Lexine Dara Comia BSA – 1A
ACCOUNTING
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It is an information system that reports the condition of a business to the
intended users.
It provides financial information and makes General Purpose Financial
Reports that helps in decision making.
Basic Accounting Activities
IDENTIFYING
RECORDING
COMMUNICATING
Identifying
transactions in an
entity.
Recording events
which includes
classifying and
summarizing of
information.
It can be done by
analyzing and
interpreting the
reported information.
Functions of Accounting
People
Make
decisions
Communicate through
financial statements
Company
Activities
measured
Accountant
Branches of Accounting
FINANCIAL
MANAGERIAL
NON-PROFIT
Reporting business
activities to the
external users.
Assists internal users
in making wellinformed business
decision.
Accounting made for
humanitarian
purposes.
Classical Notion of Stewardship
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Managers are accountable to the stakeholders for the safe keeping of the
company’s resources.
Stewards must think about what is best for the business.
Users of Accounting Information
External User
Internal User
People like investors and lenders who
use financial statements for their
personal gain.
Managers and people who run the
company. They aim to use their
knowledge to improve the efficiency
of the company.
Basic Accounting Concepts and Principles
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Financial transactions must have equal and opposite effects in at least two
different accounts.
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Integrity
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Objectivity
Professional Competence and Due Care
Confidentiality
Professional Behaviour
Forms of Business Organization as Nature of Operations
Service Business
Offers services to
people
Merchandising
Business
Buying and
selling of goods
Manufacturing
Business
Manufacturing
goods out of raw
materials
Agricultural
Business
Planting and
selling of goods
Hybrid Business
More than one
type of activity
Forms of Business Organization
PROPRIETORSHIP
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One owner
Unlimited
liability for
unpaid debts
PARTNERSHIP
CORPORATION
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Two or more
owners
Unlimited liability
for unpaid debts
Unlimited owners
Limited liability
for corporate
debts
COOPERATIVE
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One man vote
Operates like
corporation
Operating Cycle
CASH
SUPPLIES, STAFF PAYROLL (RENDER
SERVICE)
ACCOUNTS RECEIVABLE
CASH
ACCOUNTS RECEIVABLE
INVENTORY
CASH
ACCOUNTS RECEIVABLE
RAW MATERIALS, DIRECT LABOR
FINISHED GOODS INVENTORY
CASH
ACCOUNTS RECEIVABLE
RAW MATERIALS, DIRECT LABOR
BIOLOGICAL ASSETS
INVENTORY
Fundamental Business Activities (inter-related)
FINANCING ACTIVITIES
INVESTING ACTIVITIES
OPERATING ACTIVITIES
More on investing or
gathering of capital
Purchase of long-term assets
Activities of a company
resulting in the sales of
products or services
Underlying Assumptions in Accounting
Accrual Basis
Records transactions as it happens, not as when cash is received.
Going Concern
Assumes the entity will continue until the next period.
Economic Entity
Personal expense should be separated from the business activities.
Monetary Unit
Measure the items in the financial statements in peso.
Periodicity
Life of an entity is divided into periods.
Qualitative Characteristics of Financial Statements
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Has predictive or confirmatory value
Capable of making a difference to the
user’s decision making
Information is
consistent and
uniform
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Independent
observers could
reach consensus.
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It must be complete, neutral, and free
from error.
Faithfully represent the substance of
what it purports to represent.
Having information Can be easily
available on time.
understood by anyone.
The benefit must excess the cost