FABM 1

• Accounting

  A process of identifying, recording, and communicating economic events of an organization to interested users
• Accounting process

  1. Identifying

  2. Recording

  3. Communicating
• Identifying


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


  Keeping a chronological diary of events that are measured in periods
• Communicating


  Occurs through the preparation and distribution of financial and other accounting reports
• Accounting is a systematic recording of financial transactions and the presentation of the related information to appropriate persons
• Basic features of accounting

  • A service activity
  • A process
  • Both an art and a discipline
• Service activity

  Provides assistance to decision makers by providing them financial reports that will guide them
• Process


  Method of performing any specific job step by step according to the objectives
• Art of accounting

  Recording, classifying, summarizing and finalizing financial events
• Art

  Refers to the way something is performed, involving creativity and skill to help attain specific objectives
• Discipline


  Follows certain standards and professional ethics
• Accounting deals with financial information only, it does not deal with non-monetary or non-financial aspects
• Accounting regards financial transactions and data, classifies them and finalizes their results given for a specified period of time
• Accounting is recognized or characterized as a storehouse of information
• This discipline of knowledge has evolved to meet the need for financial information as required by various interested groups
• Function of accounting in business

  Considered as the "language of business"
• Means of accounting

  By which business info is communicated to business owners and stakeholders
• Role of accounting in business

  To provide information for managers and owners to use in operating business
• Accounting helps users

  To see the true picture of the business in financial terms
• Record-keeping was already common

  Around 3600 B.C.
• Regions with early record-keeping

  • Mesopotamia
  • China
  • India
  • Central America
  • South America
• The oldest evidence of record-keeping was the clay tablet
• Double-Entry Bookkeeping

  14th Century
• The most important event in accounting history is the dissemination of double-entry bookkeeping by Luca Pacioli
• Luca Pacioli


  The father of accounting in 14th Century Italy
• Luca Pacioli was a friend and contemporary of Leonardo da Vinci
• Luca Pacioli wrote Summa de arithmetica, the first book published that contained double-entry bookkeeping