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Accounting Teaching Demo

This document provides an introduction to the field of accounting. It defines accounting as a service that provides quantitative financial information to assist with economic decision making. The key functions of accounting are to ascertain financial results and position through financial reports. Accounting follows principles like accrual accounting, going concern, and full disclosure. It has various branches including financial accounting, management accounting, cost accounting, and more. The document outlines accounting concepts, principles, and the historical development of the field.

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Analou Lopez
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226 views29 pages

Accounting Teaching Demo

This document provides an introduction to the field of accounting. It defines accounting as a service that provides quantitative financial information to assist with economic decision making. The key functions of accounting are to ascertain financial results and position through financial reports. Accounting follows principles like accrual accounting, going concern, and full disclosure. It has various branches including financial accounting, management accounting, cost accounting, and more. The document outlines accounting concepts, principles, and the historical development of the field.

Uploaded by

Analou Lopez
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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Introduction to

Accounting
What is Accounting?
Accounting
-It is a service activity on which it provides
quantitative information primarily financial in
nature, about economic entities that is intended to
be useful in making economic decisions.
Function

 Provide Quantitative Information

Purpose

 HELPS FINANCIAL USERS SEE THE TRUE PICTURE OF


THE BUSINESS IN FINANCIAL TERMS.
Objectives
 PROVIDES USEFUL INFORMATION FOR ECONOMIC DECISION
MAKING.

 SPECIFIC OBJECTIVES:
 ASCERTAIN THE RESULT OF THE BUSINESS OPERATIONS
 ASCERTAIN THE FINANCIAL POSITION OF THE BUSINESS
 ASSIST USER IN PREDIVTING ENTITY’S FINANCIAL
CAPACITY REGARDING FUTURE CASH FLOWS, FINANCIAL
CONDITIONS AND RESULTS OF OPERATION
Accounting Equation
● ASSET= LIABILITIES + OWNER’S EQUITY
● PROFIT OR LOSS
REVENUE – EXPENSES
ASSET- ECONOMIC RESOURCE CONTROLLED OR OWNED BY THE ENTITY.
LIABILITIES- PRESENT OBLIGATION OF THE ENTITY TO TRANSFER AN
ECONOMIC RESOURCE AS A RESULT OF PAST EVENTS.
OWNER’S EQUITY- THESE ARE RESIDUAL INTEREST IN THE ASSETS OF
THE ENTITY AFTER DEDUCTING ALL ITS LIABILITIES.
REVENUE- MONEY THAT A PERSON/ENTITY RECEIVED IN EXCHANGE FOR
THEIR LABOR OR PRODUCTS.
EXPENSES – COST OF OPERATIONS THAT A COMPANY INCURS TO
GENERATE REVENUE.
Nature of Accounting
● SERVICE ACTIVITY
○ AS A SERVICE, ACCOUNTING INTENDS TO SUPPLY FINANCIAL REPORTS TO BE
USED BY ECONOMIC DECISION MAKERS.
● A PROCESS, AN ART AND A DISCIPLINE
○ PROCESS - ACCOUNTING GOES THROUGH AN ACCOUNTING CYCLE THROUGH
SUMMARIZES THE VOLUMINOUS AND REPETITIVE BUSINESS TRANSACTIONS INTO
ORGANIZED AND UNDERSTANDABLE FINANCIAL REPORTS.
○ ART- ACCOUNTING DEMANDS CRITICAL THINKING AND CREATIVE SKILLS.
○ DISCIPLINE- IT OBSERVES ACCOUNTING STANDARDS AND PROFESSIONAL
ETHICS.
● LANGUAGE OF BUSINESS
○ ACCOUNTING IS THE MEDIUM OF COMMUNICATION THROUGH WHICH FINANCIAL
REPORTS ARE FURNISHED TO DIFFERENT PARTIES FOR DECISION MAKING.
● EYES OF THE BUSINESS
○ ACCOUNTING HELPS BUSINESS OWNERS/MANAGERS
TO CHECK ON HIS FINANCIAL PROGRESS THAT CAN BE
USED FOR DECISION MAKING TO ACHIEVE THE GOALS
AND OBJECTIVES OF THE BUSINESS.
USERS OF ACCOUNTING INFORMATION

○ INTERNAL USERS – THOSE WHO OWN AND MANAGE/CONTROL THE


BUSINESS ENTITY.
 OWNERS
 MANAGERS
○ EXTERNAL USERS- THOSE WHO DO NOT OWN, MANAGE, OR CONTROL THE
BUSINESS ENTITY
 INVESTORS
 CREDITORS/LENDERS
 GOVERNMENT
 CUSTOMERS
 GENERAL PUBLIC
 EMPLOYEES
● BOOKKEEPING- INITIAL ACTIVITY/CLERICAL PART OF
ACCOUNTING.

● THE BASIS OF MODERN ACCOUNTING THEORY IS DOUBLE-


ENTRY BOOKKEEPING.
● DOUBLE ENTRY BOOKKEEPING SYSTEM- IS BASED ON THE
DUAL ASPECT CONCEPT WHICH SAYS THAT IN EVERY
BUSINESS TRANSACTIONS, TWO EFFECTS OF RECORDING ARE
TO BE MADE WHICH IS THE VALUE RECEIVED (DEBIT) AND THE
VALUE PARTED WITH (CREDIT).
● BASIC PRINCIPLE OF BOOKKEEPING IS THE PRINCIPLE OF
BALANCE.
BOOKKEEPING, ACCOUNTING AND
AUDITING
• Bookkeeping is the routine recording of economic activities. It is a
mechanical process.
• Accounting is the analysis and interpretation of financial information,
conduct of audits and preparation of financial statements.
• Auditing confirms the credibility of financial statements and protects or
ensures the confidence of financial users.
BRIEF HISTORY OF ACCOUNTING
● Accounting can be traced to ancient civilizations. Accounting records dating
back more than 7,000 years have been found in Mesopotamia. Other early
accounting records were also found in the ruins of ancient Babylon, Assyria and
Sumeria.

● The Roman Empire had access to detailed financial information as seen in “The
Deeds of the Divine Augustus”. Records of cash, commodities, and transactions
were kept by military personnel of the Roman Army.

● The merchants during the Goryeo Dynasty of Korea kept track of their
businesses and trades through record-keeping methodologies.
Luca Bartolomeo de Pacioli (FATHER OF ACCOUNTING)
- An Italian mathematician and Franciscan friar
- Book Summa de arithmetica, geometria, proportioni et proportionalita or
Summary of arithmetic, geometry, proportions and proportionality. Published
on 1494.
● Details of calculation and recording
- Describes the accounting methods then in use among Northern- Italian
merchants, including double-entry bookkeeping, trial balances, balance sheets and
various other tools still employed by professional accountants.
MAIN BRANCHES OF ACCOUNTING

1. Financial Accounting
2. Management Accounting
3. Cost Accounting
OTHER BRANCHES OF ACCOUNTING

1. Government Accounting
2. Auditing
3. Tax Accounting
4. Accounting Education
5. Accounting Research
FINANCIAL ACCOUNTING- accounting process
Record-Classified- Summarized
- Financial Statements
- Branch of accounting wherein we communicate the
financial results of a business entity through a tool
which we call financial statements.
COST ACCOUNTING- a branch of accounting which
literally talks about anything that the company has
sacrificed to pay cost.

GOVERNMENT ACCOUNTING- is a branch of


accounting which deals with the receipts and disposition
of public funds.
AUDITING- is more checking and verification to know what
we are doing is correct.
2 Kinds
1. Internal Auditing- branch of auditing in which we are
checking the operations of a company if it is in line with
the management policies.
2. External Auditing- a third party accountant or auditor
checks the financial statements its accuracy and if it is
aligned with the financial reporting framework.
● TAX ACCOUNTING- is a branch of accounting that
deals with the totality of the process of taxation.

● ACCOUNTING RESEARCH-
2 Types
1. Academic- is applied in the academe or education
sector.
2. Economic/Industrial- applied in the industry or the
work that we do.
ACCOUNTING CONCEPTS AND PRINCIPLES
● Generally Accepted Accounting Principles (GAAP)
● Generally accepted accounting principles (GAAP) refer to
a common set of accounting principles, standards, and
procedures issued by the Financial Accounting Standards
Board (FASB).
● As applied in the Philippines, the GAAP in the Philippines
is the Philippine Financial Reporting Standards (PFRS)
and Philippine Accounting Standards (PAS).

●
ACCOUNTING CONCEPTS
1. Economic Entity or Accounting Entity

● The personal transactions of the owner are


separate from that of the business he/she owns.
● 2. Accrual Basis of Accounting

● Revenue is recorded when earned.


● Expenses are recorded when it happens.

● Regardless of when cash is received or paid.

CASH ACCRUAL
Revenue Received Earned
Expenses Paid Incurred
3. Going Concern

● The company will continue operating indefinitely until the


foreseeable future, and that company closure is not
imminent.
4. Monetary Unit

● Transactions are expressed in a monetary unit of measure.


5. Time Period

● Transactions are summarized and reported at regular time


intervals.
• Calendar Year (January 1- December 31)
• Fiscal Year (Any starting point + 12 months)
ACCOUNTING PRINCIPLES
1. Cost Principle
● Amounts shown in financial reports are historical
costs.

2. Full Disclosure Principle


● Sufficient information for informed judgments.

3. Matching Principle
● Matching revenues with expenses to know the profit
of the business.
4. Revenue Recognition Principle
● Recognize revenue when goods are sold or services are
rendered, regardless of cash receipt.

5. Materiality
● In accounting, materiality refers to the impact of an
omission or misstatement of information in a company’s
financial statements on the user of those statements. If it is
probable that users of financial statements would have
altered their actions if the information had not been omitted
or misstated, then the item is considered to be material.
6. Conservatism
● If there are two acceptable alternatives in a situation,
choose the alternative that will result in lesser income or
resource.

7. Objectivity
● Recording and reporting process should be performed with
independence which is free from bias.
Quiz!!
Thank You for Listening!
“CPA’s are not born, they are made. To become a CPA, you
need discipline, perseverance, diligence and sacrifice”

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