B.A

• Businesses focus more on providing products or services for the purpose of making profit.
• Entrepreneurship, on the contrary, focuses on generating new value, and this value could be social, emotional, aesthetic and/or financial
• Entrepreneurship is a process of actions of an entrepreneur who is always in search of something new to exploit new ideas into gainful opportunities by accepting the risk and uncertainty of the enterprise (De Guzman, 2018)
• Entrepreneurship is a science of converting ideas into business (Abad, 2009).
• Entrepreneurship focuses on generating new value, which can be social, emotional, aesthetic, and/or financial
• Entrepreneurship is a process of actions by an entrepreneur who seeks to exploit new ideas into gainful opportunities by accepting risk and uncertainty
• Entrepreneurship is described as the science of converting ideas into business
• Salient features of entrepreneurship include providing values to customers, opening and managing self-owned businesses, risk-taking ventures, the art of correct practices, and wealth-creating ventures
• Entrepreneurship involves constant change, movement, and innovation
• Entrepreneurship operates within the concept of wealth creation rather than profit generation
• Entrepreneurs define value from the perspective of buyers, not just their own, as what is valuable to the entrepreneur may not be valuable to consumers
• Entrepreneurship entails opening and managing self-owned enterprises, excluding businesses managed by others for the benefit of owners
• Types of Business According to Nature of Activity:
• Service Business:

  • Provides intangible resources
  • Offers professional skills, expertise, advice, and similar products
  • Examples include salons, repair shops, schools, banks, accounting firms, and law firms
• Merchandising Business:

  • Buys products at wholesale price and sells at retail price
  • Known as "Buy-and-Sell" businesses
  • Makes profit by selling products at higher than purchase
  • Sells products without changing their form
  • Examples include grocery stores, convenience stores, distributors, and other resellers
• Manufacturing Business:

  • Buys products to use as materials in making new products
• Hybrid Business:

  • Companies that may be classified in more than one type of business
  • Example: Restaurant
• Forms of Business According to Ownership:
• Sole Proprietorship (Registered with DTI):

  • Simplest and easiest business to organize
  • Controlled and owned by an individual/entrepreneur
  • Owner is solely responsible for all business liabilities
  • Sole proprietors are considered single taxpayers
• Partnership (Owned by 2 or more, Registered with SEC):

  • Owned by two or more persons who contribute resources
  • Partners divide profits among themselves
  • Partners have mutual agreements on decision-making and future partners
• Corporation (Owned by 5 or more, Registered with SEC):

  • An artificial being created by law
  • Has a distinct legal personality separate from owners
  • Types include Stock Corporation and Non-Stock Corporation
• Cooperative (Registered with CDA):

  • Business organization owned by a group of individuals for mutual benefit
  • Group members are called members
  • Cooperatives may be incorporated or unincorporated
• Functions of Accounting in Business:
• Accounting is a discipline with techniques to record, classify, and summarize transactions in a proper and systematic way
• Accounting presents and explains income, expenditure, profit-loss, and asset-liabilities for management and investors
• Accounting measures the financial position of entities involved in economic activity and aids in management decision-making
• Users of Accounting Information and Decisions Made:
• Internal Users:

  • Management uses accounting information for planning, controlling, and decision-making processes
• External Users:

  • Employees use accounting information to determine job security, future remuneration, and retirement benefits
  • Owners analyze the viability and profitability of investments using accounting information
  • Creditors use accounting information to determine creditworthiness of businesses
  • Investors are concerned with risk and returns of investment decisions
  • Consumers assess the financial position of businesses for decision-making
  • Regulatory authorities use accounting information to ensure compliance with rules and regulations
• Business Entity:

  • A business is considered a separate entity from the owner(s) and should be treated separately
  • Example: Insurance premiums or expenses for the owner’s house should be excluded from the expenses of the business
• Going Concern:

  • Assumes that an entity will continue to operate independently
  • Example: Possible losses from the closure of the business cannot be anticipated in the account
• Monetary Unit:

  • Financial transactions recorded and reported should be in the monetary unit
  • Non-financial or non-monetary information that cannot be measured in a monetary unit is not recorded in the accounting books
  • Example: A foreign currency like US dollar as payment from clients can be accepted even if the business is operating in the Philippines
• Historical Cost:

  • All business resources acquired should be valued and recorded based on the actual cash equivalent or original cost of acquisition
  • Example: The cost of fixed assets is recorded at the date of acquisition cost, including invoice price, freight charges, insurance, and installation costs
• Matching Concept:

  • Requires that revenue recorded in a given accounting period should have an equivalent expense recorded to show the true profit of the business
  • Example: Advance payment from clients must be recorded in the month when services were rendered
• Accounting Period:

  • Business must complete the whole accounting process over a specific time period
  • Example: The owner can monitor the results of the business operation periodically either monthly, quarterly, or annually to check profitability
• Conservatism:

  • Gives guidance on how to record uncertain events and estimates
  • Always consider any error on the most conservative side of any transaction
  • Example: Gold Guitar, Inc. does not need to record a gain on financial statements from a patent lawsuit settlement until it is certain
• Consistency:

  • Companies should use the same accounting treatment for similar events and transactions over time
  • Example: Bob’s Computers can change accounting methods for a justifiable reason, like minimizing taxes
• Materiality Concept:

  • Financial information is material to the financial statements if it would change the opinion of a reasonable person
  • Example: An extraordinary loss of P10,000 in a company with a net income of P10,000,000 is considered immaterial
• Objectivity:

  • Accounting information and financial reporting should be independent and supported with unbiased evidence
  • Example: A company's bank wants to see financial statements before allowing a loan
• Revenue Recognition Principle:

  • Revenue should be recognized and recorded when it is realized or realizable and when it is earned
  • Example: Sales should not be recorded until payment is received and the product is delivered