Chapter 1: Introduction to Accounting OUTPUT (FS) accounting report
ACCOUNTING- process of identifying,
recording and communicating economic BOOKKEEPING AND ACCOUNTING ARE NOT
information that’s useful in decision making THE SAME
BOOKKEEPING - process of recording the
ESSENTIAL ELEMENTS accounts or transactions of an entity
IDENTIFYING - Analyzes each business - Normally ends with the preparation of
transaction and identifies if “accountable trial balance
event” or “non-accountable event” - Does not require the interpretation of
- only ACCOUNTABLE EVENTS are recorded in the significance of the information
the books processed
- Accountable events – affect the ALE, IE ACCOUNTING – covers the whole process of
identifying, recording, and communicating
RECORDING – recognizes the accountable information to the interested users
events.
- after JOURNALIZING, LANGUAGE OF BUSINESS – FUNDAMENTAL
classifies effects on the accounts – POSTING TO THE COMMUNICATIO OF FINANCIAL
- Account is the basic storage of INFORMATION
information in accounting -external users – not directly involved in
managing the business
COMMUNICATING – summarizes the - internal users – directly involved in
accounting information then produce reports managing the business
(FS) to communicated with interested users
GENERAL PURPOSE ACCOUNTING
NATURE OF ACCOUNTING INFORMATION – designed to meet the
ACCOUNTING is a process with the basic common needs – FINANCIAL ACCOUNTING
purpose of providing information about – external users – PFRS (PHILIPPINE
economic activities that is intended to be FINANCIAL REPORTING STANDARDS
useful I in making economic decisions
SPECIAL PURPOSE ACCOUNTING
TYPES OF INFORMATION INFORMATION – specific needs –
1) QUANTITATIVE INFORMATION – management accounting or others – internal
numbers, quantities, or units users
2) QUALITATIVE INFORMATION – words or
descriptive form FINANCIAL STATEMENTS – structured
- Found in the notes (FS) and face of representation of an entity’s financial
other components of FS position and results of its operation
3) FINANCIAL INFORMATION – money, - End product of the accounting process
quantitative information
FINANCIAL REPORTING – FS + other
ACCOUNTING AS SCIENCE AND ART information
- SOCIAL SCIENCE, acctg is a body of
knowledge which has been systematically PRIMARY OBJECTIVE OF FINANCIAL
gathered, classified and organized REPORTING
- PRACTICAL ART, requires the use of creative - To provide information about an
skills and judgement entity’s economic resources (assets)
claims to those resources (liabilities
ACCOUNTING AS AN INFORMATION SYSTEM and equity) and changes in those
- SYSTEM – resources (income, expenses and
INPUT identified accountable events, other changes)
PROCESSes are recording, classifying and SECONDARY OBJECTIVE
summarizing,
- To provide information useful in
assessing the entity’s management
stewardship
MANAGEMENT ACCOUNTING – internal
users – management advisory services
GOVERNMENT ACCOUNTING, AUDITING,
TAX, ACCOUNTING, COST ACCOUNTING,
ACCOUNTING EDUCATION, ACCOUNTING
RESEARCH
FORMS OF BUSINESS ORGANIZATION
A Business is an activity where goods or
services are exchanged for money –
entrepreneur or businessman
1. SOLE OR SINGLE PROPRIETORSHIP –
registered in DTI (DEPARTMENT OF
TRADE AND INDUSTRY)
2. PARTNERSHIP – contract – SEC
(SECURITIES AND EXCHANGE
COMISSION)
3. CORPORATION – operation of law - SEC
(SECURITIES AND EXCHANGE
COMISSION)
4. COOPERATIVE – Philippine Cooperative
Code of 2008 – CDA (COOPERATIVE
DEVELOPMENT AUTHORITY)
TYPES OF BUSINESS ACCORDING TO
ACTIVITIES
- SERVICE BUSINESS
- MERCHANDISING (TRADING)
- MANUFACTURING