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 (according to Accounting Theory)


  • 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
• Accounting is a systematic recording of financial transactions and the presentation of the related information to appropriate persons
• Accounting provides assistance to decision makers by providing them financial reports that will guide them in coming up with sound decisions
• Accounting is a process, as it performs the specific task of collecting, processing and communicating financial information. In doing so, it follows some definite steps like the collection, recording, summarization, finalization and reporting of financial data
• Accounting is the art of recording, classifying, summarizing and interpreting financial data. The word art refers to the way something is performed. It is behavioral knowledge involving a certain creativity and skill to help us attain some specific objectives
• Accounting is a systematic method consisting of definite techniques and its proper application requires skill and expertise
• Accounting records financial transactions and data, classifies these and finalizes their results given for a specified period of time, as needed by their users. At every stage, from start to finish, accounting deals with financial information and financial information only. It does not deal with non-monetary or non-financial aspects of such information
• Accounting is recognized and characterized as a storehouse of information. As a service function, it collects processes and communicates financial information of any entity. This discipline of knowledge has evolved to meet the need for financial information as required by various interested groups
• Accounting helps the users of these financial reports to see the true picture of the business in financial terms. In order for a business to survive, it is important that a business owner or manager be well-informed
• Record-keeping was already common from Mesopotamia, China and India to Central and South America. The oldest evidence of this practice was the clay tablet of Mesopotamia which dealt with commercial transactions at the time such as listing of accounts receivable and accounts payable.


  Around 3500 B.C.
• 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. Mass production and the great importance of fixed assets were given attention during this period.


  1760-1830
• The modern, formal accounting profession emerged in Scotland in 1854 when Queen Victoria granted a Royal Charter to the Institute of Accountants in Glasgow, creating the profession of the Chartered Accountant (CA). In the late 1800s, chartered accountants from Scotland and Britain came to the U.S. to audit British investments. Some of these accountants stayed in the U.S., setting up accounting practices and becoming the origins of several U.S. accounting firms. The first national U.S. accounting society was set up in 1887. The American Association of Public Accountants was the forerunner to the current American Institute of Certified Public Accountants (AICPA). In this period rapid changes in accounting practice and reports were made. Accounting standards to be observed by accounting professionals were promulgated. Notable practices such as mergers, acquisitions and growth of multinational corporations were developed.


  19th Century
• Merger


  When one company takes over all the operations of another business entity resulting in the dissolution of another business.
• The accounting profession in the 21st century developed around state requirements for financial statement audits. Beyond the industry's self-regulation, the government also sets accounting standards, through laws and agencies such as the Securities and Exchange Commission (SEC). As economies worldwide continued to globalize, accounting regulatory bodies required accounting practitioners to observe International Accounting Standards. This is to assure transparency and reliability, and to obtain greater confidence on accounting information used by global investors. Nowadays, investors seek investment opportunities all over the world. To remain competitive, businesses everywhere feel the need to operate globally.


  The Present
• Accounting Concepts


  Generally accepted accounting principles, which form the fundamental basis of consistently preparing the universal form of financial statements
• 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, focus is on quantitative information rather than qualitative information
• Going Concern Concept


  • Business is expected to continue indefinitely, people may come and go but the business remains forever until it 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


  • No transaction can be said to have taken place unless money has been realized
• Accrual Concept


  • Revenue should be recognized when earned regardless of collection, 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, both debit and credit factors must be recorded
• The accounting principles are a broad set of rules that the business or the companies must adhere to when they are preparing and reporting their financial numbers as well as earnings
• Historical Cost Principle


  • 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