FABM(all lesson)

• Accounting


  A system that measures business activities, processes that information into reports and communicates the results to decision makers
• Accounting quantifies business communication. For this reason, accounting is called the language of business
• Accountants


  The "Scorekeepers of business"
• Accounting


  A service activity. Its function is to provide quantitative information, primarily financial in nature, about economic entities that is intended to be useful in making economic decisions
• Accounting


  An information system that measures, processes and communicates financial information about an economic entity
• Accounting


  The process of identifying, measuring and communicating economic information to permit informed judgements and decisions by users of the information
• Accounting


  The art of recording, classifying and summarizing in a significant manner and in terms of money, transactions and events which are, in part at least, of a financial character, and interpreting the results thereof
• Functions of Accounting


  1. Record

  2. Classifying

  3. Summarizing

  4. Interpreting
• Recording


  1. Business transactions are recorded thematically and chronologically in the proper accounting books

  2. Before the effects of transactions can be recorded, they must be measured

  3. Accounting information must be expressed in terms of a common financial denominator (money)
• Classifying


  1. Items are sorted and grouped. Similar items being classified under the same time

  2. Classification reduces the effects of numerous transactions into useful groups or categories
• Summarizing


  1. After each accounting period, data recorded are summarized through financial statements

  2. These summarize the effects of all business transactions that occurred during some period
• Interpreting


  1. The accountant's interpretation on the financial statements

  2. Accounting provides the decision-makers with information to make reasoned choices among the alternative uses of scarce resources in the conduct of business and economic activities
• Accounting Information System


  • Used by a business to analyze transactions, handle routine bookkeeping tasks and structure information so it can be used to evaluate the performance health of the business
  • Generates output in the form of financial reports which can be further categorized into internal and external reports
• Preconditions for the Emergence of Systematic Bookkeeping


  • Art of Writing
  • Arithmetic
  • Private Property
  • Money
  • Credit
  • Commerce
  • Capital
• Florentine Approach


  • The earliest evidence of business bookkeeping in Florence, France was evidenced by the bank ledger fragments of 1211 and with the development of accounting in Tuscany, Italy during the 13th century
  • Accounts were not related in any special way and balancing of the accounts was lacking
  • The emergence of double entry itself was first witnessed in the "ledger" of Renieri Fini & Brothers (1296-1305) and Giovanni Farolfi & Company (1299-1300)
• Amatino Manucci


  The inventor of double-entry bookkeeping. He managed to construct a comprehensive and fully articulated set of double-entry records, with a regular balancing procedure on closure of the General Ledger
• Luca Pacioli


  • A Franciscan friar and a celebrated mathematician, is generally associated with the introduction of double-entry bookkeeping
  • He stated that the purpose of bookkeeping was "to give the trader without delay information as to his assets and liabilities"
  • He said "It is always good to close the books each year, especially if you are in a partnership with others. Frequent accounting makes for long friendship"
• Ordonnance de Commerce of 1673


  • The earliest systematized form of accounting regulation developed in continental Europe, starting in France in 1673
  • The government introduced the submission of an annual fair value statement of financial position to protect the economy from bankruptcy
  • It is the legal requirement for businesses to keep accounting records
• Nicolas Petri


  In the 17th century, he was the first person to group similar transactions in a separate record and enter the monthly totals in the journal, rather than recording all transactions in a series
• Benjamin Workman


  In 1769, he published The American Accountant, the earliest-known American accounting textbook
• Industrial Revolution and Corporate Organization

  • This revolution changed the method of producing commercial goods from the handicraft method to the factory system
  • Development of a corporate form of organization
  • Accountancy reached the shores of the United States of America as a natural result of investments being made by British businessmen
• Railroads


  • They are the heavy users of debt financing in the late 1800s
  • Were the first American firms to issue balance sheets to absentee creditors
  • Depreciation had become a tool used by management to counter fluctuations in profits
• United States Steel


  On March 12, 1903, they published consolidated financial statements as of December 31, 1902, together with Price Waterhouse & Company's assurance that they were audited and found correct
• Eugen Schmalenbach


  In early 1920s, he was frustrated repeatedly with his failure to compare meaningfully the financial data made available by different companies. This led to a research on the problem and the publication of his book, The Modern Chart of Accounts
• Dan Brinklin and Bob Frankston


  • They wrote VisiCalc for the Apple II, the first electronic spreadsheet, the most important business application for the personal computer
  • Tasks those are time-consuming when done manually can now be done with speed, consistency, precision, and reliability by computers
• Republic Act 9298 (Philippine Accountancy Act of 2004)


  Signed into law by President Gloria Macapagal-Arroyo on May 13, 2004. This law regulates the practice of accountancy in the Philippines
• Branches of Accounting


  • Bookkeeping
  • Financial Accounting
  • Management Accounting
  • Cost Accounting
  • Financial Management
  • Government Accounting
  • Auditing
  • Taxation
  • Accountancy Research
  • Forensic Accounting
  • International Accounting
• Bookkeeping


  • A mechanical task involving the collection of basic data
  • The data are first entered in the accounting records or the books of accounts, and then extracted, classified and summarized in the form of income statement, balance sheet, and cash flows statement
• Financial Accounting


  • Involves recording and classifying business transactions, and preparing and presenting financial statements to be used by internal and external users
  • In the preparation financial statements, strict compliance with generally accepted accounting principles or GAAP is observed. Financial accounting is primarily concerned in processing historical data
• Management Accounting


  • Focuses on providing information for use by internal users, the management
  • This branch deals with the needs of the management rather than strict compliance with generally accepted accounting principles
  • Managerial Accounting involves financial analysis, budgeting and forecasting, cost analysis, evaluation of business decisions and similar areas
• Cost Accounting


  • Often times considered as a subset of management accounting, cost accounting refers to the recording, presentation and analysis of manufacturing costs
  • Very useful in manufacturing business since they have the most complicated costing process
  • Cost accountants also analyze actual cost versus budgets or standards to help determine future courses of action regarding the company's cost management
• Financial Management


  • Can be defined as the management of the finances of an organization to achieve the financial objectives of the entity
  • Financial management decisions cover investment decisions, financing decisions, distributing profits back to investors, and risk management
• Government Accounting


  • Refers to the process of recording and management of all financial transactions incurred by the government which includes its income and expenditures
  • Various governmental accounting system are used by various public sector entities
• Auditing


  • External Auditing
  • Internal Auditing
• External Auditing


  Refers to the examination of financial statements by an independent party with the purpose of expressing an opinion as the fairness of presentation and the compliance with GAAP
• Internal Auditing


  Focuses on evaluating the adequacy of a company's internal control structure by testing segregation of duties, policies and procedures, degrees of authorization, and other controls implemented by management
• Taxation


  Tax accounting helps clients follow rules set by tax authorities. It include tax planning and preparation of tax returns it also involves determination of income tax and other taxes, tax advisory service such as ways to minimize taxes legally, evaluation of the consequences of tax decisions and other tax related matters
• Accountancy Research


  The systematic process collecting and analyzing information to increase one's understanding of the function of a professional accountant and contribute to the solution of problems besetting the practice of the profession
• Forensic Accounting


  Involves court and litigation cases, fraud investigation, claims and dispute resolution, and other areas that involve legal matters. This is one of the popular trends in accounting today
• International Accounting


  Study of standard, guidelines and rules of accounting, auditing and taxation that exist within each country as well as comparison of those items across countries