ACC 101
FUNDAMENTAL
S OF
ACCOUNTING
MS. ARLA MAE TAN LARA
WHY
ACCOUNTING?
ACCOUNTING
O LANGUAGE of
BUSINESS
HISTORY OF
ACCOUNTING
A = L + E
O 14th – 17th Century
- RENAISSANCE PERIOD in EUROPE,
ITALY
O FRA LUCA PACOILI – Father of the
Double
Entry Bookkeeping
O CONCEPTUAL FRAMEWORK
Generally Accepted Accounting
Principles
ACCOUNTING
Ois 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
Ois the art of recording,
classifying and summarizing
in a significant manner and in
terms of money transaction
and events which are in part
of at least of financial and
interpreting the result
thereof.
ACCOUNTING
Ois the process of
identifying, measuring, and
communicating economic
information to permit
informed judgement and
decision by users of the
information.
All of the above definitions touch the
most important points of Accounting
as:
1. accounting is about quantitative
information
2. the information is of financial in
character
3. usefulness of information in decision
making
4 PHASES OF
ACCOUNTING
1 . RECORDING
2. CLASSIFYING
3. SUMMARIZING
4. INTERPRETING
RECORDING
O Recording - this is the phase of
accounting which involves the
routine and mechanical process of
writing down the business
transactions and events in the books
of accounts in a chronological
manner called Journalizing.
Before business transactions and events could
be recorded, firstly, the documents should be
identified, analyzed and measured.
- By identifying, we mean, there should be a
basis of determining whether such were
business transactions and events or not. As
a rule, only transactions and events with
financial bearing to the business are
recognized.
- By analyzing, we mean that there should be
a "dual effect", normally the value received
and the value parted with of the
transactions.
- By measuring, we mean the assigning of
monetary values involved in a transaction.
In the Philippines, we used the peso as the
common financial denominator.
CLASSIFYING
O Classifying this is the phase of
accounting which involves sorting or
grouping of similar and interrelated
transactions and events into their
respective kind and classes. This is
actually the process of transferring
the entries from the journal to the
ledger called Posting
SUMMARIZING
Summarizing this is the phase of
accounting which involves the
completion of the financial statements
and the accounting requirements as
well. This starts from striking of a trial
balance, plotting down of adjusting
entries in the worksheet and the
preparations of closing entries, post-
closing trial balance and reversing
entries.
INTERPRETING
Interpreting this is the phase of
accounting which involves the
"analytical and interpretative works".
It is then, that when financial
statements are analyzed, interpreted
and are communicated to those
interested parties where these could
be of great help to management as a
basis for making a sound decision.
TYPES OF ACCOUNTING
INFORMATION
O Financial Accounting
O Auditing
O Management Accounting
O Tax Accounting
O Financial Management
O Cost Accounting
O Government Accounting
Financial Accounting
O concerns primarily in describing the
financial resources, obligations, and
activities of an economic entity
resulting to the preparation of
general-purpose financial reports on
financial position and operating
results.
Auditing
O Internal Auditing sees to it, that the
established accounting procedures are being
followed throughout the year. It determines
strict adherence to management policies and
measures the efficiency of operations. These
are usually performed by its own employees or
staff of the company while the external
auditing is performed by an independent
professional accountant, who critically
examines the book of accounts and renders an
opinion on the fairness of financial statements
being examined
Management
Accounting
O It is primarily concern with the
designs, installation and
improvements of accounting system
intended specifically to help
management in running the
business.
Tax Accounting
O It involves the preparation of income tax
returns and the determination of correct
amount of taxes due and payable to the
government. The most challenging
aspect of tax accounting is not the
preparation itself, but the tax planning
which is anticipating the tax effects of
business transactions and structuring
these transactions in a manner that will
minimize the income tax burden.
Financial Management
This is a new type of accounting
information wherein its primary
concern is to set-up financial planning
objectives-including the sources and
application of its resources beneficial
to the economic entity.
Cost Accounting
O concerns primarily on cost collection,
allocation and control of producing
goods and services.
Government
Accounting
O deals primarily on the proper
custody of public funds in both
national and local government, such
as cities, provinces, municipalities
and barangays.
HYUNDAI
FACEBOOK
NIKE
SHELL
STARBUCKS
TIKTOK
SHOPEE
GCASH
SPOTIFY
YOUTUBE
TOYOTA
LOUIS VUITTON
TRIBAL
JOLLIBEE
ROBINSON’S
SUPERMARKET
PEPSI
WATSON
MERCURY DRUG
M LHUILLIER
INSTAGRAM
MITSUBISHI
HANABISHI
PETRON
RUSI MOTORCYCLES
PALAWAN EXPRESS
PEN SHOPPE
CITI BANK
APPLE
SILVER SWAN
JCO DONUTS & COFFEE
UNIVERSAL ROBINA
SM MALLS
AQUA FLASK
CHERRY MOBILE
GOOGLE
MCDONALDS
GLOBE
CHANEL
MICROSOFT
PINTEREST
PUMA
SAN MIGUEL BREWERY
PAYLESS
MASTER CARD
LANDBANK
FORMS OF BUSINESS
ORGANIZATION
1. Sole/Single
Proprietorship
2. Partnership
3. Corporation
4. Cooperatives
SINGLE
PROPRIETORSHIP
O It is a business structure owned by
an individual who has full
control/authority of its business and
owns all the assets, personally owes
answer to all liabilities or suffer all
losses but enjoys all the profits to
the exclusion of others.
PARTNERSHIP
O Under Civil Code of the Philippines, a
partnership is treated as a juridical
person, having a separate legal
personality from that of its members.
Partnerships may either be general
partnership or limited partnership. It
consist of two or more partners.
CORPORATION
O It is a juridical person establish under the
operation of law with a personality
separate and distinct from that of its
stockholders. The liability of the
shareholders of the corporation is limited
to the amount of their share capital. It
consist of at least 15 incorporators, each
of whom must hold at least 1 share and
must be registered with the Securities
and Exchange Commission (SEC)
COOPERATIVES
O Articles of Cooperation is registered with
Cooperative Development Authority (CDA). It has
its board of directors who are elected from
among its members. In a cooperative, it is on a
"one-man, one-vote" basis. Moreover, patronage
refund is given to cooperative members who
patronize their business activities. Annually,
cooperatives are also holding members'
assembly meeting wherein they are going to
elect the new sets of officers and board of
directors. It is during this assembly that each
member will receive a copy of cooperatives'
financial reports.
TYPES OF BUSINESS
AS TO ACTIVITY
1. Service
2. Merchandising/Trading
3. Manufacturing
4. Agriculture
5. Hybrid Companies
SERVICE
This type of business offers professional
skills, advice and consultation.
It offers intangible products to customer
using their skills and expertise.
Example:
1. Barber shop
2. Beauty Parlor
3. Banks
4. Accounting and Law Firm
MERCHANDISING/
TRADING
This type of business buys at wholesales
and later sells the products at retail.
They make a profit by selling the
merchandise or products at prices that
are higher than their purchase cost.
It is also known as “buy and sell”
Example:
1. Sari-sari Store
2. Book Stores
3. Hardware
MANUFACTURING
This type of business buys raw
materials and uses them in making a
new product, therefore combining raw
materials, labor, and expenses into a
product for sale later on.
Example:
1. Shoe Manufacturing Business
2. Car Manufacturing
AGRICULTURE
O the business is engaged in planting
of crops and sells its products either
in raw or finished form at a profit.
HYBRID COMPANIES
Those involve in more than one type of
activity which are manufacturing,
merchandise and service
ASSIGNMENT 1
O Define the following terms:
1. Asset
2. Liabilities
3. Equity
4. Income
5. Expense