ACCOUNTING

• • Accounting is 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 is the process of identifying , measuring, and communicating economic information to permit informed judgements and decisions by users of the information.
• • Accounting is the art of recording, classifying and summarizing in a significant manner and in terms of money.
• FOUR PHASES OF ACCOUNTING

  • RECORDING
  • CLASSIFYING
  • SUMMARIZING
  • INTERPRETING
• • RECORDING-business transactions are recorded systematically and chronologically in the proper accounting books.
• • CLASSIFYINGthey may be classified as asset accounts, Liability accounts, capital accounts, income accounts, and expense accounts.
• • SUMMARIZINGdata recorded are summarized through financial statements.
• • INTERPRETING due to the technicality of accounting reports, the accountant’s  interpretation of the financial statement is needed.
• TYPES OF BUSINESS

  • services
  • trader
  • manufacture
  • raw materials
  • infrastructure
  • financial
  • insurance
• • Services Selling people's time
• • TRADER - Buying and Selling products 
• • MANUFACTURE- Designing products, aggregating components and assembling finished products
• • RAW MATERIALS- Growing or extracting raw materials 
• • INFRASTRUCTURE - Selling the utilization of infrastructure
• • FINANCIAL - Receiving deposits, lending and investing money 
• • INSURANCE - Pooling premiums of many to meet claims of a few
• A business is an organization engaged in the trade of goods, services, or both to consumers, generally to earn profit and increase the wealth of the owners
• FORMS OF BUSINESS ORGANIZATION

  • sole proprietorship
  • partnership
  • corporation
• SOLE PROPRIETORSHIP – The business organization has a single owner called the proprietor who generally is also the manager, Sole prop
• • PARTNERSHIP – A partnership is a business owned and operated by two or more persons who bind themselves to contribute money, property, or industry to a common fund with the intention of dividing the profits among themselves.
• CORPORATION – A corporation is a business owned by its stockholders. It is an artificial being created by operation of law, having the rights of succession and the powers, attributes and properties expressly authorized by law or incident to its existence.
• SOLE PROPRIETORSHIP

  1. Sole control over the operations
  2. Relatively easy to establish as there are less requirements mandated by law as compared to other forms of business.
  3. No sharing of profits
  4. Income from business is taxed as personal income
• PARTNERSHIP

  ADVANTAGES

  1. Has the benefit of second opinion in decision making
  2. Relatively easy to establish as there are less requirements mandated by law
  3. More investment capital is available
  4. Partners pay only personal income tax
  5. Partners share in the loss
• PARTNERSHIP

  DISADVANTAGES

  1. Partners are prone to encounter disagreement in decision making
  2. Partners assume unlimited personal liability
  3. Partners share in the profits
  4. Life of the business is limited
  5. Changes in ownership requires dissolution of the business
• CORPORATION

  ADVANTAGES

  1. Stockholders have limited liability
  2. Can raise the most investment capital
  3. Life of business is unlimited
  4. Ownership is easily transferable without the need to dissolve the business and without the consent of the other stockholders
• DISADVANTAGES

  1. Earnings from investment in corporations are taxed twice-corporate income tax and final tax on dividend income
  2. Difficult to establish as it is more expensive to start up
  3. Difficult to establish as it is closely regulated by government agencies
• ACCOUNTANCY ACT OF 2004 

  SCOPE OF PRACTICE: (SEC.4)

  • PRACTICE OF PUBLIC ACCOUNTANCY
  • PRACTICE IN COMMERCE AND INDUSTRY
  • PRACTICE IN EDUCATION/ACADEME
  • PRACTICE IN GOVERNMENT
• • PRACTICE IN COMMERCE AND INDUSTRYshall constitute a person involved in decision making requiring professional knowledge in the science of accounting, or when such employment or position requires that the holder thereof must be a certified public accountant.
• • PRACTICE IN EDUCATION/ACADEMEshall constitute a person in an educational institution which involves teaching of accounting, auditing, management advisory services, finance, business law, taxation, in other technically related subjects.
• • PRACTICE IN GOVERNMENT shall constitute any person who holds, or is appointed to eight a in an accounting professional group in government or in government-owned and/or controlled corporation.
• BRANCHES OF ACCOUNTING

  • auditing
  • bookkeeping
  • cost bookkeeping, costing & cost accounting
  • financial accounting
  • financial management
  • management accounting
  • taxation
• auditing is the accounting profession's most significant service to the public. An external audit is the independent examination that ensures the fairness and the reliability of the reports that management submits to the user outside the business entity.
• • bookkeeping it's a mechanical task involving the collection of basic financial data. The data are first entered in the accounting records or the book of accounts, and then extracted, classified and summarized in the form of income statement, balance sheet, and cash flow statement.
• • COST BOOKKEEPING, COSTING & COST ACCTG.cost bookkeeping is the process that involves the recording of cost data in the book of accounts.
• FINANCIAL ACCOUNTING- financial accounting is focused on the recording of business transactions and the periodic preparation of reports on financial position and results of operation.
• • FINANCIAL MANAGEMENT- financial managers are responsible for setting financial objectives, making plans based on those objectives, obtaining the finance needed to achieve the plans, and generally safeguarding all the financial resources of the entity.
• • MANAGEMENT ACCOUNTING- management accounting incorporates cost accounting data and adapts them for specific decisions which management may be called upon to make.
• • TAXATION - tax accounting includes the preparation of tax returns and the consideration of tax consequences of proposed business transactions or alternative courses of action.
• Bookkeeping is mainly related to identifying, measuring and recording Financial transactions. Its objective is simply to keep a record of all financial transactions of a business;
• Accounting, on the other hand, is the process of summarizing, interpreting, and communicating financial transactions which were classified in the ledger account.