BASIC ACCOUNTING UNIT 1 L1-L2

Accounting (American Accounting Association, 1966)

______ is the process of identifying, measuring, and communicating financial information to allow users to make informed judgments and decisions.

Accounting (American Institute of Accountants, 1956)

______ is the art of recording, classifying, and summarizing transactions and events which are financial and are quantifiable in terms of money.

Purpose of Accounting

The ______ is to provide quantitative financial information to help make decisions.

Identifying and Analyzing

______ is the start of the accounting process; it identifies financial transactions of the business and analyzes the effects of those transactions on the business.

Recording or Journalizing

______ records or journalizes filtered transactions into different accounting documents.

Bookkeeping

______ is another term for recording or journalizing transactions.

Communicating

The universal language of accounting. The results of the first two phases are communicated to internal and external users through financial statements

Decision-usefulness

______ is the essence of accounting in which financial data is used to make informed decisions.

Bookkeeper

A ______ is responsible for developing and maintaining accounting records.

Accountant

An ______ supplies financial information to make informed judgments and better decisions. It addresses the essence of accounting: the decision-usefulness of data.

Service Activity

______ refers to all the processes that an accountant undergoes and accomplishes for the business organization and its units in day-to-day operations.

Process

______ is a step-by-step and systematic procedure that produces results relevant to management and other potential users.

Art and Discipline

______ allows accountants to devise their own tactics while adhering to well-defined procedures and regulations.

Deals with Financial Information

______ means accounting information is expressed in monetary values as a common financial denominator for accountable economic transactions and events.

Information System

An ______ measures business activities, processes information into reports, and communicates these to decision-makers.

Marketing Department

The ______ analyzes accounting information to determine the impact of promotional strategies on monthly sales.

Finance Department

The ______ uses accounting information to determine how much funding is needed to implement expansion plans.

Production Department

The ______ uses accounting information to determine which production processes incurred fewer costs.

Human Resources Department

The ______ uses accounting information to determine performance bonuses and other employee benefits.

Keeping Systematic Records

______ ensures that correct and relevant data is organized and detailed to reflect the business's economic standing and provides users with relevant information for informed decisions.

Protecting Properties of the Business

______ ensures that business assets are monitored and performing well, keeping track of assets, especially cash, to avoid fraud, corruption, and theft.

Communicating Results to Various Parties

______ aims to communicate the financial health and performance of a company effectively by producing accurate information for internal and external users.

Auditing

______ is an independent undertaking in which information from a completed accounting process is evaluated to determine whether it complies with established accounting standards.

Meeting Legal Requirements

______ ensures that the company complies with legal requirements and government regulations such as trade and business standards, fair employment agreements, and proper payment of taxes.

Mesopotamian Era (3,500 B.C.)

The ______ involved the informal recording of money and trade-related information using stone tablets to record sales and loans.

Hammurabi Code

The ______ established rules and regulations for commercial transactions.

Luca Pacioli

______ is known as the Father of Accounting.

Father of Accounting

The title ______ refers to Luca Pacioli.

Double-entry System

The ______ introduced the debit and credit system that paved the way for modern accounting.

Industrial Revolution

The ______ emphasized the importance of accounting through the development of machines, factories, and systems of checks and balances.

Queen Victoria of the British Empire

During the reign of ______, the first recorded accounting standards were formalized and reported company transactions were monitored.

Modern Auditing

______ evolved from the accounting standards developed during Queen Victoria's reign.

Global Accounting Standards

______ continually adapt to the needs of the global market and business environment, requiring uniform accounting standards across different countries and industries.

Generally Accepted Accounting Principles (GAAP)

______ is the common set of accounting rules, procedures, and guidelines used in the United States for financial reporting.

International Financial Reporting Standards (IFRS)

______ originated in the European Union to harmonize accounting systems and establish a common set of financial reporting standards.

IFRS Foundation

The ______ establishes the International Financial Reporting Standards.

International Accounting Standards Board (IASB)

The ______ regulates the International Financial Reporting Standards and oversees the accounting standards used in preparing financial statements.

Purpose of IFRS

The ______ is to provide transparent and reliable information about a company's financial position, cash flows, changes in equity, and performance.

IFRS Accounting Standards

______ are currently required in 140 jurisdictions worldwide and permitted for use in many other countries.

Users of Accounting Information

______ are individuals, businesses, governments, and other organizations dealing with financial transactions.

Financial Accounting

______ is concerned with preparing financial reports for external users (examples of external users: creditors, stockholders, governments); follows the generally accepted principles or accounting standards set by regulatory bodies.

Philippine Financial Reporting Standards (PFRS)

______ are the accounting standards followed by Financial Accounting.

Accounting Standards

______ ensure consistency and comparability of financial statements.

Management Accounting

______ is concerned with producing accounting information for internal users (examples of internal users: owners, managers, employees); provides useful information that helps stakeholders make informed decisions concerning day-to-day operations and business direction; does not necessarily adhere to the PFRSs.

Cost Accounting

______ is concerned with recording and analyzing the costs for producing goods or services; provides information that is useful in making decisions concerning the production of a business or an organization.

Government Accounting

______ deals with how the government apportions and spends financial resources; involves the presentation of where government funds come from and how funds are spent.

Auditing

______ is concerned with verifying the correctness of financial reports; involves evaluation based on established criteria; raises the credibility of an organization.

Internal Auditing

______ is performed by someone who works for the reporting entity; checks the validity of accounting records, discovers operational inefficiencies, and identifies weaknesses in the internal control measures implemented by a business.

External Auditing

______ is performed by someone outside the reporting entity; ensures fairness and compliance of financial reports.

Tax Accounting

______ covers everything tax-related (computation of different kinds of taxes, preparation of tax returns, assessment of repercussions of tax decisions).

Tax Evasion

______ is the act of omitting sources of income on taxable transactions; intentional non-payment of tax; is illegal and may be subject to imprisonment.

Tax Avoidance

______ is the process of reducing tax in compliance with tax laws; is a legitimate practice.

Accounting Education

______ helps the education sector in coming up with a curriculum to help aspiring accountants be equipped with relevant accounting knowledge and skills.

Accounting Practitioners

______ can work as teachers or professors who can share their expertise in the accounting industry.

Accounting Research

______ centers on the pursuit of current and relevant information in the field of accounting; can help a particular clientele solve problems concerning its business; can help regulatory bodies amend existing accounting principles; can help develop new accounting standards to address issues and trends in accounting practices.

Bureau of Internal Revenue (BIR)

The ______ is a government agency under the Department of Finance mandated by the Philippine Constitution to collect taxes from individuals and businesses and impose fines or penalties when these individuals or companies fail to pay their tax.

2 Definitions of Accounting

1. Accounting (American Accounting Association, 1966)

2. Accounting (American Institute of Accountants, 1956)

3 Processes of Accounting

1. Identifying and Analyzing

2. Recording or Journalizing

3. Communicating

2 Roles in Accounting

1. Bookkeeper

2. Accountant

5 Natures of Accounting

1. Service Activity

2. Process

3. Art and Discipline

4. Deals with Financial Information

5. Information System

4 Departments That Use Accounting Information

1. Marketing Department

2. Finance Department

3. Production Department

4. Human Resources Department

4 Functions of Accounting in Business

1. Keeping Systematic Records

2. Protecting Properties of the Business

3. Communicating Results to Various Parties

4. Meeting Legal Requirements

History of Accounting

1. Mesopotamian Era (3,500 B.C.)

2. Luca Pacioli (14th Century)

3. Queen Victoria of the British Empire (19th Century)

4. Industrial Revolution (17th and 18th century)

5. Accounting systems continually adapt to the needs of the global market and the business environment. 

6. The existence of multinational and transnational corporations required uniform accounting standards across different countries and industries.

Mesopotamian Era

1. Hammurabi Code

Queen Victoria of the British Empire (19th Century)

1. Formalized Accounting Standards

2. Modern Auditing

2 Credible Accounting Standards

1. Generally Accepted Accounting Principles (GAAP)

2. IFRS (International Financial Reporting Standards)

IFRS (International Financial Reporting Standards)

1. IFRS Foundation

2. International Accounting Standards Board (IASB)

3. IFRS Accounting Standards

Users of Accounting Information

1. Individuals

2. Businesses

3. Governments

4. Other organizations dealing with financial transactions

8 Branches of Accounting

1. Financial Accounting

2. Management Accounting

3. Cost Accounting

4. Government Accounting

5. Auditing

6. Tax Accounting

7. Accounting Education

8. Accounting Research

Financial Accounting

1. Philippine Financial Reporting Standards (PFRS)

2. Accounting Standards

Auditing

1. Internal Auditing

2. External Auditing

Tax Accounting

1. Tax Evasion

2. Tax Avoidance

Accounting Education

1. Accounting Practitioners

Luca Pacioli (14th Century)

1. Introduced the double-entry system of debit and credit

2. Paved the way for modern accounting.

Industrial Revolution (17th and 18th century)

Development of machines and factories for mass production of goods; accounting was emphasized with utmost importance and relevance; system of checks and balance to monitor the process and expenses in production.