Explain Accounting as a service activity.
functions to gather quantitative information, primarily financial in nature, about economic entities that is intended to make economic decisions.
Accounting provides what types of information?
Quantitative Information - which is in terms of numbers. quantities and units.
Qualitative Information - expressed in words or is descriptive in form.
Financial Information - which is expressed in terms of money.
How is accounting a communication service profession?
Acounting is a communication service profession. It is a social science with a social thrust. And that statement users rely on information provided by accounting to make a sound economic decision.
It’s implication is that financial information should posses fundamental and enhancing qualities to be reliable and to be able to earn the confidence of the decision-making users.
The decision making users are a group of people who control and make decisions for an organization, a government unit, or a country.
The dual nature of accounting: Art and Science
The process of providing accounting information or the accounting process
Accounting as “Science”
Accounting is a social science with a body of knowledge systematically gathered, classified and organized. It is influenced by, interacts with, economic, social and political environments.
Practical applications of accounting as a science:
The use of science of mathematics as an integral part in processing financial information.
The use of fixed rules of debit and credit in double-entry bookkeeping.
The systematic processing of transactions and events thorug the streps of accounting process/ accounting cycle which culminate the summarized information in basic financial statements.
Accounting as an art
Accounting is a pratical art which uses a creative skill and informed judgement in choosing alternative courses of action which is generally acceptable by the Accountancy Profession.
Practical application of Accounting as an Art.
Reliable estimates and judgement is ensured if they are based on information supported by:
1. recorded data
2. professional opinion of subject specialists, and
3. audit opinion of an external auditor with his craft and skill as a CPA professional as guaranteed by a government professional license to engage in public practice.
Accounting in the internet era.
Accounting is an act of collecting information on resource usage for the purpose of trend analysis, auditing, billing and cost allocation.
Accounting as a language of business.
Financial statements should be stated in a language of a broad geographical jurisdiction.
Philippine SEC rule on Language of Financial Statements
Financial Statements should be filed in such form and order and use generally accepted terminology that will best indicate their significance and character.
Accounting as an Information System
Accounting identifies and measures economic activities, processes these information to financial reports, and communicate these reports to decision-makers.
Explain the economic entity.
An economic entity is a separately identifiable combinations of persons and properties that uses or controls economic or scarce resouces to acheive certain goals or objectives.
A scarce resource is so limited that it commands a price.
What are the classifications of a Economic Entity?
- Not-for-profit or Non profit entity - provides socially desirable needs for communities and thier members, where their activities are not directed for profit.
- Business entity - provides or distributes goods or services primarily for profit.
- Legal entity - one that is recognized by law as a person.
- Reporting entity - Entities that are required or that choses to prepare financial statements. Not necessarily a legal entity. It can be a portion of an entity or a composition of entities.
The Branches of Accounting
- Financial Accounting
- Auditing
- Management Accounting
- Goverment Accounting
- Tax Accounting
- Fiduciary Accounting
- Social Responsibility Accounting
- Environmental Accounting
- Price-Level Accounting
Sustainability Reporting
It is the organization’s practice of reporting publicly on significant, economic, environmental and/or social impacts in accordance with globally accepted standards.
Philippine SEC rule on Sustainability Reporting
SEC mandates all publicly listed companies to comply with SEC Memorandum Circular 4 series 2019 to submit a sustainability report as an attahment to the SEC Form 17 A.
Reports on 2024 onwards, the Corporate Sustainability Reporting Directive requires large companies to report on sustainability policy and performance.
The 5 principles of sustainable development:
- CEE
- CBP
- SDS
- CHR
- PCM
IFRS S1 (ISSB)
All entities are required to disclose information about sustainability related risks and opportunities that could reasonably affect an entity’s cash flows, it’s access to finance or cost of capital over a short, medium, or long term.
IFRS S2
Requires all entities to disclose information about climate related risks and opportunities that is usefeul to users of general purpose financial reports in making decisions relating to providing resources to the company.
