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Basic Accounting

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Basic

Accounting
Accounting

• Language of business
• 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.
• To provide quantitative information,
primarily financial in nature, about economic
entities that is intended to be useful in
making economic decisions.
Accounting as an Information
System for Business Decisions
BUS
INE DECISION MAKERS
SS
TRA
NSA
CTI Information Needs
ON Informatio
S n

PROCESSING
MEASUREMENT Accomplished by COMMUNICATION
Accomplished by storage and Accomplished by
recording of data preparation of reporting
data
ELEMENTS OF ACCOUNTING
1. ASSETS
• Are the economic resources a business owns that are expected to be of benefits in the future.

Example: CASH, OFFICE SUPPLIES, FURNITURE, LAND, BUILDING, ETC.


2. LIABILITIES
• Are the economic obligations/debts payable to other entities or persons whether within the
business or outside the business.
Example: ACCOUNTS PAYABLE, TAX PAYABLE, , ETC.
3. CAPITAL
• Claims held by the owners of the business after claims of creditors ( those the business have
obligations to) are satisfied.
Example: INCOME, EXPENSE, DIVIDEND, ETC.
ACCOUNTING PROCESS
1. RECORDING
• This phase translates the financial transactions and events into a written accounting data.

2. CLASSIFYING
• Under this function, similar and interrelated transactions and event are sorted or grouped
together into their respective classes.
3. SUMMARIZING
• At the end of a certain period of time, which can be a month, a quarter, a semester or a year,
owners of the business or other interested users of accounting data ask the accountant
information about the condition of the business.
4. INTERPRETING
• Due to technical and specialized nature of accounting, reports submitted by the accountant
require further interpretation for the guidance of management and other users.
USERS OF ACCOUNTING
INFORMATION
BUSINESS TRANSACTIONS

ACCOUNTING

THOSE WITH DIRECT THOSE WITH INDIRECT


MANAGEMENT
FINANCIAL INTERESTS FINANCIAL INTEREST

ACTIONS THAT AFFECT BUSINESS TRANSACTIONS/


EVENTS
MANAGEMENT
• OWNERS
• BOARD OF DIRECTORS
• OFFICERS OF THE COMPANY MANAGERS
• MANAGERS
• DEPARTMENT HEADS
• SUPERVISORS
USERS with DIRECT FINANCIAL
INTEREST
• PRESENT OR POTENTIAL INVESTORS
• PRESENT OR POTENTIAL TRADE CREDITORS
• BANKS AND OTHER LENDERS
USERS with an INDIRECT
FINANCIAL INTEREST
• TAX AUTHORITIES
• REGULATORY AGENCIES
• OTHER GROUPS
• EMPLOYESS AND LABOR UNUONS
• CUSTOMERS AND CLIENTS
• GENERAL PUBLIC
BRANCHES OF ACCOUNTING
• FINANCIAL ACCOUNTING
• It is a branch of accounting that primarily concerned with the measurement and communication of
information that summarizes and reports the financial position and operating results of a business
enterprises.
• MANAGEMENT ACCOUNTING
• The specific information needs of the internal users, principally the management, are provided by the
internal reporting functions of the accounting system called management accounting.
• AUDITING
• This branch involves an independent review of the accounting records.
• TAX ACCOUNTING
• This refers to the use of financial reports as in the computation of taxes that must be paid to the
government.
• COST ACCOUNTING
• This refers to the accounting for cost of manufacturing goods.
CAREERS IN ACCOUNTING
• PUBLIC ACCOUNTING
• PRIVATE ACCOUNTING
• GOVERNMENT AND OTHER NOT-FOR-PROFIT ACCOUNTING
• ACCOUNTING EDUCATION
BASIC PROFESSIONAL VALUES
AND ETHICS
• INTEGRITY
• A professional accountant should be straightforward and honest in performing professional services.
• OBJECTIVITY
• A professional accountant should not allow bias, conflict of interest or undue influence of others to override
professional or business judgments.
• PROFESSIONAL COMPETENCE AND DUE CARE
• A CPA has a continuing duty to maintain professional knowledge and skill at the level required to ensure that a
client or employer receives competent professional service based on current developments in practice, legislation
and techniques.
• CONFIDENTIALITY
• A professional accountant should respect the confidentiality of information acquired during the course of
performing professional services and should not use or disclose any such information without proper and specific
authority or unless there is legal act professional right or duty to disclosed.
• PROFESSIONAL BEHAVIOR
• A CPA should comply with relevant laws and regulations and should avoid any action to discredits the profession
Types of Businesses

1.Service Business
• This type of business provides various forms of services, not intangible
products, to its customers or clients.
2. Merchandising Business
• This type of business entity is in the “buy and sell” business.

3. Manufacturing Business
• Unlike a trader or merchandiser, a manufacturer, also called a fabricator or
producer or processor, is in the normal business of producing the products
that he sells.
Forms of Business Organizations
1.Sole Proprietorship
• Is a business owned by one person.
2. Partnership
• As defined in Article of the Partnership Law: “By the contract of a partnership, two or
more persons bind themselves to contribute money, property or industry to a common
fund, with the intension of dividing the profit among themselves”.
3. Corporation
• Section 2 of Batas Pambansa 68, otherwise known as the Corporation Code of the
Philippines, provides “ A corporation is an artificial being, created by operation of law,
having the right of succession and the powers, attributes and properties expressly
authorized by law or incident to its existence,”
Activities in Business
Organizations
1. Financing Activities
• Are activities that obtaining resources from and returning resources to owners as well
as obtaining resources through borrowings and repayments of the amounts borrowed.
2. Investing Activities
• Includes the acquisition and disposition of property, plant and equipment and other
long-term assets and debt and equity instruments of other enterprises that are not
considered cash equivalent or held for dealing or trading purposes.
3. Operations Activities
• are principal revenue-producing activities of an enterprises and include delivering or
producing goods for sale and providing services.
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