Introduction to Accounting
WHAT IS ACCOUNTING?
Accounting- is a process of identifying, recording and communicating economic
information that is useful in making economic decisions.
 IDENTIFYING- the accountant analyzes each business transaction and is can be an
“accountable event” or “non-accountable event.
Events that may affect decision making of users
 RECORDING- The accountant recognizes the identified “accountable events”
Journalizing
Posting
 COMMUNICATING- The accountant summarizes the information processed in the
accounting system in order to produce meaningful reports.
NATURE OF ACCOUNTING
Accounting is a process with the basic purpose of providing information about economic
activities that is intended to be useful in making economic decisions.
TYPES OF INFORMATION PROVIDED BY ACCOUNTING
1. Quantitative information – information expressed in numbers, quantities or units.
Example: (Inventories, Equipments, etc.)
2. Qualitative information – information expressed in words or descriptive form. Qualitative
information if found in the notes to financial statements as well as on the face of the other
components of financial statements.
Example: (Accounting Policies, Accounting Estimates, etc.)
3. Financial information – information expressed in money. Financial information is also
quantitative information because monetary amounts are normally expressed in numbers.
Example: (Cash, Receivables, Payables, etc.)
ACCOUNTING AS SCIENCE AND ART
•
As a social science, accounting is a body of knowledge which has been systematically
gathered, classified and organized.
•
As a practical art, accounting requires the use of creative skills and judgment.
ACCOUNTING AS AN INFORMATION SYSTEM
INPUTS
*Identifying
PROCESS
*Recording
OUTPUTS
*Communicating
BOOKKEEPING VS ACCOUNTING
 Bookkeeping refers to the process of recording the accounts or transactions of an
entity.
 Accounting, on the other hand, covers the whole process of identifying, recording
and communicating information to interested users.
USERS OF ACCOUNTING INFORMATION
 Internal users – those who are directly involved in managing the business.
 External users – those who are not directly involved in managing the business.
USERS OF ACCOUNTING INFORMATION
.
TYPES OF ACCOUNTING INFORMATION
CLASSIFIED AS TO USERS’ NEEDS
 General purpose – is information designed to meet the common needs of most
statement users.
 Special purpose– is information designed to meet the specific needs of
particular statement users.
COMMON BRANCHES OF ACCOUNTING
1.
Financial Accounting- is the branch of accounting that focuses on general purpose financial
statements.
2. Management Accounting- involves the accumulation and communication of information for
use by internal users.
3. Government Accounting- refers to the accounting for the government
4. Auditing- involves the inspection of an entity’s financial statements or business processes to
ascertain their correspondence with an established criteria.
5. Tax Accounting- is the preparation of tax returns and rendering of tax advice
COMMON BRANCHES OF ACCOUNTING
6. Cost Accounting– is the systematic recording and analysis of the cost of materials, labor, and
overhead incident to the production of goods or rendering of services.
7. Accounting Education– refers to teaching accounting and accounting-related subjects in an
organized learning environment
8. Accounting Research – pertains to the careful analysis of economic events and other variables to
understand their impact on decisions.
FORMS OF BUSINESS ORGANIZATIONS
ACCORDING TO STRUCTURE
1.
Sole or single proprietorship – is a business that is owned by only one individual.
2.
Partnership – is a business that is owned by two or more individuals who entered into a
contract to carry on the business and divide among themselves the earning therefrom.
3.
Corporation – a corporation is also owned by more than one individual. However, unlike
a partnership, a corporation is created by operation of law rather than a contract.
4.
Cooperative – a cooperative is also owned by more than one individual. However, a
cooperative is formed in accordance with the provisions of the Philippine Cooperative
Code of 2008.
TYPES OF BUSINESS ACCORDING TO ACTIVITIES
1. Service Business - offers services as its main product rather than physical goods.
2. Merchandising Business- A merchandising business (or trading business) is one that buys
and sells goods without changing their physical form.
3. Manufacturing Business- A manufacturing business is one that buys raw materials and
processes them into final products.
HOW MIGHT ACCOUNTING HELP YOU?