Week 1

Unit 1: Introduction to Bookkeeping

Topics: Classes of Business Activities
Types of Ownership
Users of Financial Statements

Learning Outcomes:
1. Describe classes of business activities
2. Describe types of ownership
3. Describe users of financial statements

Concept Digest (Discussion)

Introduction to Bookkeeping

According to Mejorada, N (2007), in any kind of economic

activity, we would like to determine the sacrifices that have to
be made and the benefits that maybe expected. If the expected
benefits exceed the required sacrifices, we may decide to proceed
with what have been planned. But then, how can we be assured that
actual benefits and sacrifices are more or less equal to those
that have been expected? Day-to-day transactions have to be
recorded, summarized and analyzed so that we can determine the
progress we are able to make periodically.

Record-keeping in Ancient times

Although our fathers must have kept track of their tools and
the conquests they made as early as the stone age, most of the
evidences of record-keeping during the ancient times dealt only
with limited aspects of operations, The earliest known record of
transactions were in the form of clay tablets showing payment of
wages in Babylonia around 3600 B.C.,
(Mejorada, 2007).

The Importance of Record-keeping

It is always advisable for an individual to keep track of his

finances, his earnings and expenditures. Any residual amount is
kept for investment purposes, for future needs and for
charitable/ civic purposes. Social and civic organizations have
to accord for funds raised or entrusted to them. Every individual
(or organization) sees to it that in the process of attaining his
goals, there is an improvement in his financial position,
(Mejorada, 2007).
 Classes of Business Activities

According to Mejorada, N (2007), business activities may be

classified as follows:
1. Service – is provided for a fee. Examples are schools,
repair shops, parlors, transportation companies and
messenger services.
2. Trading (Merchandising) – goods are bought and sold.
Examples are appliance stores, grocery stores, etc.
3. Manufacturing – raw materials are converted into finished
goods. Examples are the firms making shoes, canned goods and
garments.
4. Extractive – resources are extracted from the earth such as
mining iron ore, gold, silver, diamond, and industrial coal.
5. Others – examples agriculture, investments, property leasing
and financing.

Types of Ownership

According to Mejorada, N (2007), types of ownership in

business organizations maybe classified into:
1. Sole Proprietorship – refers to a business firm with only
one owner. The owner is called proprietor.
2. Partnership – is owned by two or more persons who agreed to
combine their resources, skills or services with the
intention of dividing profit among themselves. The owners
are called partners.
3. Corporation – is a firmed owned by five or more persons and
has been granted legal personality by the Security and
Exchange Commission (SEC) as provided by the Corporation
Code of the Philippines. It may be a stock corporation or a
non-stock corporation. In a stock corporation, ownership is
divided into shares of stock. The owners are called
stockholders.

Users of Financial Statements

According to Mejorada, N (2007), the users of financial

statements of a business firm are the different parties,
interested in its operations and financial position. Among them
are the following:
1. Management – refers to the group of people to whom
management of a business has been entrusted. It keeps track
of operations so that it can evaluate its own performance.
Actual results of preparations as shown by financial reports
are periodically compared with budgeted figures. How
 efficient and effective has it been? Has it attained its
predetermined goals? How can operations be further improved?
2. Owners – owners of a business would want to be assured of
its profitability and safety of their investment.
3. Creditors – the different parties who have extended credit
to business would want to be assured that the obligations to
them can be repaid. Thus, they are interested in the
financial position of the firm, its cash flows and results
of operations.
4. Government Agencies – is interested in the results of
operations of business firm for planning and control
purposes aside from collection of revenue. Some of the
government agencies interested in the financial statements
of the business firm are the Bangko Sentral ng Pilipinas,
Securities and Exchange Commission, and the Bureau of
Internal Revenue.
5. Prospective Investors – this group of people use the
financial statements as one of the bases in determining
whether they should put their money in a particular kind of
business. The criteria include profitability and safety of
investment.
6. Others – others who may be interested in the financial
statements of a business firm are trade association, labor
unions, employees and the public.
Considering the fact that the different groups are interested in
the results of operations and financial position of a business
firm, the financial statements must be prepared objectively and
in accordance with generally accepted accounting principles
(GAAP).

Activities (Formative)
Title: Theory Analytical Exercise
Things to do:
1. Determine whether the following statements are true or
false.
2. If your answer is false, explain.
Questions:
_______________1. Examples of manufacturing firms are repair
shops and dental clinics.
_______________2. Every economic entity should keep track of
its accomplishments and the sacrifices
involved to realize them.
_______________3. When a company is owned by two or more
individuals, it is a partnership.
_______________4. When a company is owned by five or more
 persons, it is automatically called a
corporation.
_______________5. Examples of service concerns are beauty
parlors, telephone companies, sari-sari
stores, and call centers.

Assessment (Summative)
Title: My Possession
Date of Submission: July
Rubric Used:
Things to do:
1. Determine whether each of the following statements refers
to (1) a sole proprietorship, (2) a partnership, or (3) a
corporation.
2. Put a check mark on your chosen answer.

Questions:
1. The ownership cannot be transferred 1 2 3
without the consent of the other owners.
2. You are the boss of your own business.
3. It has a juridical personality so that
it can sue and be sued.
4.It has a juridical personality even if
it is not registered with the SEC.
5. Although, it is the easiest to form,
its capacity to raise capital is limited.

References:
 Mejorada, N (2007). Bookkeeping. Quezon City, Philippines.
KATHA Publishing Co. Inc.
 https://www.thebalancesmb.com/bookkeeping-101-a-beginning-
tutorial-392961