Lesson 1: Introduction to Accounting

• Accounting


  Accounting is a service activity. Its function is to provide quantitative information, primarily financial in nature. It is about economic entities. It is intended to be useful in making economic decisions and in making reasoned choices among alternative courses of action. — Accounting Standards Council
• Accounting is a service activity

  Accounting is not done for free; accounting firms provide accounting services.
• Financial in nature


  Cash, money, etc.
• About economic entities


  All organizations and businesses are economic entities.
• Useful in making decisions

  Useful in management for business decisions.
• Accounting plays a huge role in a business as it dictates the status and flow of the organization.
• Nature of Accounting


  1. Art - accounting is an art in nature; there is a systematized process.
  2. Financial/financial in nature - cash, money, etc.
  3. Process - accounting is science; it uses a step-by-step process, meaning you can't skip or pass steps.
  4. Information System - providing financial reports and statements to inform directors and executives about the status of the business.
• Functions of Accounting

  1. Maintenance of systematic records
  2. Financial results of an entity can be communicated
  3. Meeting legal requirement
  4. Protecting assets of a business
  5. Assistance management
• Maintenance of systematic records

  Through bookkeeping, making financial statements, taxes, etc.
• Protecting assets of a business

  Utilizes bookkeeping, financial statements, taxes and more to provide financial advice.
• Business is not just a hobby; it is done to grow and enlarge finances.
• Accounting is the language and heart of a business.
• History of Accounting

  • Accounting can be traced to ancient civilization.
  • Accounting records have been found more than 7,000 years ago in Mesopotamia.
  • There was business (kalakal/barter/trade) in ancient times.
  • Accounting records were also found in Ancient Babylon, Assyria, and Sumeria.
  • Accounting is an effective way to manage finances.
  • Everything has a translation to money in accounting.
• Luca Bartolomeo de Pacioli (Part 1)

  • He is an Italian mathematician and Franciscan Friar.
  • He is regarded as the 'Father of Accounting' as he formally introduced the term "accounting" in his published book.
• Luca Bartolomeo de Pacioli (Part 2)

  • He published the book "Summa de Arithemetica, Geometria, Proportioni, et Proportionalita" (or Summary of Arithmetic, Geometry, Proportion, and Proportionality in English) in 1494.
  • He pioneered bookkeeping and the Double Entry Accounting System—a balancing system which basically states that if something happens on the left side of the entry, there should also happen something on the right side of the entry (thus the name "Double Entry").