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Understanding the Accounting Process

The document defines accounting and explains its components of identifying, measuring, and communicating. Accounting is defined as a service activity that provides quantitative financial information to help with economic decision making. Identifying recognizes accountable business events. Measuring assigns monetary amounts to transactions using historical cost or current value. Communicating prepares and distributes accounting reports for users.

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3 views2 pages

Understanding the Accounting Process

The document defines accounting and explains its components of identifying, measuring, and communicating. Accounting is defined as a service activity that provides quantitative financial information to help with economic decision making. Identifying recognizes accountable business events. Measuring assigns monetary amounts to transactions using historical cost or current value. Communicating prepares and distributes accounting reports for users.

Uploaded by

blunty piper
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd

Chapter 1: The Accountancy Profession

Questions:

1. Define Accounting.

Accounting, by book definition, is a service activity. The accounting


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 (ASC) )
Accounting 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 (AICPA) - Committee of
Accounting Terminology)
Accounting is the process of identifying, measuring and
communicating economic information to permit informed judgment and
decision by users of information. (American Accounting Association (AAA) -
Statement of Basic Accounting Theory)

2. Explain identifying as a component of accounting.

Identifying is also considered as the analytical component.


Identifying is the accounting process, it is the recognition and
derecognition of business activities as “accountable” events.

3. When is a transaction accountable or quantifiable?

When it has an effect on assets, liabilities and equity.

4. Explain measuring as a component of accounting.

Measuring is also considered as the technical component.


It is the accounting process of assigning of peso amounts to the
accountable economic transactions and events.
The measurement bases are historical cost and current value.
Historical cost is the original acquisition cost and the most common
measure of financial transaction.
Current vlue includes fair value, value in use, fulfillment value and
current cost.

5. Explain communicating as component of accounting.

Communicating is also considered as the formal component.


This is the process of preparing and distributing accounting reports
to potential users of accounting information.
Implicit in the communication process are the recording, classifying and
summarizing aspects of accounting.

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