Fundamentals of Accountancy, Business, and Management 1

What is Accounting?

• Accounting is the systematic process of measuring and reporting relevant financial information about the activities of an economic organization or unit.

• Its underlying purpose is to provide financial information

• It is capable of being expressed in monetary terms

What is Accounting according to the AICPA?

• AICPA: American Institute of Certified Public Accountants

• defines accounting as the art of recording, classifying, and summarizing, in a significant manner and in terms of money, transactions, and events, which are in part at least of a financial character, and interpreting the result thereof.

What is Accounting according to the PICPA?

• PICPA: Philippine Institute of Certified Public Accountants

• defines accounting as a service activity

• its function is to provide quantitative information, primarily financial in nature, about economic entities, that is intended to be useful in making economic decisions

Describe its nature and functions in business?

1. Systematic process

   • process is a series of actions that produce something or that lead to a particular result

   • as such, the performance of the four aspects of accounting leads to communicating to its users the relevant financial information needed by the parties interested

2. Art

   • art is a skill acquired by experience, study, or observation

   • also defined as an occupation requiring knowledge or skill

   • the 4 aspects of accounting require both knowledge and skill through experience, study, or observation as a means to produce the key end product (financial reports)

3. Service Activity

   • service - the occupation or function of serving

   • activity - something that is done as work or for a particular purpose

= Accounting - a work or occupation for serving a particular purpose

• Since its purpose is to provide financial information, the data that it will process in terms of the 4 aspects of accounting should be expressed in monetary terms

• in short, it is interested in activities that can be measured and expressed in terms of the value of money

What are the 4 aspects of Accounting and explain

1. Recording - writing down business transactions CHRONOLOGICALLY in the BOOKS OF ACCOUNT as they TRANSPIRE (OCCUR)

2. Classifying - SORTING SIMILAR and RELATED BUSINESS TRANSACTIONS into the three categories: assets, liabilities, and equity (revenue and expenses)

3. Summarizing - PREPARING the FINANCIAL STATEMENTS from the transactions recorded in the BOOKS OF ACCOUNT that are designed to meet the information needs of its users

what is the basic function of Accounting in business?

What are the different branches of accounting and explain

who are the users of financial information?

what are the types of business organizations and give out their advantages & disadvantages

what are the legal requirements in the formation of business

what are the three types of business activities/operations

define GAAP

what is an accounting system

what is a transaction

describe entity concept

describe periodicity

describe Going Concern

what are the basic accounting principles and explain each

describe what is a balance sheet

describe what is an income statement

describe what is statement of owner’s equity

describe what is statement of cash flows

what are assets

what are liabilities

what is owner’s equity