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INTRODUCTION TO
ACCOUNTING
Chapter 1
CHAPTER OBJECTIVES
You should be able to…

Define accounting.

Describe the nature of accounting.

Explain the functions of accounting as a business.

Narrate the history or origin of accounting.
ACCOUNTING IS THE
“LANGUAGE OF BUSINESS.”
Situation:
Mr. Dela Cruz started a printing business. He started with
P100,000.00 of his personal money to start the business. After a
month, Mr. Dela Cruz wants to know how much the business
made and if the money invested is still there. Unfortunately,
Mr. Dela Cruz was not able to organize his transactions and
some receipts are lost. He is at a loss on the current financial
condition and the income of the business.
THIS IS WHERE ACCOUNTING COMES IN!
Continuation:
Mr. Dela Cruz started a printing business. He started with
P100,000.00 of his personal money to start the business. After a
month, Mr. Dela Cruz wants to know how much the business
made and if the money invested is still there. Mr. Dela Cruz was
able to keep track of the transactions of his business for the
month. From his capital of P100,000, P50,000 was used to buy
computer and printer for the business, P 5,000 for paying the
bills and P15,000 for the rent. Easily the balance of cash left
will be P 30,000. If there is a collection of P50,000 from
customers, then the balance of cash would be P80,000.
SEE THE DIFFERENCE!
WHAT IS ACCOUNTING?
-
It is the art of recording, classifying, and summarizing in a
significant manner and in terms of money, transactions and
events which are, in part of at least of financial character,
and interpreting the results thereof. (American Institute of
Certified Public Accountants or AICPA)
-
It is the process of classifying, measuring and communicating
economic information to permit informed judgment and
decision by users of the information. (American Accounting
Association or AAA)
WHAT IS ACCOUNTING?
-
It 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. (Accounting Standards Council’s Statement of
Financial Accounting Standards No. 1)
IS ACCOUNTING AN ART OR A SCIENCE?
Nature of Accounting

Accounting is an art.

Accounting is a process.

Accounting is a means and not an end.

Accounting deals with financial information and transactions.

Accounting is an information system.
Functions of Accounting in Business

It is a discipline, with techniques all measurable transactions
in terms of money or money’s worth are recorded, classified
and summarized in a proper and systematic way.

It helps to present and explain status of financial position
and income-loss of a particular period and helps management
& investors to be provided with necessary information and
statements.
Functions of Accounting in Business

It is an aid to management. It is a system that keeps a record
of financial events and analyzes them for presenting reports
of the financial result and position of an economic activity.

This process gives management body the information
necessary for taking a decision. This information is needed
for the interested parties, inside or outside of the
organization.
History of Accounting:
Prehistory:

Sticks, stones, bones, leaves, etc.

Cave paintings in Europe
Ancient History:

Mesopotamia (8500 BC) – clay tokens, (disks, spheres,
pellets)
 Bullae
- the first bill of lading

Clay tablets

Egypt, China, Babylon, Greece, Roman Empire
History of Accounting:
Middle Ages

13th to 15th century – Merchants and bankers of Florence,
Venice and Genoa (cities in modern day Italy)

1340 AD – Double entry records first appeared in Genoa

Fra Luca Pacioli – Father of Accounting
- Wrote the treatise “Everything about Arithmetic,
Geometry, Proportions, and Proportionality” 1494 in Venice.
“Summa de Arithmetica, Geometria, Proportioni et
Proportionalita”
History of Accounting:
Modern Times

Industrial Revolution (mid 18th century – mid 19th century) –
from handicrafts to mass produced goods. It ushered problem
of costing large volume of machine made products.

Cost Accounting emerged.

The growth of corporations

Corporate owners (stockholders) – were no longer managers
of the business.

Information age – development of accounting standards and
accounting systems.
K-W-L Chart
What I Know
What I Want to Know
What I Learned
THANK YOU VERY
MUCH!