Accounting

is 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
decision.
- Accounting Standards Council

Is 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 results thereof.-
-American Institute of Certified Public Accountants
Accounting
is the process of identifying, measuring and
communicating economic information to permit
informed judgment and decision by users of the
information.
-American Accounting Association
HISTORY
- “Father of Accounting”
In 1494he published his book, SUMMA DE
ARITHMETICA, GEOMETRIA,
PROPORTIONI ET PROPORTIONALITA
(Everything about Arithmetic,Geometry,
Proportions and Proportionality.”

Particularis de Computis et Scripturis or “Details of

Calculation and Recording.”
- double entry bookkeeping.
-36 Chapters.
-there are 3 books discussed in Summa.
-recognition or non-recognition of business activities as accountable
events.

-assigning of peso amounts to the accountable economic transactions

and events.

-process of preparing and distributing accounting reports to potential

users of accounting information.
Implicit in the Communication Process are:

Recording
-or JOURNALIZING is the process of systematically maintaining a
record of all economic business transactions after they have been
identified and measured.

Classifying
-is the sorting or grouping of similar and interrelated economic
transactions into their respective classes.

Summarizing
-is the preparation of financial statements which include the
statement of financial position, statement of comprehensive
income, statement of changes in equity and statement of cash
flows..
Objective of Accounting
-to provide quantitative financial information about a business
that is useful to statement users particularly owners and
creditors, in making economic decisions.
Forms of Business Organizations

1. SOLE PROPRIETORSHIP

also known as the sole trader or simply

a proprietorship, is a type of business entity
that is owned and run by one individual or one
legal person.
Forms of Business Organizations
2. PARTNERSHIP

A business owned by two or more persons who bind themselves

together to contribute money, property or industry to a common fund,
with the intention of dividing the profit among themselves.

OR
Forms of Business Organizations

3. CORPORATION

An artificial being created by operation of law, having the right

of succession and the powers, attributes ad properties
expressly authorized by law or incident to its existence.
Types of Business
TYPE ACTIVITY

1. SERVICE Selling people’s time

2. MERCHANDISING/TRADE Buying and selling products

3. MANUFACTURING Conversion of raw materials

into finished products
4. RAW MATERIALS Growing or extracting of raw
materials
5. INFRASTRUCTURE Selling the utilization or use of
infrastructures
6. FINANCIAL Receiving deposits, lending and
investing money
7. INSURANCE Pooling of premiums of many
to meet claims of few
1. Public Accounting
Public accountants render independent and expert financial services to the
public. Accountants collect professional fees for their services. They offer three kinds of
services, namely auditing, taxation and management advisory services.

2. Private Accounting (Commerce and Industry)

CPAs are employed in business entities in various capacity as accounting
staff, chief accountant, internal auditor and controller.
3. Government Accounting
The focus of government accounting is the custody and administration of
funds. Accountants are employed in many branches of government, more particularly
the BIR, Commission on Audit, Department of Budget and Management, Securities
and exchange Commission and the local government units.

4. Education/Academe
This guarantees the continued development of the profession. By this,
accountants are considered modern day heroes as they make others understand the
body of accounting knowledge and prepare the candidates for the tough CPA
exams.
BRANCHES OF ACCOUNTING

Primary service offered by most public practitioners.

AUDITING
It is the examination of financial statements by
independent certified public accountant for the
purpose of expressing an opinion as to the fairness
with which the financial statements are prepared.

Mechanical task involving the collection of basic

BOOKKEEPING
financial data. It is procedural and largely concerned
with development and maintenance of accounting
records. It is the how of accounting.
BRANCHES OF ACCOUNTING
Cost accounting is the branch of accounting that
provides economic and financial information to
decision makers within a company. It is limited COST
predominantly to use within the company to aid ACCOUNTING
management in the process of making choices that
will benefit the stockholders/owners by maximizing
company profits that translate into maximizing
stockholder wealth.

Primarily concerned with the recording of business FINANCIAL

transactions and the eventual preparation of ACCOUNTING
financial statements.
BRANCHES OF ACCOUNTING

FINANCIAL It refers to the efficient and effective management of

MANAGEMENT money (funds) in such a manner as to accomplish the
objectives of the organization. It includes how to
raise the capital, how to allocate it i.e. capital
budgeting. Not only about long term budgeting but
also how to allocate the short term resources like
current assets.

MANAGEMENT
ACCOUNTING It incorporates cost accounting data and adapts
them for specific decisions which management
may be called upon to make. It is needed by
management in planning, controlling an evaluating
the entity’s operations.
BRANCHES OF ACCOUNTING

Tax accounting includes the preparation of tax returns

TAXATION
and the determination of the tax consequences of
certain proposed business endeavors or transactions.

Government accounting is concerned with systematic

GOVERNMENT
and scientific recording of government revenues and
ACCOUNTING
expenditures. It reveals how public funds have been
generated and utilized for the welfare of the general
public.
Fundamental Principles (PICOP)

Professional Competence and

Due Care

Integrity

Confidentiality

Objectivity

Professional Behavior
 Also known as the Republic Act No. 9298 is the law regulating the practice of
accountancy in the Philippines

 Signed by President Gloria Macapagal-Arroyo on May 13, 2004.

 International Accounting Standards and
Accounting Standards in the Philippines
-are authoritative statements of how
particular types of transaction and other
events should be reflected in financial
statements.
International Accounting Standards

IASC -IAS
IASB -IFRS
SIC/ IFRIC -Interpretations
Philippines

ASC -SFAS/ PAS

FRSC -PFRS
IC/PIC -Interpretations
PRIMARY

Suppliers and other

Investors Lenders
trade creditors

SECONDARY

Employees Customers

Government and
Public
their agencies
 Concerned with the risk inherent in, and return provided by,
Investors
their investments.

Interested in the information that enables them to

Lenders determine whether their loans, and the interest
attaching to them will be paid when due.

Suppliers and other Interested in information that enables them to

trade creditors determine whether amounts owing to them will be paid
when due.
 Employees Customers

Interested in information about the Customers have an interest in

stability and profitability of their information about the continuance
employers. They are also interested in of an entity, especially when they
information which enables them to have a long term involvement with,
assess the ability of the entity to or are dependent on, the entity.
provide remuneration, retirement
benefits and employment
opportunities.
 Government and Interested in the allocation of resources and, therefore,
their agencies the activities of entities. They also require information in
order to regulate the activities of entities, determine
taxation policies and as the basis for national income
and similar statistics.

The financial statements may assist the public by

providing information about the trends and recent Public
developments in the prosperity of the entity and the
range of its activities.
 Accounting embraces auditing. Auditing is one of the
areas of accounting specialization.
 Accounting is essentially constructive in nature. It ceases
when financial statements are prepared.
Auditing is analytical. The work of an auditor begins when
the work of an accountant ends.
 Bookkeeping is procedural and largely concerned with
development and maintenance of accounting records. The “how”
of accounting.

 Accounting is conceptual and is concerned with the “why”,

reason or justification for any action adopted.