FABM SHS

• FUNDAMENTALS of Accountancy, Business & Management 1
• Lesson 1: Introduction to Accounting
• FUNDAMENTALS of Accountancy, Business & Management 1
• Lesson 1: Introduction to Accounting
• Teacher: Cherry Mae M. Villota, LPT
• At the end of this lesson, learners will be able to

  • Define accounting
  • Describe the nature of accounting
  • Explain the functions of accounting in business
  • Narrate the history/origin of accounting
• Knowledge needed in the study of Accounting includes the ability to identify and acquaint with its proper use on various business documents supporting the transactions before said transactions can be recorded in the book of accounts
• Knowledge needed in the study of Accounting includes the ability to analyze the transactions and situational problem requirements
• Knowledge needed in the study of Accounting includes knowledge in Arithmetic
• Knowledge needed in the study of Accounting includes a psychological factor “YES, I CAN”
• In BUSINESS


  • Accounting technicians
  • Graduate/undergraduates of any business course
  • Holders of baccalaureate degree in BSA
  • Passed licensure examination for CPA
• Career Opportunities


  • CPAs in Government Service
  • CPAs in Commerce and Industry
  • CPAs in Public Practice
  • CPAs in Education
• All CPAs are members of the Philippine Institute of Certified Public Accountant (PICPA)
• Accounting


  Process of recording systematically the business transactions in a chronological manner
• Accounting requires complete and accurate bookkeeping records necessary in the performance of its responsibility which is the analysis and interpretation of the financial reports
• Importance of keeping records and documents of business includes keeping a diary which will record all the activities for the day and even for a year
• Book of accounts are records that should be kept by the business for that purpose
• Data recorded in book of accounts that are financial in character which are processed and transformed into a report form called financial statements
• Keeping records is a government requirement
• Government requirements for keeping records


  • Bureau of Internal Revenue
  • Municipal or City ordinances
• Accounting as the “LANGUAGE OF BUSINESS”

  Bridging communication through Financial Statements
• The Accounting Standards Council (ASC): '“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.”'
• The American Accounting Association (AAA): '“ACCOUNTING is the PROCESS of IDENTIFYING, MEASURING and COMMUNICATING economic information to permit informed judgments and decisions by USERS OF THE INFORMATION.”'
• The Committee on Accounting Terminology of the American Institute of Certified Public Accountants (AICPA): '“ACCOUNTING is an ART of RECORDING, CLASSIFYING, 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.”'
• FOUR (4) FUNCTIONS OF ACCOUNTING

  • RECORDING
  • CLASSIFYING
  • SUMMARIZING
  • INTERPRETING
• FUNCTIONS OF ACCOUNTING


  1. RECORDING: Writing down transactions

  2. CLASSIFYING: Sorting transactions

  3. SUMMARIZING: Completing financial statements

  4. INTERPRETING: Analytical and interpretative works
• Recording


  Involves the routine and mechanical process of writing down the business transactions and events in the book of accounts in a chronological manner called JOURNALIZING
• Classifying


  Involves sorting or grouping of similar transactions and events into their respective kind and classes
• Summarizing


  Involves the completion of the financial statements and the accounting requirements
• Summarizing includes


  • Trial balance
  • Closing entries
  • Reversing entries
  • Adjusting entries
  • Post-closing trial balance
• Interpreting


  Involves the analytical and interpretative works
• NATURE OF ACCOUNTING


  • LANGUAGE OF BUSINESS
  • ART
  • SERVICE ACTIVITY
  • PROCESS
• The American Association of Public Accountants was the initiator of the current American Institute of Certified Public Accountants (AICPA)
• Lesson 2: External and Internal Users of Accounting Information
• Accounting is called the language of business to communicate accounting information to help many types of users
• The user’s need for financial information depend upon the type of decisions to be made
• External Users


  • Investors
  • Suppliers and Creditors
  • Customers
  • Government and their agencies
• Internal Users


  • Management
  • Employees
  • Owners
• External users need accounting information to

  • Evaluate and examine the feasibility of investing in a company
  • Assess the ability of the enterprise to pay dividends
  • Determine the credit integrity and worthiness of the organization
  • Regulate the activities of the enterprise
• Internal users need accounting information to

  • Know the income/earnings for the period
  • Analyze the organization’s performance
  • Know the profit or income, asset and liabilities of the business