basic acc

accounting

began informally in Mesopotamia around 3,500 B.C., when people recorded money and trade on stone tablets

Luca Pacioli

called the "Father of Accounting" for introducing the double-entry bookkeeping system

journal

the book of ORIGINAL entry; transactions are recorded here first (journalizing)

ledger

the book of FINAL entry; journal entries are posted/summarized here by account.

bookkeeping

the systematic recording of transactions (also called journalizing); done by a Bookkeeper.

accountant

develops and maintains records AND supplies financial information to help others make informed decisions/judgments.

GAAP (Generally Accepted Accounting Principles)

the generally accepted set of LOCAL accounting principles.

IFRS (International Financial Reporting Standards)

global standards set by the IFRS Foundation, required in 140+ jurisdictions.

auditing

the systematic process of verifying the reliability and correctness of financial reports.

internal auditing

done by people INSIDE the company to help it run better, safer, and more efficiently.

external auditing

done by an INDEPENDENT, outside firm to prove that records are accurate.

BIR (Bureau of Internal Revenue)

collects taxes

COA (Commission on Audit)

monitors the use of PUBLIC funds.

DBM (Department of Budget and Management)

prepares the NATIONAL BUDGET.

SEC (Securities and Exchange Commission)

regulates corporations and securities.

TRAIN Law (Tax Reform for Acceleration and Inclusion)

the major Philippine tax reform law passed in 2017

tax avoidance

the LEGAL minimizing of tax liability using allowed deductions/exemptions.

tax evasion

the ILLEGAL practice of failing to pay taxes or hiding income.

Internal users (inside the business)

OEM

Owners

provide the financial resources needed to sustain and grow the business.

employees

use accounting info mainly to gauge job security and the company's long-term stability

management (senior/middle managers, supervisors)

use accounting information for planning and decision-making

External users (outside the business)

ICCGP

investors

provide or plan to provide funds; assess profitability and stability

creditors

provide funds through LOANS

customers

assess product quality, fair pricing, andbusiness stability.

government

collects taxes and ensures compliance.

public

assesses the company's economic and social impact (jobs, environment).

financial accounting

prepares financial statementsfor EXTERNAL users using PFRS/IFRS

managerial accounting

gives flexible, frequent INTERNAL reports for budgeting and forecasting.

cost accounting

analyzes production and operating costs to help set prices and control expenses.

tax accounting

deals with tax complianceandplanning.

government accounting

sed by government agencies for public funds.

fiduciary accounting

manages assets entrusted to a person acting on behalf of another.

forensic accounting

combines accounting, auditing,and investigative techniques to examine financial data for legal purposes; forensic accountants are alled the "Detectives" of the accounting world.

account

an organized record used to track and summarize a business's financial transactions

chart of accounts (COA)

classifies andorganizesaccounts systematically.

assets

resources owned by the business(e.g., cash,accounts receivable, equipment, building, land). Current assets are used/converted within a year (e.g., accountsreceivable).

liabilities

what the business OWES(e.g., accountspayable, salaries payable, bank loans). Current liabilities are due within a year (e.g., accounts payable).

owner’s equity

increases through investments and profits; it decreases through withdrawals/drawings and losses.

Owner's Equity = Assets − Liabilities.

income/revenue

earnings from business operations(e.g., service income, sales revenue)

expenses

costs of operating the business(e.g., salaries expense, rent expense, utilities expense).