer be content with just
a diploma. To meet the demands of an ever-changing environment you
must undergo a lifelong process of learning by attending conferences
and seminars. A dynamic environment requires you to have new skills
and be dynamic, too. Knowledge is not enough. Creativity,
Innovation and Entrepreneurial Skills have overpassed knowledge!
 Values, Skills, Knowledge

Effective communication skills

Integrity
Positive Attitude
Competency
Flexibility
Creativity
Critical mind
Interpersonal Skills
Intellectual skills- knowledge base

Read pages 27-28 and solve ex 1 and 2

DO IT !!!
Effective Communication Skills. You should not only be able to read, write and speak good
English. More important is that you should be able to get your message clearly across to others
such that others understand you. It also means that you can understand and interpret well what
you hear and read.

Integrity. Can people trust you? Are you truthful and do what is right no matter what the cost
may be? Integrity means possessing a sterling character, being trustworthy, of being always on
the right side and standing for truth.
Positive Attitude. You must believe in yourself that you can do it, try and never say you can’t.
Nobody wants a person who does nothing but complain. Always have a pleasant disposition,
exert effort to do your assigned task and well.

Adaptability and Flexibility. You must be aware of the changes taking place in the
environment, accept these changes and be able to make adjustments promptly.

Creative and Innovative. You must be open to new ideas. You must be inquisitive and
appreciate the viewpoints of others. Dare to start a new trend, a new style, a new strategy.

Critical Mind. Identify and define clearly the problem, set up various options, evaluate these
before making informed judgement and make the right decision.

Interpersonal Skills. As part of a business team, you should learn to get along well with
people, motivating, leading, and influencing them. Also, part of “people skill” requires that you
know how to organize and delegate tasks, and to withstand and resolve conflicts.
Stronger Qualities- Crisis upon crisis (pandemic, wars and natural
calamities) are presently taking place which can be resolved with
stronger qualities of leadership. Be it in the frontline, or in business or
in a community we need people with qualities of resiliency,
discernment and collaborative teamworking.
Resiliency. This is a quality relevant in this day and age which
makes one aware of the adverse situations taking place and is
strong enough to bounce back and move on without predetermined
plans. You keep going until you find the solution.
Discernment- One must have a vision, understand the situation,
make acute judgement, analyze the situation and act wisely.
Collaborative teamwork. As part of the team the members must have
individuality possessing distinct skills and values as described above.
The members, however, must know how to combine their skills and
expertise and work as a cohesive group. This way productivity is
enhanced, problems are solved and the firm’s goal achieved. Although
we let go on traditional practices still the leaders should be mission and
goal focused and remember success of the firm depends on teamwork.
 Let’s Reviewing Skills, Qualities and Knowledge that
do it!! accounting professionals must possess.
Ex. 1 solution

 a. positive attitude
 b. creative
 c. flexible
d. competent
 e. innovative
 f. Empathy
 g. collaborative
 h. time management
 i. accounting
 J. general
THE PRESENT- DAY ACCOUNTANT
The accountant is not simply expected to keep records and
produce financial reports. The accountant, as part of the management
team, is expected to wear many business hats. The accountant is
involved in strategic planning, budgeting, and control. The accountant
is expected to assist the firm as planner, economic forecaster, financial
analyst, and systems analyst aside from the traditional practice as
external or internal auditor.
The objective is to develop accountants with specialized skills
and with more practical experience and mind. By virtue of the
Commission en banc Resolution no.231-2017 dated March 28,2017,
policies, standards and guidelines were issued for the implementation
of learning-competency based standards and outcomes expected of
graduates of the four bachelor degree programs in accounting which are
the following:
BACHELOR OF SCIENCE IN ACCOUNTANCY (BSA)
Certified Public Accountants (CPAs) provide assurance and audit services
for statutory financial reporting. They also provide tax-related services,
management advisory services, and expertise in financial reporting and
control, assisting various stakeholders to come up with informed judgement
relevant in making major business decisions. The practice of the professions
requires one to pass the CPA Licensure Examination or CPALE. The
Accountancy Act of 2004 provides the requirements to qualify for the
CPALE.
BACHELOR OF SCIENCE IN INTERNAL AUDITING (BSIA)
Internal Auditors systematically work with management to audit all
systems and operations to ensure that a) risks are properly managed,
b) processes are in place, and c) procedures are in compliance with the
policies and regulations of the organization and those of the
government, as well. Their audit services help identify areas where
improvements might be needed and these include financial control and
IT, tangible aspects of operations such as supply chain or IT systems, as
well as intangible aspects such as organizational culture and ethics.
BACHELOR OF SCIENCE IN ACCOUNTING INFO SYSTEM (BSAIS)
AIS managers must acquire a combination of knowledge in business,
accounting and computer systems. This profession involves
coordinating effectively the firm’s information technology activities,
providing expertise in choosing the best design and maintenance for the
firm’s overall information system, assessing the integrity and the
effectiveness of the system and recommending improvements towards
overall efficiency of operation.
BACHELOR OF SCIENCE IN MANAGEMENT ACCOUNTING-BSMA
Management accountants are expected to provide their expertise
in accounting and finance relevant to decision making and other
actions such as planning and control of business activities and
influencing behaviors at different levels of activities towards the overall
realization of the organization’s goals and objectives.
The above programs are expected to provide a foundation of
professional knowledge, professional skills, and professional values,
attitudes and ethics to enable them as practitioners to continue
learning and adapting to changes throughout their professional lives.
 Career Fields in Accounting
The accountant renders professional service in the
following major fields of work:

Public accounting
Industry or private accounting
Government and not for profit accounting
Research and education
Offers services as: auditors, tax consultant, forensic
officer, management consultant, finance officer,
budget officer, cost accountant, controller, EDP
head, bookkeepers

DO IT ! Read pages 28 to 30 Solve ex. 3 and 4

PUBLIC ACCOUNTING-
Certified Public Accountants (CPAs) specialize in tax
forms, balance statements, and other forms of financial
documentation that their clients are required to submit
or disclose. As auditor, one is licensed to make an independent
examination or review of the financial records of the firm and renders
an opinion as to the fairness of presentation of the firm's financial
statements. Audited financial statements are required not only by the
government and financing institutions but also by the stockholders of a
corporation, as well. The role of the auditor is leaning more on
providing assurance services the essence of which is in the
improvement of quality of information provided to the financial
statement users.
For assurance and auditing of statutory financial reports, it is required
that one must first pass the Certified Public Accountant Licensure
Examination given by the Professional Regulation Commission.
Qualifications as well as requirements are contained in the
Accountancy Act of 2004 explained in pages 33 and 34.
The bigger and more popular acctg firms include Sycip, Gorres and
Velayo or SGV & Co; Isla Lipana and Company; Punongbayan,
Araullo and Company; Manabat Delgado Amper & Co, KPMG, and
their international affiliates: Ernst and Young, KPMG International,
Deloitte Touche Tohmatsu, and PricewaterhouseCoopers.
CPAs, Internal Auditors, AIS specialists, and Management Accountants
may serve as tax consultants or management consultants, or
financial advisor. A tax consultant is skilled in preparing tax returns
and in giving advice concerning tax consequences on economic or
financial decisions made by a client. The tax expert represents the
client (an individual or a firm) on tax and other accounting related
matters before government agencies such as the Bureau of Internal
Revenue and the Bureau of Customs. A management consultant
advices management on many delicate issues such as analysis, design,
review and installation of an accounting information system, financial
planning, profit planning, operation and cost controls. Financial
advisor renders service as financial planner, provides financial advice,
assists in the development of financial products, rehabilitation and debt
INDUSTRY ACCOUNTING (also called Private Accounting)
The accountants render services as financial accountant, controller,
budget officer, internal auditor, electronic data processing head, tax
officer and cost accountant. The Chief Accountant heads the
accounting dept. supervising all the work done by the accounting clerks.
He prepares the financial statements and the financial analysis. An
internal auditor assists in the maintenance of the organization's internal
control, conducts on-going review of operation to ensure its efficiency,
compliance with company policies and protection of its resources. A
budget officer prepares plans and forecasts of the firms’s future
operation, makes projections of the activities measured in quantitative
terms (called budgets) to ensure that established goals will be
accomplished. Budgets serve as control devices against which actual
performance (activities) are measured and ensure operating efficiency.
The Chief Information Officer (CIO) oversees the electronic data
processing operation (through the electronic equipment such as the
computers) to ensure its efficient performance, maintenance and control.
A Tax Officer handles tax plans, prepares tax returns and advises
and projects. The complexity of the tax laws requires a high level of
competence which can be provided only by a licensed accountant.

GOVT AND NOT FOR PROFIT ACOUNTING

This is a career field where the accounting practitioner works as
treasurer, accountant, auditor, budget officer or analyst in any of the
government agencies, labor unions, colleges and universities, trade
associations and many or a commissioner of any one of these
government agencies: Commission on Audit (COA), Bureau of Internal
Revenue (BIR), Bureau of Custom. Or even as Governor of the Bangko
Sentral ng Pilipinas (BSP).

RESEARCH AND EDUCATION

A professional field where the accountant assumes the role of researcher,
teacher or administrator. A researcher investigates and makes a study
creating, applying, relating or improving accounting theories and
business concepts that will address the current problems/changes in a
particular business or industry sector.
An accounting professor develops competent students and prepares
them for the CPA board exams. Subjects such as accounting, auditing,
management advisory services, finance, financial management,
business law, taxation are usually handled by accounting professors. All
accounting subjects whether for accountancy or non-accountancy
majors and finance subjects for accountancy majors should be handled
by CPAs only. Anyone of the four aforementioned accounting
practitioners may also end up as Vice President for Academics or Dean
of the Business, Finance and Management Programs.

Skills of the accountants vary depending on their field of

specialization. Be that as it may, any of these roles
require precision, analytical skills, and strong
ethics. It is also important for them to be
technically prepared for online work since with
the pandemic professionals go to the office only
when the need arises.
ORGANIZATION SET UP- FINANCE DEPT

FUNCTIONS OF THE MANAGEMENT

ACCOUNTANT:
1. ASSISTS IN THE DESIGN AND
IN THE IMPLEMENTATION THE AIS
2. PREPARES AND SUBMITS SPECIAL REPORTS
3. CVP ANA, Pricing, Budgeting, FSA,
3. MAKES SPECIAL ANALYSES= Drop a product,
change product, eliminate a dept/branch, change price
 Identify the different roles of an accountant:
auditor, tax consultant, management accountant, bookkeeper,
system analyst, financial manager, forensic accountant.
a. Does the basic accounting tasks of
accumulating, recording, classifying and
summarizing financial data into financial
reports.
b. Examines records and reports and renders an
opinion as to the fair presentation of the
reports in accordance with generally accepted
accounting principles.
c. Prepares reports submitted to the BIR and
advises clients on the impact of taxes on
financial and economic decisions made.
d. Handles embezzlement cases and uses a paper
trail to trace the money based on documents,
cash transfers and electronic trails.
e. Makes a value chain analysis to control costs
and determine the right balance to achieve the
 Accounting Courses
Accounting courses are ladderized starting from the basic course
called bookkeeping, it goes up step by step for the following courses:

Financial Accounting
Conceptual Framework and Standards
Intermediate Accounting
Cost Accounting
Management Accounting
Advanced Financial Accounting and Reporting
Auditing
Government Accounting
Tax Accounting
Forensic Accounting
Let’s do it!!!

SOLUTION
a. Financial Acctg d. Govt acctg
b. Bookkeeping e. Auditing
c. Management acctg f. Cost acctg
PROFESSIONAL REGULATORY AND STANDARDS
SETTING BODIES
REGULATORY BODIES
 Professional Regulation Commission
 Board of Accountancy
 Phil Institute of Certified Public Accountants- national
professional body of accountants
 SEC, BSP, BIR
STANDARD SETTING BODIES= Under PICPA tasked to formulate,
promulgate and interpret
Philippine Financial Reporting Standards Council
Philippine Accounting Standards Council
Interpretation
INTERNATIONAL ACCOUNTING STANDARDS BOARD
PROFESIONAL ACCOUNTING ASSOCIATIONS- UNDER PICPA
NACPAE, GACPA, ACPACI, AIA, ACMA, IFA, AFA,CAPA
Professional Regulatory Bodies and Professional
Asso

DO IT Answer exercise 5 page 41

EX 5
a. SEC
b. PRC
c. BOA
d. PICPA
e. ASC
f. NACPAE
g. ETC
h. CPEC
 ETHICAL STANDARDS

DO IT Answer exercise 7 page 41 Ex 8 page 42 and

Case Study no 2 page 22 are for your reflection.
 Corporate Governance
The
The system
system byby
which
which aa company
company is
is directed
directed
and
and controlled.
controlled.
Board
Board of
of Incentives and
Directors
Directors monitoring for

Top
Top To pursue
Management objectives of
Management

Stockholders
Stockholders
 An effective corporate governance system
Corporate
An effective
should
Governance
corporate governance system
should also
also protect
protect the
the interests
interests of
of the
the
company’s
company’s other
other stakeholders.
stakeholders.

Employees
Employees Customers
Customers Creditors
Creditors Suppliers
Suppliers

And
And the
the communities
communities in
in
which
which the
the company
company operates.
operates.
 GOOD GOVERNANCE

Explain what is good governance.

Explain the effects of lack of good governance to the employees, customers and the public.

DO IT
Give the guidelines contained in the revised code of Corporate Governance

Read pages 36 and 37. And answer the following:

Good Governance is the process of directing the
affairs of the firm with a view of upholding
standards and protecting the interest of all
stakeholders.
 The collapse of some giant corporations was fueled by
greed, arrogance and power. They engaged in fraud,
misappropriation of funds, weak decision making which
were all covered up by preparing fraudulent reports. ‘
 Enron, WorldCom, Lehman all leading firms broke down
after losing public trust because of accounting frauds
(manipulating net income) or business frauds (deviating
business funds to personal bank accounts.
 Arthur Andersen, an accounting firm, charged with
fraudulent accounting and auditing practices was forced
to turn over its license after losing the trust of its clients
who transferred to other audit firms. Enron, one of the
world’s largest energy firms, fraudulently inflated profits
resulting in bankruptcy and the criminal conviction of its
senior executives.
Accountancy Act of 2004
Revised Accountancy Act of 2021
Revised Accountancy Act of 2021
Revised Accountancy Act of 2021
FINANCIAL STATEMENTS AND the

ACCOUNTING FRAMEWORK

FINANCIAL STATEMENTS

CONCEPTUA
ACCOUNTING
L
STANDARDS
FRAMEWORK
Reliable
Reliablefinancial
financialreports
reportsand
andrelevant
relevantfinancial
financialinformation
informationcan
canonly
only
be
beassembled
assembledififguided
guidedby
bystandards
standardsand
andconcepts.
concepts.
Accountants
Accountantsare
areguided
guidedbybythe
theFramework
Frameworkand
andthe
theStandards
Standardsininthe
the
preparation
preparationof
ofthe
thefinancial statements.These
financialstatements. Thesealso
alsohelp
helpthe
theStatement
Statement
Users
Usersin
ininterpreting
interpretingfinancial
financialstatements
statementsand
andthe
theAuditors
Auditorsin
in
rendering
renderingananopinion
opinionas
asto
toits
itsfairness
fairnessof
ofpresentation.
presentation.
AAconcept
conceptisismore
moreororless
lessaageneral
generalrule
rulesuch
suchas
asthe
theaccrual
accrualand
and
deferral
deferralrule
ruleof
ofrecognizing
recognizingand
andmeasuring
measuringassets
assetsand
andliabilities.
liabilities.
AAstandard
standardisismore
morespecific
specificthan
thanaaconcept,
concept,such
suchasasIFRS
IFRS1515Revenue
Revenue
from
fromContracts
Contractsand
andare
areset
setup
upby
byaccounting
accountinggoverning
governingbodies
bodiessuch
suchas
as
the
theFinancial
FinancialReporting
ReportingStandard
StandardCouncil
Council(FRSC)
(FRSC)andandthe
thePhilippine
Philippine
Interpretation
InterpretationCommittee
Committee(PIC).
(PIC).

Standards
Standardsare
areset
setup
upto
toharmonize
harmonizethe
thevariety
varietyof
ofaccounting
accountingpractices
practices
that
thatco-exist
co-existas
aswe
wegogoglobal.
global.Once
Oncestandardized,
standardized,the
theFinancial
Financial
Reporting
ReportingStandard
Standardshould
shouldprevail
prevailover
overaaconcept
conceptwithin
withinthe
the
accounting
accountingframework.
framework.
The financial statements and the elements of financial statements
were discussed in chapter 1. Qualitative characteristics, assumptions
and principles will be in chapter 3.
Basic Accounting
Principles

Monetary Unit Assumption – include in

the accounting records only transaction data
that can be expressed or measured in terms of
money.
Economic Entity Assumption – requires
that activities of the entity be kept separate
and distinct from the activities of its owner and
all other economic entities.
BASIC ACCOUNTING
PRINCIPLES

Objectivity Principle- dictates that

transactions should be verifiable and
substantiated by documents such as official
receipts when collecting cash from clients and
customers.

Going Concern Principle- assumes that the

business will be operating for an indefinite
period of time not just for a month or a year.
 Basic Accounting
Principles

Cost Principle (Historical) – dictates that

companies record assets at their cost.
Reported at cost when purchased and also
over the time the asset is held.
Cost easily verified, whereas market value is
often subjective.
Fair value information may be more useful.
Basic Accounting
Principles
Reporting Period- transactions are recorded
and financial statements prepared for a period
usually one year- January to December
(calendar period) or ending other than
December 31 (fiscal period).

Accrual Principle- assets, liabilities,

revenues and expenses should be recorded at
the time period they relate or took place
regardless of when cash is collected or paid.
END OF MODULE 2
THANK
THANK YOU
YOU SO
SO MUCH
MUCH FOR
FOR YOUR
YOUR SUPPORT
SUPPORT
GOD
GOD BLESS
BLESS YOU
YOUAND
AND MORE
MORE POWER
POWER TO
TO YOU
YOU
AND
AND YOUR
YOUR SCHOOL!
SCHOOL!