ACCOUNTING

• Assets = Liabilities + Equity
• Recording


  1. Transactions are recorded chronologically in the books of original entries, i.e., Journal Books
• Classifying


  1. Sorting similar and related business transactions into three categories of assets, liabilities, and owner's equity
• Summarizing


  Preparing the financial statements from the transactions recorded in the books of accounts that are designed to meet the information needs of users
• Analysis and interpretation


  1. Analyzing then interpreting the financial data to make a meaningful judgment of the profitability and financial position of the business
• Accounting


  The process of identifying, recording, and communicating economic events of an organization to interested users
• Identifying


  Selecting economic events that are relevant to a particular business transaction
• Recording


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


  Preparation and distribution of financial and other accounting reports
• Accounting


  • It is a specialized language; a "language of business" that provides information about the financial position of an organization to other users
  • It is used in assessing the economic performance and condition of the business
• Accounting is part of our daily life. It is essential in the world of business because it functions as its language and provides information that is useful in decision making. It has its own characteristics, nature and origin. Simply understanding accounting will help an aspiring accountants or business manager understand the business works. 1. Definition: a. Accounting is an art of recording, classifying and summarizing in a significant manner and it terms of money, transactions and events which are in part of a financial character, and interpreting the results thereof.
• Nature of Accounting


  • Accounting is a service activity: 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: A process refers to the method of performing any specific job step by step according to the objectives, or target. Accounting is identified as a process as it performs the specific task of collecting, processing and communicating financial information
  • Accounting is an art: Accounting is an art of recording, classifying, summarizing and finalizing the financial data. The word 'art' refers to the way of performing something. It is a behavioral knowledge involving certain creativity and skill that may help us to attain some specific objectives. Accounting is a systematic method consisting of definite techniques and its proper application requires applied skill and expertise
  • Accounting is means and not an end: Accounting finds out the financial results and position of an entity and the same time, it communicates this information to its users. The users then take their own decisions on the basis of such information
• Accounting


  Deals with financial information and transactions, records the financial transactions and date after classifying the same and finalizes their result for a definite period for conveying them to their users
• Accounting


  • Only deals with financial information, does not deal with non-monetary information of non-financial aspect
• Accounting


  An information system that collects, processes and communicates financial information of any entity
• Accounting


  A discipline of knowledge that has evolved to meet the need of financial information required by different interested groups
• Functions of Accounting in business


  Provides information for managers and owners to use in operating the business
• Functions of Accounting in business


  Allows business owners to assess the efficiency and effectiveness of their business operations
• Functions of Accounting in business

  Prepared accounting reports can be compared with industry standards or to a leading competitor to determine how the business is doing
• Functions of Accounting in business

  Business owners may use historical financial accounting statements to create trends for analyzing and forecasting future sales
• The Different Branches of Accounting

  • Financial Accounting
  • Management Accounting
  • Government Accounting
  • Auditing
  • Tax Accounting
  • Cost Accounting
  • Accounting Education
• Financial Accounting


  The broadest branch, focused on the needs of external users, deals with the preparation of periodic financial reports using historical data to provide useful and timely information about an entity's financial position and operating results to users, following generally accepted accounting principles (GAAP)
• Management Accounting


  Also known as managerial accounting, emphasizes the preparation and analysis of accounting information within the organization to provide timely and relevant information for internal users' decision-making needs, often sensitive information not distributed externally
• Government Accounting


  The process of recording, analyzing, classifying, summarizing, communicating and interpreting financial information about the government in aggregate and in detail reflecting transactions and other economic events involving the receipt, spending, transfer, usability and disposition of assets and liabilities
• Types of Auditing


  • External auditing
  • Internal auditing
• External auditing


  Examination of financial statements by an independent CPA with the purpose of expressing an opinion as to fairness of presentation and compliance with GAAP
• Internal auditing


  Determining the operational efficiency of the company regarding the protection of the company's assets, accuracy and reliability of the accounting data, and adherence to certain management policies, by testing segregation of duties, policies and procedures, degrees of authorization, and other controls implemented by management
• Tax Accounting


  Helps clients follow rules set by tax authorities, includes tax planning and preparation of tax returns, determination of income tax and other taxes, tax advisory services such as ways to minimize taxes legally, and evaluation of the consequences of tax decisions
• Cost Accounting


  Refers to the recording, presentation, and analysis of manufacturing costs, including raw materials, direct labor, factory overhead, and all other costs involved in each stage of production of finished goods
• Accounting Education


  Involves planned grading and formal teaching in educational institutions, where accounting professionals can become faculty members and contribute to the development of the profession through effective teaching, publications of research, and influencing students to pursue careers in accounting
• Employment (DOLE), Social Security System (SSS), and Local Government Units
• Forms of Business Organizations

  • Sole /Single Proprietorship
  • Partnership
  • Corporation
  • Cooperatives
• Sole /Single Proprietorship


  A business owned and managed by only one person
• Partnership


  A business organization owned and managed by two or more people who agree to contribute money, property, or industry to a common fund for the purpose of earning a profit
• Corporation


  A business organized as a separate legal entity (artificial person) under the corporation law, managed by an elected board of directors, where the investors are called stockholders or shareholders and the unit of ownership is called share of stock
• Cooperatives


  A duly registered association of persons with a common bond of interest, voluntarily joining together to achieve their social, economic and cultural needs, where the owners are called members who contribute equitably to the capital of the cooperative, regulated by the Cooperative Development Authority (CDA)
• Service business


  Type of business operations engaged in the rendering of services
• Service business


  • dental clinics
  • barber shops and beauty parlors
  • repair shops
  • banks
  • accounting and law firms
• Merchandising business


  Type of business engaged in the buying and selling of goods
• Merchandising business


  • Make a profit by selling the merchandise or products at prices that are higher than their purchase costs