FUNAC

• Four Phases of Accounting

  1. Recording

  2. Classifying

  3. Summarizing

  4. Interpreting
• Recording


  Technically called bookkeeping. Business transactions are recorded systematically and chronologically in the proper accounting books. Preparation of the first book called journal.
• Classifying


  Items are sorted and grouped. Similar items are classified under the same name. They may be classified as liquid or non-liquid, operating or non-operating, real or nominal. Preparation of the second book called ledger.
• Summarizing


  After each accounting period, data recorded are summarized through financial statements. Preparation of trial balance, Balance Sheet and Income Statement.
• Interpreting


  The accountant's interpretation on the financial statement is needed.
• Accounting


  The process of identifying, recording and communicating economic events of an organization to interested users.
• Three Phases of Accounting

  1. Identifying

  2. Recording

  3. Communicating
• Identifying


  Selecting economic events that are relevant to a particular business transaction. Identifying the transactions and events.
• Recording


  Keeping a chronological diary of events that are measured in pesos. The diary referred to in the definition are the journals and ledgers.
• Communicating


  Occurs through the preparation and distribution of financial and other accounting reports. The interpreted data to the various users such as owners, investors, banks, etc.
• Accounting


  • It is a service activity
  • It is a process
  • It is both an art and a discipline
  • It deals with financial information and transactions
  • It is an information system
• The history of accounting is thousands of years old and can even be traced to ancient civilizations
• Around 3500 B.C., record-keeping was already common from Mesopotamia, China and India to Central and South America
• The Clay Tablets of Mesopotamia are ancient artifacts that hold the world's earliest writing
• Dissemination of double entry bookkeeping by Luca Pacioli "The Father of Accounting"


  14th Century
• Luca Pacioli wrote Summa de Arithmetica, the first book published that contained a detailed chapter on double-entry bookkeeping
• The Industrial Revolution


  1760-1830
• The beginnings of modern accounting in Europe and America


  19th Century
• The first national U.S. accounting society was set up in 1887
• A merger is when one company takes over all the operations of another business entity resulting in the dissolution of another business
• Accounting regulatory bodies required accounting practitioners to observe International Accounting Standards
• Accounting Concepts


  • Business Entity Concept
  • Monetary Unit Concept
  • Going Concern Concept
  • Accounting Period Concept
  • Cost Concept
  • Realization Concept
  • Accrual Concept
  • Matching Concept
  • Dual Aspect Concept
• Business Entity Concept


  A business enterprise is separate and distinct from its owner or investor
• Monetary Unit Concept


  Amounts are stated into a single monetary unit. This means that the focus of accounting transactions is on quantitative information rather than on qualitative information.
• Going Concern Concept


  Business is expected to continue indefinitely. People may come and go, but the business remains forever. Until and unless the business dies by itself.
• Accounting Period Concept


  Financial statements are to be divided into specific time intervals.
• Cost Concept


  Accounts should be recorded initially at cost.
• Realization Concept


  Unless money has been realized, no transaction can be said to have been taken place.
• Accrual Concept


  Revenue should be recognized when earned regardless of collection and expenses should be recognized when incurred regardless of payment.
• Matching Concept


  Cost should be matched with the revenue generated
• Dual Aspect Concept

  Transaction has a dual effect. By this, the individual has to record to both the debit and credit factors, when it comes to any transactions.
• Basic Principles in Accounting

  • Historical Cost
  • Materiality Principle
  • Full Disclosure Principle
  • Consistency Principle
  • Conservatism Principle
  • Objectivity Principle
• Historical Cost


  Acquired assets are to be recorded in the accounting books at actual cost or consideration received when the time the asset is acquired.
• Materiality Principle


  In case of assets that are immaterial to make a difference in the financial statements, the company should instead record it as an expense.
• Full Disclosure Principle


  Financial records and statements must disclose all relevant and vital financial information without any concealment.
• Consistency Principle


  Accounting methods, policies and practices should be applied on a uniform basis from period to period.
• Conservatism Principle


  In case of doubt, assets and income should not be overstated while liabilities and expenses should not be understated.
• Objectivity Principle


  All financial statements and data presented should be verifiable and free from personal biases. Every single transaction recorded should be backed up by appropriate claims and proof.
• Four Phases of Accounting

  1. Recording

  2. Classifying

  3. Summarizing

  4. Interpreting
• Recording


  Technically called bookkeeping. Business transactions are recorded systematically and chronologically in the proper accounting books. Preparation of the first book called journal.