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Accounting
It is a process of identifying, recording, and communicating economic information that is useful in making economic decisions.
Identifying
Recording
Communicating
Essential elements of the definition of accounting:
Identifying
The account analyzes each business transaction and identifies whether the transaction is an “accountable event” or “non-accountable event”.
Accountable events or economic events
It affects the assets, liabilities, equity, income, and expenses of a business
Recording
The accountant recognizes (i.e., records) the identified “accountable events”.
Journalizing
The process of recognizes the identified “accountable events”
Posting
After journalizing, the accountant then classifies the effects of the event on the “accounts”. This process is called?
Account
Basic storage of information in accounting
Communicating
At the end of each accounting period, the accountant summarizes the information processed in the accounting system in order to produce meaningful reports
Financial statements
Accounting information is communicated to interested users through accounting reports, the most common form of?
Accounting
Process with the basic purpose of providing information about economic activities that is intended to be useful in making economic decisions
Quantitative information
Qualitative information
Financial information
Types of information provided by accounting:
Quantitative information
Information expressed in numbers, quantities, or units
Qualitative information
Information expressed in words or descriptive form. It is also found in the notes to financial statements as well as on the face of the other components of financial statements
Financial information
Information expressed in money. It is also quantitative information because monetary amounts are normally expressed in numbers
Social science
Accounting is a body of knowledge which has been systematically gathered, classified and organized
Practical art
Accounting requires the use of creative skills and judgement
Bookkeeping
Refers to the process of recording the accounts or transactions of an entity. It normally ends with the preparation of the trial balance
Accounting
It covers the whole process of identifying, recording, and communicating information to interested users
Language of business
Accounting is often referred to as the?
To provide external users with information that is useful in making, among others, investment and credit decisions
To provide internal users with information that is useful in managing the business
Accounting has the following two broad functions in a business:
Internal users
External users
Users of Accounting Information:
Internal users
Those who are directly involved in managing the business
External users
Those who are not directly involved in managing the business
General purpose accounting information
Special purpose accounting information
Types of accounting information classified as to users’ needs:
General purpose accounting information
It is information designed to meet the common needs of most statement users. It is provided by financial accounting and is prepared primarily for external users
Special purpose accounting information
It is information designed to meet the specific needs of particular statement users. It is provided by management accounting or other branches of accounting and is prepared primarily for internal users
Double entry recording system
It is the first systematic record keeping dealing with and was formulated by Fra Luca Pacioli
Fra Luca Pacioli
A Franciscan monk and mathematician and considered as the father of modern accounting
Summa di Arithmetica Geometria Proportioni and Proportionista
Pacioli’s book that is published on November 10, 1494 in Venice
Financial accounting
Management accounting
Government accounting
Auditing
Tax accounting
Cost accounting
Accounting education
Accounting research
Common branches of accounting:
Financial accounting
It is the branch of accounting that focuses on general purpose financial statements
General purpose financial statements
Those statements that cater to the common needs of external users, primarily the potential and existing investors, and lenders and other creditors
PFRS Accounting Standards
Financial accounting is governed by?
Financial statements
These are the structured representation of an entity’s financial position and result of its operations
Financial report
Includes the financial statements plus other information provided outside the financial statements that assists in the interpretation of a complete set of financial statements or improves users’ ability to make efficient economic decisions
Financial reporting
It is the provision of financial information about an entity that is useful to external users, primarily the investors, lenders, and other creditors, in making investment and credit decisions
Management accounting
Involves the accumulation and communication of information for use by internal users
Management advisory services
Which includes services to clients on matters of accounting, finance, business policies, organization procedures, product costs, distribution, and many other phases of business conduct and operations
Government accounting
It refers to the accounting for the government and its instrumentalities, focusing attention on the custody of public funds, the purpose or purposes to which those funds are committed, and the responsibility and accountability of the individuals entrusted with those funds
Auditing
Involves the inspection of an entity’s financial statements or business process to ascertain their correspondence with established criteria
Tax accounting
It is the preparation of tax returns and rendering of tax advice, such as the determination of tax consequences of certain proposed business endeavors
Cost accounting
It is the systematic recording and analysis of the costs of materials, labor, and overhead incident to the production of goods or rendering of services
Accounting education
Refers to teaching accounting and accounting-related subjects in an organized learning environment. It is a process of facilitating the acquisition of knowledge and skills regarding one or more of the other branches of accounting
Accounting research
Pertains to the careful analysis of economic events and other variables to understand their impact on decisions. It includes a broad range of topics, which may be related to one or more of the other branches of accounting, the economy as a whole, or the market environment
Financial accounting
Impact of fair value measurement on the financial statements
Management accounting
Inventory management and its effect on earnings
Auditing
Internal controls and modern technology
Accounting education
Becoming a certified public accountant
Sole or single proprietorship
Partnership
Corporation
Cooperative
Forms of Business Organizations:
Business
It is an activity where goods or services are exchanged for money
Entrepreneur or Businessman
A person who is engaged in business
Sole or single proprietorship
It is a business that is owned by only one individual. It is the most common and simplest form of a business organization
Sole proprietor
Business owner of single proprietorship
Department of Trade and Industry (DTI)
A sole proprietorship is registered with?
Partnership
It is a business that is owned by two or more individuals who entered into a contract to carry on the business and divide among themselves the earnings therefrom
Partners
Business owners in the partnership
Securities and Exchange Commission (SEC)
A partnership is registered with?
Corporation
Owned by more than one individual. However, unlike a partnership, it is created by operation of law rather than a contract
Shares of stocks
Ownership in a corporation is represented by?
Stockholders or shareholders
Owners in the corporation are called?
Corporation
It is an artificial being or a juridical person
Securities and Exchange Commission
A corporation is registered with?
Cooperative
It is also owned by more than one individual. It is formed in accordance with the provisions of The Philippine Cooperative Code of 2008
Members
Owners of a cooperative
Net surplus
Cooperative earns profit
Patronage refund
Pertains to the profit that a cooperative returns to its owners
Cooperative Development Authority (CDA)
A cooperative is registered with?
Service Business
Merchandising (Trading)
Manufacturing
Types of Business according to activities
Service Business
It is one that offers services as its main product rather than physical goods. It may offer professional skills, expertise, advice, lending service, and similar services
Merchandising or Trading Business
It is one that buys and sells goods without changing their physical form
Manufacturing Business
It is one that buys raw materials and processes them into final products
Hybrid business
Engage in more than one type of activity