ACCTG 101, CHAPTER 1 : ACCOUNTING AND ITS ENVIRONMENT

Accounting

It has evolved, like medicine and law, in response to social and economic needs of society.

Accounting

It is relevant in world of business that measures business activities and quantifies business communication.

Accounting

It is the language of business.

Accountants

Scorekeepers of business.

Accounting

It is a service activity, provides quantitative information.

Accounting Standards Council

According to this organization, accounting is a service activity.

Accounting

info system that measures, processes, and communicates financial information

Financial Accounting Standards Board

According to this organization, accounting is an info system that measures, processes, and communicates financial information

Accounting

identifying, measuring, and communicating economic info to permit informed judgments and decisions

American Accounting Association

According to this organization, accounting is the process of identifying, measuring, and communicating economic info to permit informed judgments and decisions

Accounting

art of recording, classifying, and summarizing in significant manner

American Institute of Certified Public Accountants

According to this organization, accounting is the art of recording, classifying, and summarizing in significant manner

Luca Pacioli

Franciscan friar and mathematician, associated with intro of double-entry bookkeeping

Summa de Arithmetica, Geometria, Proportioni et Proportionalita

Luca Pacioli’s book which includes Particularis de Computis et Scipturis

Amantino Manucci

inventor of double-entry bookkeeping

General Ledger, Two Merchandise Ledgers, Expenses Ledger, & Cash Book

Amantino Manucci used five books namely

Goethe

famous German poet and dramatist, referred double-entry bookkeeping as one of the finest discoveries of human intellect

Werner Sombart

eminent economist-sociologist, believed that double-entry bookkeeping is born of the same spirit as system of galileo and newton

Services

A type of business - selling people’s time

Trader

A type of business - buying and selling products

Services

A type of business - hiring skilled staff and selling their time; accounting, software development, legal

Trader

A type of business - buying raw materials to make it available for sale; wholesale, retail

Manufacture

A type of business - designing products, aggregating components, and assembling

Manufacture

A type of business - raw materials to finished goods; construction, engineering, chemicals

Raw Materials

A type of business - growing, extracting raw materials

Raw Materials

A type of business - buying land and using them to provide materials; farming, mining, oil

Infrastructure

A type of business - selling utilization of infrastructure

Infrastructure

A type of business - buying and operating assets and selling occupancy; transport, hotels, sports facilities

Financial

A type of business - deposits, lending, investing money

Financial

A type of business - accepting cash from depositors and paying them interest; bank, investment house

Insurance

A type of business - pooling premiums of many to meet claims of few

Insurance

A type of business - collecting cash from many customers, investing money to pay the losses; life, health, property

Sole Proprietorship

A form of business organization - has single owner who’s the proprietor and manager

Partnership

A form of business organization - owned and operated by two or more people who contribute money, property, or industry

Corporation

A form of business organization - owned by stockholders, artificial being created by operation of law, having rights of succession and powers, attributes, and properties expressly authorized by law

Micro, Small, and Medium Enterprises

MSMEs meaning

Financing Activities

A type of activity in business organization - organizations require finance to obtain other resources so they compete in financial markets such as owners and creditors & banks and suppliers

Investing Activities

A type of activity in business organization - using of capital to acquire other resources to be used in the transformation process from one form to another

Operating Activities

A type of activity in business organization - involve the use of resources to design, produce, distribute, and market good/services

Efficient Business

provides goods and services at a low cost

Effective Business

successful in providing goods and services demanded

Business Transactions

economic activities of a business

Sufficient Cash or Credit, Good Bookkeeper, and Accounting System

Luca Pacioli said that every merchant needs three things namely:

debet dare, debet habere

Pacioli introduced the doubt-entry accounting system where every ____ there exists a _____

Memorandum

book where all transactions are recorded

Journal

it is the merchant’s private book

Ledger

alphabetical listing of all the business’ accounts along with running balance

Entity Concept

A type of fundamental concept - most basic concept in accounting wherein accounting entity is an orgnization or section of organization that stands apart as separate economic unit

Periodicity Concept

A type of fundamental concept - entity’s life is subdivided into equal time periods for reporting purposes

Stable Monetary Unit Concept

A type of fundamental concept - Philippine pesos is a reasonable unit of measure and its purchasing power is stable; allows accountants to add and subtract

Going Concern

A type of fundamental concept - financial statements are prepared on the assumption that reporting entity will continue its operation in the foreseeable future

Generally Accepted Accounting Principles

encompasses conventions, rules, and procedures necessary to define accepted accounting practice

Relevance, Objectivity, and Feasibility

Generally Accepted Accounting Principles has three criteria namely:

Objectivity Principle

One of the basic principles - accounting records and statements must be reliable for accuracy and usefulness

Historical Cost

One of the basic principles - acquired assets should be recorded at their actual cost

Revenue Recognition Principle

One of the basic principles - revenue = recognized in accounting period when goods are delivered or services are rendered

Expense Recognition Principle

One of the basic principles - expenses = recognized when goods and services are used up to produce revenue

Adequate Disclosure

One of the basic principles - all relevant information = affect understanding/assessment of accounting entity should be disclosed in financial statements

Materiality

One of the basic principles - financial reporting is only concerned with info that is significant enough to affect evaluations and decisions

Consistency Principle

One of the basic principles - firms should use same accounting method from period to period

Don Vicente Fabella

in 1915, first Filipino CPA in US and founder of Jose Rizal University in 1919

Dr. Nicanor Reyes

founder and first president of FEU

Belen Enrile-Gutierrez

first Filipina CPA and one of the seven original trustees of FEU in 1933

Jaime Hernandez and Paciano Dizon

first and second Filipino Auditor Generals of the COA

Manuel Villar

Filipino tycoon, former speaker of the house of representatives, senate president, and 2010 presidential candidate

Washington SyCip

past president of International Federation of Accountants, the only asian who has held chairman

Jose W. Diokno

former senator of the PH and secretary of justice

Wenceslao Lagumbay

former senator of PH

Alberto Romulo

former senator of the PH, executive secretary and secretary of foreign affairs

Andres Soriano

founder of the country’s conglomerate

Manuel Morales

full time monetary board member of BSP during Ramos presidency

Act No. 315

Approved by sixth legislature on March 17, 1928, entitled “an act regulating the practice of Public Accounting; creating the board of accountancy; providing for examination, for the granting of certificates, and the registration of certified public accountants; for the suspension or revocation of certificates; and for other purposes

March 17, 1928

When was Act No. 315 approved by Sixth Legislature?

R.A No. 9298 or Philippine Accountancy Act of 2004

was signed into law by Arroyo on May 13, 2004

May 13, 2004

When was R.A No. 9298 or Philippine Accountancy Act of 2004 signed into law?

Philippine Institute of Certified Public Accountants (PICPA)

integrated national professional organization of CPAs in the PH

Accounting Standards Council

On Nov. 18, 1981, PICPA created this organization to establish and improve accounting standards

General Knowledge, Organizational and Business Knowledge, Information Technology Knowledge, & Accounting Knowledge

Core Competencies Framework for Accountants - Knowledge

Intellectual, Interpersonal, & Communication

Core Competencies Framework for Accountants - Skills

Professional Ethics and Moral Values

Core Competencies Framework for Accountants - Values

Auditing

A branch of accounting - most significant service to public

External Auditing

independent examination that ensures fairness and reliability of reports that management submits to users outside of business entity

Internal Auditing

perform routine tasks and undertake detailed checking of company’s accounting procedures

Bookkkeeping

A branch of accounting - mechanical task involving collection of basic financial data

Cost Bookkeeping, Costing, and Cost Accounting

A branch of accounting - involves the recording of cost data in books of accounts

Financial Accounting

A branch of accounting - focused on recording of business transactions and periodic preparation of reports on financial position and results of operations

Financial Management

A branch of accounting - new branch that has grown rapidly, responsible for setting financial objectives, making plans, obtaining finance needed to achieve, and safeguarding financial resources

Management Accounting

A branch of accounting - incorporates cost accounting data and adapts them for specific decisions which management may be called upon to make

Taxation

A branch of accounting - preparation of tax returns, consideration of tax consequences of proposed business transactions or alternative courses of action

Government Accounting

A branch of accounting - concerned with identification of sources and uses of resources consistent with the provisions of city, municipal, provincial, or national law