Module 1

• Accounting is commonly referred to as the “language of business” because it is practical and universal
• According to the Financial Reporting Standards Council (FRSC), accounting is a service. It provides quantitative financial information about economic entities intended to be helpful in making economic decisions.
• the American Accounting Association(AAA), definesaccounting as“the process of identifying, measuring, and communicating economic information to permit informed judgment and decisions” by users of the information.
• TheAmerican Institute of Certified Public Accountants(AICPA) defines accounting as the “art of recording, classifying, and summarizing”money, transactions, and eventsthatare, in part, at least of financial character and interpreting the results thereof.
• 5 Natures of Accounting

  1. Accounting is an art
  2. Accounting is a science
  3. Accounting is an ideology
  4. Accounting deals with financial information and transactions
  5. Accounting is an information system
• Internal Users – People within a business organization who use accounting information.

  • Owners
  • Managers
  • Employees
• External Users – People outside the business entity (organization) who use the accounting information of the company

  • Investors
  • Creditors/Lenders
  • Customers
  • Suppliers
  • Government
  • Public
• Friar Luca Pacioli is known as the father of accouting.
• Branches of Accounting

  1. Financial Accounting
  2. Managerial Accounting
  3. Auditing
  4. Taxation
  5. Government Accounting
  6. Cost Accounting
• Financial Accounting


  The gathering, classifying, analyzing, and recording of financial data in the books of accounts and preparing reports to management on the financial data.
• Managerial Accounting


  The gathering and reporting to management of data necessary for management decisions
• Auditing

  • External Auditing– The work of Certified Public Accountants outside the business organization in ascertaining the correctness of data in the financial statements for the statements’ acceptability to the public and government regulatory agencies
  • Internal Auditing–Reviews the business operations to check if they comply with management policies. It also evaluates the efficiency of business operations.
• Taxation


  Deals with the preparation of various tax returns and tax planning for the business. The data prepared is to be reported to the revenue collection agencies of the government
• Government Accounting


  Used by all branches of the government and by those who receive government funds to oversee the complicated business of providing government services andthe use of government funding in compliance with the imposed regulations
• Cost Accounting


  Analyzes the costs incurred by the business to help managers control expenses.
• Forms of Business Organizations

  • Sole Proprietorship
  • Partnership
  • Corporation
• Sole Proprietorship


  This is the simplest form of business organization where only one (1) individual owns the business
• Partnership


  This is formed by two (2) or more individuals to carry on as business owners
• Corporation –


  A separate body consisting of at least five (5) to 15 individuals treated by law as a unit
• Types of Business According to Activities

  • Merchandising Business
  • Manufacturing Business
  • Service Business