Fundamentals of
Accounting and
Business
Management
Accounting
The word accounting comes from the
French word “computer’’ meaning to
account or score. Other accounting terms
are derived from Latin, such as “Debit” –
“he owes” and “Credit” – “he trusts”
American Institute of CPA (AICPA)
Accounting is 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 financial character, and
interpreting the results thereof.
American Accounting Association
(AAA)
Accounting is the process of identifying,
measuring, and communicating economic
information to permit informed judgement
and decision by users of the information.
Financial Reporting Standards
Council (FRSC)
Accounting 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 decision.
Identifying
This involves selecting economic events
that are relevant to a particular business
transaction. The economic events are
referred to as transactions.
Recording
This involves chronological diary of events
that are measure in pesos and cents. The
Diary referred to in the definition are the
journals and ledgers.
Communicating
This occurs through the preparation and
distribution of financial and other
accounting reports it also includes the
analysis and interpretation of data for the
users.
1. Accounting is a service activity.
Accounting aids decision makers by
providing them financial reports that will
guide them in coming up with sound
decisions.
2. Accounting is a process.
A process refers to the method of
performing any specific job step by step
according to the objectives and targets.
Accounting is identified as a process, as it
performs the specific task of collecting,
processing, and communicating financial
information.
2. Accounting is a process.
Collection, recording, classification,
summarization, finalization, and reporting
of financial data.
3. Accounting is both an art and
discipline
Accounting is the art of recording,
classifying, summarizing, and finalizing
financial data. The word “art” refers to the
way something is performed. Accounting
is a systematic method consisting of
definite techniques and its proper
application requires skills and expertise.
4. Accounting deals with financial
information and transactions
Accounting records financial transactions
and data, classifies these and finalizes their
results given for a specific period of time,
as needed by their users.
5. Accounting is a means and not an
end
Accounting is a tool to achieve specific
objectives. It is not the objective itself.
6. Accounting is an information
system
Accounting is recognized and
characterized as a storehouse of
information. As a service function, it
collects processes and communicates
financial information to any entity.