CFAS - Conceptual Framework

Accounting is the process of identifying, measuring, and communicating economic information to permit informed judgement and decision by users of the information. This accounting definition is given by

• Accounting Standards Council (ASC)

• American Accounting Association

• American Institute of CPA (AICPA)

• International Accounting Standards Board (IASB)

Answer explanation

According to ASC, Accounting is a service activity. The accounting function is to provide

quantitative information, primarily financial in nature, about economic entities, that

is intended to be useful in making economic decision.

According to AICPA, Accounting is the 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.

According to AAA, Accounting is the process of identifying, measuring, and communicating

economic information to permit informed judgement and decision by users of the information.

Which accounting process is the recognition or nonrecognition of business activities as accountable events?

• Identifying

• Measuring

• Recording

• Classifying

Answer explanation

A. Identifying is the recognition or non recognition of buseness activities as accountable

events. Measuring is the accounting process is the assigning of peso amounts to the accountable economic transactions and events. Recording is also called “journalizing”.

It is the process of 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 transactions into their respective classes. It is accomplished by posting

to the ledger.

These are events that affect the entity and in which other entities participate.

• Past events

• Current events

• External events

• Internal events

It is the law mandating and strengthening the continuing professional development program for all regulated professions, including the accounting profession.

• R.A. No. 9298

• R.A. No. 9198

• R.A. No. 10912

• R.A. No. 11912

Answer explanation

R.A. 10912 is the law mandating and strengthening the continuing professional development

program for all regulated professions, including the accounting profession. R.A. 9298 is the Philippine

Accountancy act of 2004 which regulates the practice of accountancy in the Philippines

This is the area of accounting where a CPA is employed in business entities in various capacity as accounting staff, chief accountant, internal auditor, and controller

• Public Accounting

• Government Accounting

• Financial Accounting

• Private Accounting

Which is not required to be represented in the FRSC?

• Department of Budget and Management

• Bureau of Internal Revenue

• Commission on Audit

• Bangko Sentral ng Pilipinas

Answer explanation

FRSC consists of 15 members including the chairman and 14 representatives from BOA, SEC, BSP,

BIR, COA, major organization of preparers and users of financial statements, and accredited national

professional organization of CPAs

Financial accounting is concerned with

• General purpose reports on financial position and financial performance.

• Specialized reports for inventory management and control.

• Specialized reports for income tax computation and recognition.

• General purpose reports on changes in stock prices and future estimate for market position.

Financial accounting is the area of accounting that emphasizes reporting to

• Management

• Regulatory bodies

• Internal auditors

• Creditors and Investors

Answer explanation

Financial accounting is the area of accounting that emphasizes reporting to creditors and investors

Generally accepted accounting principles.

• Are accounting adaptations based on the laws of economic science.

• Derive their credibility and authority from legal rulings and court precedents.

• Derive their credibility and authority from the national government through SEC.

• Derive their credibility and authority from general recognition and acceptance by

  the accountancy profession.

Answer explanation

GAAP represent the rules, procedures, practice, and standards followed in the preparation and presentation

of financial statements. It is formalized initially through the creation of ASC.

Proper application of accounting principles is most dependent upon the

• Existence of specific guidelines

• Oversight of regulatory bodies

• External audit function

• Professional judgment of the accountant