Mt. Carmel College of San Francisco, Inc.

8501, San Francisco, Agusan del Sur, Philippines

Tel. No. (085) 839-2161 • e-mail: mccsf.registrarsoffice@gmail.com

Fundamentals of Accounting &

Management 1

Source: iEduNote.com

This is an introductory course in accounting, business, and management data

analysis that will develop students’ appreciation of accounting as a language of
business and an understanding of basic accounting concepts and principles that
will help them analyze business transactions. (Source DepEd CG)

Fundamentals of Accounting, Business & Management 1 - First Semester, SY 2020-2021 |1

 Mt. Carmel College of San Francisco, Inc.
8501, San Francisco, Agusan del Sur, Philippines
Tel. No. (085) 839-2161 • e-mail: mccsf.registrarsoffice@gmail.com

SENIOR HIGH SCHOOL LEVEL

School Year 2020-2021

Subject Fundamentals of Accounting & Management 1

Grade Level Grade 11 Section
Semester First Semester Quarter 1
Module No. 01 Chapter No. 1
Lesson No. 01 Date Week 1

Content The learner demonstrates an understanding of the definition, nature, function, and
Standard history of accounting

Performance The learner shall be able to cite specific examples in which accounting is used in
Standard making business decisions.

Learning The learner…

Competencies 1. define accounting
2. describe the nature of accounting
3. narrate the history/origin of accounting

At the end of the lesson, the learners will be able to:

Specific
Learning 1. define accounting
Outcomes 2. describe the nature of accounting
3. explain the functions of accounting in business
4. differentiate bookkeeping and accounting
5. narrate the history and origin of accounting

Introduction
Accounting is an old discipline that dates back to thousands of years but the one closet to what we
now have dates back to 1400 in Italy. The Italian mathematician, scholar and philosopher Fra Luca Pacioli
published Summa de Arithmetica, Geometrica, Proportioni et Proporcionalita in 1494. It contain
descriptions of the practice of accounting at that time. Because of this work, Pacioli has been referred to
as the “Father of Accounting.”

Accounting is defined as an information system that measures, processes and communicates

information, which are primarily financial in nature, about an identifiable entity for the purpose of making
economics decisions. Accounting has been referred to as the language of business because it is the
communication link between the entity and the users of financial information. These users of financial
information are decision-makers. These decisions-makers are the management of entity, the employers,
the investors, the lenders, the government and consuming public.

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 Mt. Carmel College of San Francisco, Inc.
8501, San Francisco, Agusan del Sur, Philippines
Tel. No. (085) 839-2161 • e-mail: mccsf.registrarsoffice@gmail.com

The accounting information system starts with the business activities that are documented.
The documented businesses are measured in terms of money. They are called the supporting documents
for the transactions and economic events.

Pre-Activity

After graduating from high school, Jose Mercado decided to put up a photocopying business
because there was none near the vicinity of the school. Students had to walk far just to nearest
photocopying center. Jose knew that the demand for photocopying services among high school students is
high because teacher after assign readings and lecture notes that should be photocopied.

Jose opened his photocopying business on July 1, 2015. He rented a commercial space located in
front of the High School fate for Php 5,000.00 per month. He also borrowed Php 50,000.00 in four years.
From his personal savings, Jose spent Php 10,000.00 for supplies like bond papers, staplers, paper clips,
and other supplies that he would need in his business. He also paid Php 2,000.00 for business permits and
licenses. And because Jose had to attend to his classes in a nearby university, he hired a staff with a
weekly salary of Php 1,000.00 to operate the business Jose plans to visit his photocopying shop after his
class every day to check on it.

Analysis

In determining the profit of the photocopying business, Jose did the usual cash-in versus cash-out
technique. This technique involves grouping of cash movements into cash-in and cash-out and simply
getting the difference between the two. This technique may suffice for now but he should really gather
financial statements that indicate the correct financial position and financial performance of his business.
However, determining the net profit takes more than just adding the cash-in and cash-out.

Business Transactions

Business transactions take place once a business ventures starts operation business transactions
are the interaction business and other stakeholders, stakeholders, include but not limited to, customers,
suppliers, investors, and government office. This transaction can be very simple like buying
photocopying supplies or very complex like applying for a bank loan that requires submission of
business and legal documents. Business transactions have to be identified, measured and documented
through an accounting process. Doing so can make easier for the owner and managers to prepare
financial statements for a particular period or as of a specific time.

Definition of Accounting

There are three widely – accepted definitions of accounting.

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 Mt. Carmel College of San Francisco, Inc.
8501, San Francisco, Agusan del Sur, Philippines
Tel. No. (085) 839-2161 • e-mail: mccsf.registrarsoffice@gmail.com

According to American Accounting Association (AAA), accounting is the process of

identifying, measuring and communicating economic information to permit informed judgment and
decisions by users of the information.

However, the American Institute of Certified Public Accountants (AICPA) defines accounting as
the art of recording, classifying and summarizing the results thereof.

And lastly, the Accounting Standards Council (ASC) see accounting as 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.

Nature of Accounting

From the three definitions above, we can see the unifying themes that describe the nature of
accounting. Accounting is an art, the word “art” refers to the design of how something can be
performed. It is a behavioral knowledge involving creativity and skill. By the very nature that
accounting activity is systematic, it has definite technique and its proper application require a
particular skill and expertise.

Moreover, accounting deals with transactions that are financial in nature. The definition of ASC
requires that business transactions have to be measured in terms of money. All other transactions that
are non-monetary are not within the scope of accounting.

It can be also be deduced that accounting is a process. A “process” is a systematic serves of

actions directed toward a particular outcome. As a process, accounting performs specific actions such
as identifying, measuring, and communicating financial information. It has to follow logical steps in
the accounting cycle like recording, classifying, and summarizing financial transactions, and
communicating the results after.

In effect, accounting is also an “information system.” An information system is a set of

interrelated components that work together to achieve a common purpose. It also serves as a repository
of collected financial data, proposed financial information, and communicated financial statements.

Moreover, accounting is a means and not an end. Although accounting has a tangible output in
the form of financial statements, it still underscores the users have the liberty to make economic
decisions based on the management assertions in the financial statements. Using this logic, accounting
indeed paves the way to end and it is not the end itself.

For businessmen, entrepreneurs, managers and stakeholders, accounting is a service activity. It is

concerned with providing the service of ensuring that financial statements are made available to users
on a timely basis.

Functions of Accounting in Business

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 Mt. Carmel College of San Francisco, Inc.
8501, San Francisco, Agusan del Sur, Philippines
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The functions of accounting in business can be attributed to the three fundamental objectives of
an information system. An information system in itself, accounting performs to following tasks.

1. To fulfill the stewardship function of the management (or owner).

2. To help interested users come up with informed decisions.
3. To support daily operations of the business.

These tasks validate why accounting is considered as the language of business. It serves as
means of communication between the business and interested users whether internal or external. It
facilitates the smooth flow of information in and out of the business. The management or owner report
on how well the business fares which is a reflection of how well they manage the business. Interested
users, on the other hands, use these reports to make informed decisions based on the past performance
and the current financial conditions of the business. In management accounting, financial information
from accounting are used to come up with recommendations on how to improve the operational
effectiveness and efficiency of the company.

Difference in Bookkeeping and Accounting

More often, bookkeeping and accounting are mistaken as one and the same. In terms of scope,
accounting is broader as it includes bookkeeping functions. Bookkeeping on the other hand, is just
confined with the recording of monetary transaction which is one part of accounting process.

History of Accounting

The origins of accounting can be traced from the Renaissance period. Particularly, the Italian
monk and mathematician Frate Luca Bartolomes Pacioli wrote Summa de Arithmetica, Geometria,
Proportioni et Proportionalita (Everything about Arithmetic, Geometry, and Proportion) which was
published in Venice in November 1494. It included a 24-page treatise on bookkeeping, Particularis de
Computis et Scripturiz (Details of Calculation and Recording), specifically on the subjects of record
keeping and double-entry accounting.

Pacioli was born on Bago San Sepolero. He lived in Venice and became the tutor of three sons
of a rich merchant, Antonio de Rompiasi, Pacioli popularized the system of recording business
transactions using memorandum books journal books and ledger books. This system of bookkeeping
was largely influenced by how commercial establishments then are Venice kept track of their business
transactions. This is probably something that he had learned from his exposure to the Venetian
merchants.

Aside from Pacioli, there are also Italian personalities who wrote about double – entry
accounting during that time. However, it is only his work that had a huge impact on the field of
accounting. It is for this reason that he is regarded as the “Father of Modern Accounting.”

Basic Financial Statements

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 Mt. Carmel College of San Francisco, Inc.
8501, San Francisco, Agusan del Sur, Philippines
Tel. No. (085) 839-2161 • e-mail: mccsf.registrarsoffice@gmail.com

Financial statements are the one of the most important documents in starting your own
business. For one, it helps fulfill the stewardship function means that the business should be
transparent on the performance and standing of the business to its stakeholders. Financial statements
or report reflects that financial standing and economic activities of the business. These economic
activities may relate to transactions that can affect the financial position, financial performance and
cash flow of the business.

A complete set of financial statement being prepared periodically by a business is composed of

the following;

1. Statement of Financial Position

2. Income Statement
3. Statement of Changes in Equity
4. Statement of Cash Flows
5. Notes, composing of a Summary of significant accounting policies and other explanatory
information.

It is important to note that the financial statements are the outputs of the accounting process.

Objectives of Financial Statements

The objective of financial statement is to provide information about the financial position,
financial performance and cash flows of a business that is useful to key personalities who are making
economic decisions. To meet this objective, financial statements provide information about a business
asset, liabilities, equity, income and expense, contribution by and contributions to owners and their
capacity as owners, and cash flows.

Application

1. Narrate how accounting started.

2. Are bookkeeping and accounting the same? Explain.
3. Explain briefly why accounting is an art? And a process?
4. What are business transactions?

Summary

Accounting is the art of analyzing financial transaction and economic events recording them,
classifying them into accounts, summarizing them reporting and interpreting the results.

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 Mt. Carmel College of San Francisco, Inc.
8501, San Francisco, Agusan del Sur, Philippines
Tel. No. (085) 839-2161 • e-mail: mccsf.registrarsoffice@gmail.com

Post – Activity

Multiple Choices. Choose the letter of the best answer. Write in on the space provided below.

______ 1. Which of the following is not a basic component of financial statement?

a. Statement of Financial Position
b. Income Statement
c. Statement of Change in cash
d. Statement of Cash Flows

_____ 2. Which of the following is not an output of accounting process?

a. Financial Position
b. Financial Performance
c. Cash Flows
d. All of the above

_____ 3. Which professional organization below defines accounting as a service activity?

a. Accounting Standards Council
b. American Association of Certified Public Accountants
c. American Accounting Association
d. Philippine Institute of Certified Public Accountants

_____ 4. The English translation of Summa de America, Geometrica, Proportione et Proportionalista

is ______________________.
a. Details of Calculation and Recording
b. Everything about Arithmetic, Geometry and Proportion
c. Everything about accounting, Geometry and Proportion
d. Details of Recording and Journalizing

_____ 5. Accounting being regarded as the performance of specific actions such as identifying,
measuring and communicating financial information through the nature of accounting
as__________.
a. Process
b. An art
c. A skill
d. A service activity

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 Mt. Carmel College of San Francisco, Inc.
8501, San Francisco, Agusan del Sur, Philippines
Tel. No. (085) 839-2161 • e-mail: mccsf.registrarsoffice@gmail.com

Fill in the Blanks. On the space provided, write the term (word or phrase) that is being described
or complete the thought of each statement.

__________________________ 1. The definition provided by the ASC requires that business

transactions have to be measured in term of _________.

_________________________ 2. The three basic functions of accounting in the business are

supportive of the fact that accounting is being regarded as the ________.

_________________________ 3. Unlike accounting _______________ is confined with the

recording of monetary transactions.

_________________________ 4. Because of the enormous impact of his work in the field of

accounting. _________ is being regarded as the “Father of Modern Accounting.”

_________________________ 5. A/An __________ is a set of interrelated components that

work together to achieve a common purpose.

True or False. On the space provided before each number, write TRUE if the statement is correct
and FASLE if the statement is wrong.

___________ 1. A complete set of financial statements has five basic components.

___________ 2. The financial statements are output of accounting process.

___________ 3. Business transactions are limited to interactions being regarded by business with
customers and suppliers.

___________ 4. There is only one acceptable definition of accounting.

___________ 5. Accounting is only applicable to business rendering services because accounting is

a service activity.

References:

Fundamentals of Accountancy, Business and Management by Vibal Group Inc,. and Joy S.
Rabo, Florenz C. Tugas, Herminigilda E. Saledrez, Copyrigth, 2016.

Fundamentals of Accounting, Business & Management 1 - First Semester, SY 2020-2021 |8

 Mt. Carmel College of San Francisco, Inc.
8501, San Francisco, Agusan del Sur, Philippines
Tel. No. (085) 839-2161 • e-mail: mccsf.registrarsoffice@gmail.com

Fundamentals of Accounting, Business and Management 1, by Rex Bookstore, Inc. and Joselito G.
Florendo, Copyright, 2016.

Fundamentals of Accountancy, Business and Management, by The Phoenix Publishing House, Inc.,
and Solita A. Frias, Copyright, 2016.

Fundamentals of Accountancy, Business and Management I, The Commission on Higher

Education in collaboration with the Philippine Normal University, Joselito G.
Florendo, Carlsberg S. Andres, Christopher B. Honoracio, Reymond Patrick P.
Monfero, Dani Rose c. Salazar, published by Commission of Higher Education,
2016, Chairperson: Patricia B. Licuanan, Ph.D.

Fundamentals of Accounting, Business & Management 1 - First Semester, SY 2020-2021 |9