Introduction to Accountancy, Business & Management – Key Notes

  • Business

  • Organized, repetitive exchanges of goods/services for profit.

  • Comprised of: Inputs (resources), Processes (systems), Outputs (goods/services) that should exceed input value.

  • Core transaction groups: Financing, Investing, Personnel, Purchasing, Conversion, Revenue.

  • Transactions = exchanges with counterparties; non-exchange events also affect finances.

Management

  • Stewardship: conserve and grow resources entrusted by owners & creditors.

  • Functions align with transaction groups (financial, HR, procurement, production, marketing/sales, general).

  • Financial objectives:
    • Liquidity (Current\ Assets!>!Current\ Liabilities)
    • Profitability (Income! -! Expenses! >! 0)
    • Solvency (long-term viability)
    • Competitiveness (attractive vs. alternatives)

  • Relies on accurate, relevant, faithful financial information.

Accounting

  • "Language of Business"; service activity providing quantitative, primarily financial, info for decisions.

  • Information System: Identify → Analyze → Record → Classify → Summarize → Communicate.

  • Key outputs: financial statements (position, performance, cash flows).

  • Basic equation: (Assets=Liabilities+Equity)(Assets = Liabilities + Equity)

Transaction Groups & Cycles

  • Financing: obtain & repay funds; provide returns.

  • Investing: acquire/maintain long-term assets.

  • Personnel: hire & compensate employees.

  • Purchasing: acquire materials/supplies.

  • Conversion: transform inputs to outputs.

  • Revenue: deliver goods/services, collect cash/receivables.

  • Each cycle: beginning (agreement) → performance/delivery → ending (settlement/repeat).

Role of Accounting in Decisions

  • Owners: invest, maintain, add, divest.

  • Creditors: lend or not; set terms.

  • Managers: plan, control, evaluate; target survival & growth.

  • Financial profile = position + performance + cash flows → assess liquidity, profitability, solvency, competitiveness.

Brief History

  • Ancient Mesopotamia: 7 000-year records.

  • 1494: Luca Pacioli formalizes double-entry.

  • 1760-1830: Industrial Revolution spurs advanced methods.

  • 1920-40: Stock-market crash ⇒ GAAP, SEC.

  • 2000s: IT, global scandals ⇒ Sarbanes-Oxley; push for IFRS.

Standards & Regulation

  • GAAP: US framework; overseen by FASB.

  • IFRS: issued by IASB; required/permitted in >140 jurisdictions (incl. Philippines).

  • Objective: transparency, comparability, efficiency in global markets.

Accountancy in the Philippines

  • Profession formally recognized 1923 (RA 3105); governed by RA 9298.

  • PICPA (est. 1929) – national CPA body; ~200 000 CPAs.

  • Adopts IFRS for financial reporting per SEC rules.

Key Takeaways

  • Business survival & growth depend on well-managed transaction cycles.

  • Management needs faithful, relevant accounting info to meet liquidity, profitability, solvency, competitiveness.

  • Accounting’s double-entry framework (Owns)=(Owes)\text{(Owns)} = \text{(Owes)} remains central to modern standards.

  • Globalization demands harmonized standards (IFRS) and ethical, competent professionals.