The qualitative characteristics of useful financial information identify the types of

information that are likely to be MOST USEFUL to the primary users in making decisions using
an entity’s financial report. Qualitative characteristics apply to information in the financial
statement as well as to financial information provided in other ways.
Feedback
1. FUNDAMENTAL QUALITATIVE CHARACTERISTICS value – it makes information
useful to users, it relates to CONTENT and SUBSTANCE Predictive
a. RELEVANT – it can make difference in the decision Value and
The PREDICTIVE
information can and CONFIRMATORY
The information can Confirmatory
help users in making help users in Value are
predictions about confirming their INTERRELAT
future outcomes.

b. FAITHFUL REPRESENTATION – means

Information the information provides TRUE,
is selected
CORRECT AND COMPLETE or. presented w/o bias. This does not mean
All information (in
COMPLETE , Information
NEUTRAL is not , FREE
that the FROM ERROR
information is
words and numbers)
manipulated to perfectly accurate in
necessary for users
increase the probity all aspects. Means
to understand the
that users will receive there are no errors in
phenomenon being
it favorably or the description and in
depicted is provided.

Consistency and
2. ENHANCING QUANTITATIVE CHARACTERISTICS – it enhances the usefulness
Comparability are
of information, it related to PRESENTATION AND FORM. NOT the same.
a. COMPARABILITY – comparable if it helps users identify similarities Consistency andrefers
different
to
sets of information that are provided by: the use of the same
 A single entity but in different periods (intra-comparability) methods or for the same
Verification can be direct or indirect. items. Comparability
 Different
Directentities in a single
Verification period
– involves (intra-comparability)
direct
b. VERIFIABILITY – information
observation (counting of verifiable if different users could goal while
is cash.) is the
reach a general agreement
Indirect as to–what
Verification information purports toconsistency is the
thechecking
involve
represent. the inputs to a model or formula and
recalculating the outputs using the same
methodology (checking DR< CR and
ledger and ending balanace.

IMPORTANT
Fundamental Enhancing

Relevance Faithful Verifiability

Representation
Comparability
Predictive Complete
Understanding
 Hierarchy of Reporting
Philippines
Standards
PFRS Financial

manageme manageme

SHALL MAY

a) Requirements in JUDGEM a) Pronouncements

OTHER PRFS issued by other
DEALING with standard – setting
similar transactions. bodies
b) CONCEPTUAL b) Other accounting
FRAMEWORK literature and

Scope of the Conceptual

Framework
The Conceptual Framework is concerned w/ general purpose financial reporting.
General purpose financial reporting involves the preparation of general purpose
financial statements. The Conceptual Framework provides the concepts that underlie
general purpose financial reporting w/ regard to the following:

1. The objective of financial reporting

2. Qualitative characteristics of useful financial information.
3. Financial statements and reporting statements
4. The elements of financial statements
5. Recognition and derecognition
6. Measurement
7. Presentation and disclosure
8. Concepts of capital and capital maintenance
Qualitative
Characteristics
FUNDAMEN ENHANCIN

Relevance Faithful
Verifiability
Representation

Completeness Comparability
Predictive Value
Understandabilit
Neutrality
Confirmatory
Value Timeless
Free from error
 Accounting Concepts and
Principles
Basic Accounting Activities of Business
Principle Organization
A number of basic
accounting principle
have been developed Financing Investing
through common usage.
Operating

Financing
Financing activities are the Investing
method’s an organization uses to obtain Investing activities involve the
financial resources from financial markets selection and management including
and how it manages these resources.
Operating disposal and replacement of a long term
Operating activities involves the resources that will be used to develop,
use of resources to design, produce produce and sell goods and services. It
distribute and market goods and includes buying land, equipment,
services. Operating activities include building and other resources that are
research and development, design and needed in the operation of the business
engineering, purchasing, human The Conceptual
Framework
The conceptual framework prescribes the concepts for general purpose financial reporting
its purpose to.

IASB o Assists the International Accounting

Standard (IASB) in developing
standards *that are based on consistent
ASSIST PREPARE
concepts.
S o Assist prepares in developing consistent
accounting policies when no standard
applies to a particular transaction or
ALL when a standard allows a choice of
PARTIES accounting policy; and
Status of Conceptual
Conceptual
Framework
Frameworks Purpose The conceptual framework is NOT a
The conceptual framework provides the standard. It there is a conflict between Standard
foundation for the development of and the Conceptual Framework, the requirement
standards that: of the standard will prevail.
o PROMOTE TRANSPARENCY by In the absence of a PFRS that
specifically applies to a transaction management
enhancing the international
shall consider the applicability of the
comparability Conceptual Framework in developing and
o STREGHTEN ACCOUNTABILITY applying n accounting policy that result in
by reducing the information gap useful information.
between providers of capital and the To meet the objectives of general
entity’s management. purpose financial reporting, a Standard
o CONTIBUTE TO ECONOMIC sometimes contains requirements that depart
EFFICIENCY by helping investors to from the Conceptual Framework. In such cases,
identify opportunities and risks the department is explained in the Basic of
around the world, thus improving Conclusion on that standard.
The Conceptual Framework may be
capital allocation. The use of a single
 Branches of
Accounting Academicians,
Government Accounting Auditing is Students and
it is concerned with the the Education
Financial
identification of the accountancy Alliance
Accounting is
sources and uses of profession’s (ASEAN Party
focused on the
resources consistent with most List) is a non-
recording of
the provisions of city, stock, non-profit
business
Bookkeeping corporation
transactions and
Taxation includes is mechanical organized and
the periodic
the preparation of task involving registered with
tax returns and the collection Management
the consideration of basic Financial Accounting
of the tax Management is incorporates cost
Cost relatively new branch
consequences of accounting data and
Bookkeeping, of accounting.
proposed business adapts them for
Costing and Cost Financial managers
transactions or specific decisions
Accounting is the are responsible for
process that setting financial
involves the objectives, making

Accounting Information
System (AIS) An accounting information
system is the combination
The Accounting of personnel, records and
Process procedures that a business
uses to meet its need for
Economic Accounting
Activities Information

Decision
Makers

An effective accounting information system should be achieve the following

objectives:
o To process the information efficiently at the least cost (cost-benefit principle)
o To protect entity’s assets, to ensure that data are reliable, and to minimize
wastes and the possibility of theft or fraud (control principle)
o To be in harmony with the entity’s organizational and human factors
Types of
Accounting
Information
Companies use three
types of AIS to record
Manual System – Computer-Based Database System –
the result of transactions;
utilize paper-based Transaction embed accounting
manual systems,
journals (general and data within the
computer-based System – replace
special) and ledgers business event data
transaction system and
(general and
data base systems. All of
this are designed to
 Fundamental
Principles
Integrity – is for being honest and fair. And
having a strong moral principle, he knew Confidentiality – it is a confidential
what is right and wrong. information don’t share it with the
others
- Integrity also implies fair dealing and
O bjectivity – it should be free from bias and
truthfulness. - Don’t use it as yours or personal.
capable of independent verification - Should respect the confidentiality of
Professional Behavior – DO NOT DO
- Conflict of interest or undue influence ANYTHING CAN DAMAGE YOUR
of others to override professional IMAGE.
judgments
Professional Competence
- Professional and Care
accountant – the NOT -
SHOULD - Should comply with relevant laws and
professional
ALLOWaccountant
BIAS have to maintain their regulations and should avoid any action
names (license) that discredits the profession.
- should not bring the profession to
- Should act diligently and in accordance disrepute
1. Attainment of professional complex
2. Maintenance of professional complex
(maintaining their duty as a personal
accountant) The Accountancy
Profession
Characteristics
Accountancy qualifies as a profession because it possesses the following attributes.
 All member of the accountancy profession are Certified Public Accountants, which
means that they have earned a Bachelor of Science in Accountancy degree and have
passed the CPA Licensure Examinations.
 CPAs have their own body language.
 CPAs adhere to a Code of Ethics.
 Like other professions, CPAs are members of a national organization, the PICPA,
whose role is to ensure the continued improvement of the accountancy profession to
Career Commerce and Industry
Accountants employed in this area vary widely
Opportunities in their scope of activities and responsibilities.
Public Practice Example jobs: Financial Accounting and
Accountants who render services on a fee basis Reporting Staff, Management Accounting
and staff accountants employed by them are Staff, Tax Accounting Staff, Internal Audit
engaged in public practice. Public accountants Government Service
should be Certified Public Accountant Accountants maybe hired by the following:
(CPAs). Their work includes auditing, taxation Congress of the Philippines, Commission on
Education/Academe Audit (COA), Bureau of Internal Revenue
This area guarantees the continued (BIR), Department of Finance, Department
development of the profession by endeavoring of Budget and Management, Bangko Sentral
to clarify and address emerging issues through ng Pilipinas (BSP) and the local government
research and sharing the result obtained with units (e.g. provincial, city or municipal
their colleagues. Considered as modern day governments.
heroes, they make others understand the body Example jobs: State Accounting Examiner,
of accounting knowledge. State Accountant, LGU Accountant, Revenue
Example Jobs: Junior Accounting Instructor Officer, Audit Examiner, Budget Analyst.
Middle-level Positions: Senior Faculty, Middle-level Positions: State Accountant
 Role of Ethics in
Business Ethical Dilemma
Ethics It is a situation of making a choice
between two or more alternatives or a
o Is concerned w/ right and wrong, and how decision- making problem between two
conduct should be judged to be good or possible moral imperatives neither of which
bad. is unambiguously acceptable or preferable.
o Business ethics tells what is right and The complexity arises out of situation
wrong in a business situation conflict in which obeying would result in
How do we solveethics
o Professional Ethical Dilemma?
tell the same thing An
cons
regarding a profession
o Ethical dilemmas can be solved by
following a process called ethical
reasoning.
o Ethical Reasoning – is looking for
information available to us and draw
conclusion based on that information in Ethical Financial Reporting
relation to our own standards. Ethics is especially important in
o “Sleep-test ethics” preparing financial reports because users
of these reports must depend on the good
Example of Ethical faith of the people involved in their
Dilemma preparation.
Fraudulent Financial Reporting
o White collar crime The intentional preparation of
o Whistle-blowing misleading financial statements is called
o Conflicts of Interest fraudulent financial reporting. These
o Fiduciary Responsibilities intentional acts are achieved through the
o Sexual Harassment
o Discrimination
manipulation of records, falsification of
Code of Ethics for transactions or the intentional
misapplication of various accounting
Professionals Accountant principles to be able to obtain a loan, to
in the Philippines
A distinguish mark of the meet earnings projections, or to increase
accountancy profession is its acceptable of the value of company. Part
the responsibility to act in public interest. Ethi
Thereof, a professional accountant’s Part
responsibility is not exclusively to satisfy PRA
Part
the individual client or employer. In acting
BUS
in the public interest a professional
accountant should serve and comply w/
ethical requirement of the Code.
Fundamental
Entity – is the specific business enterprise, Concepts
which may be a proprietorship, partnership or
operation.
Monetary Unit – The Philippine peso is a
- Separate from the owners from the business reasonable unit of measure and that its
purchasing power is relatively stable.
Periodicity– An entity’s life can be
meaningfully subdivided into equal time
periods for reporting purposes. It will be Going Concern – financial statements are
aimless to wait for the actual last day of normally prepared on the assumption that
operations to perfectly measure the entity’s the reporting entity is a going concern and
will continue in operation for the
foreseeable future.
 Introduction to
Chapter
Accounting
1:

Accounting is the system that

measures business activities, processes Accounting is a
that information into reports and language of
communicates the results to decision- business and
makers. Accounting quantifies
business communication. For this financial
reason, accounting is called the reporting.

Definition of

 Accounting is a service activity. Its

function to provide quantitative information,  Identifying – the recognition and non-
primarily financial in nature, about recognition of accountable events.
economics entities that is intended to be  Measuring – the process of
useful in making economic decisions. – determining the monetary amount at which
Accounting Standards Council, 1983 the elements of the financial statements are to
 Accounting is an information system be recognized.
that measures, processes and communicates  Communicating – the process of
financial information about an economic preparing and distributing accounting reports
entity. – Financial Accounting Standards to potential users of accounting information.
Board, 1978 (recording, classifying and summarizing)
 Accounting is the process of o Recording (journalizing) – is the process
identifying, measuring and communicating of systematically maintaining a record of
economic information to permit informed all economic business transactions.
judgments and decisions by users of the - Classifying (posting) – is the sorting or
information – American Accounting grouping of similar and interrelated
Association economic transactions or simply posting
to the ledger
Users of Financial - Summarizing (financial statement) – is
Information
Primary Others
The two classification of economic
o Existing & o Employees transactions or events are
Potential o Customers
Investors o Government
o Lenders
o External transactions or exchange
Agencies
o Other creditors o Public transaction – involving one entity
and another entity.
o Internal transaction – are economic
The primary users of financial information events involving the entity only
are the parties to whom general purpose
financial reports are primarily directed.