FUNDAMENTALS OF

SENIOR
ACCOUNTANCY, BUSINESS HIGH
AND MANAGEMENT 1 (FABM 1) SCHOOL

Self-Learning

Definition of Accounting Module

1
Quarter 3
FABM1 – Grade 11
Quarter 1 – Module 1: Definition of Accounting
First Edition, 2020

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FABM 1 SENIOR
HIGH
SCHOOL

Self-Learning
Module

1
Quarter 3

Definition of Accounting
Introductory Message

For the facilitator:

Welcome to the Fundamentals of Accountancy, Business and Management 1

for Grade 11 Module on Definition of Accounting!

This Self-Learning Module was collaboratively designed, developed and

reviewed by educators from the Schools Division Office of Pasig City headed by its
Officer-in-Charge Schools Division Superintendent, Ma. Evalou Concepcion A.
Agustin, in partnership with the City Government of Pasig through its mayor,
Honorable Victor Ma. Regis N. Sotto. The writers utilized the standards set by the K
to 12 Curriculum using the Most Essential Learning Competencies (MELC) in
developing this instructional resource.

This learning material hopes to engage the learners in guided and independent
learning activities at their own pace and time. Further, this also aims to help learners
acquire the needed 21st century skills especially the 5 Cs, namely: Communication,
Collaboration, Creativity, Critical Thinking, and Character while taking into
consideration their needs and circumstances.

In addition to the material in the main text, you will also see this box in the
body of the module:

Notes to the Teacher

This contains helpful tips or strategies that
will help you in guiding the learners.

As a facilitator you are expected to orient the learners on how to use this
module. You also need to keep track of the learners' progress while allowing them to
manage their own learning. Moreover, you are expected to encourage and assist the
learners as they do the tasks included in the module.
 For the learner:

Welcome to the Fundamentals of Accountancy, Business and Management 1

Self Learning Module on Definition of Accounting!

This module was designed to provide you with fun and meaningful
opportunities for guided and independent learning at your own pace and time. You
will be enabled to process the contents of the learning material while being an active
learner.

This module has the following parts and corresponding icons:

Expectations - This points to the set of knowledge and skills

that you will learn after completing the module.

Pretest - This measures your prior knowledge about the lesson

at hand.

Recap - This part of the module provides a review of concepts

and skills that you already know about a previous lesson.

Lesson - This section discusses the topic in the module.

Activities - This is a set of activities that you need to perform.

Wrap-Up - This section summarizes the concepts and

application of the lesson.

Valuing - This part integrates a desirable moral value in the

lesson.

Posttest - This measures how much you have learned from the
entire module.
 EXPECTATIONS

After going through this module, you are expected to:

1. define accounting;
2. understand why accounting is called the language of the business; and
3. explain the essential role of accounting in the business.

PRETEST

Directions: Choose the letter of the best answer. Write the letter of your choice on a
separate sheet of paper.

1. Which of the following is the definition of accounting by the Accounting

Standards Council (ASC)?

A. It is a service activity, its function is to provide quantitative information,

primarily financial in nature, about economic entities, that are intended
to be useful in making economic decisions.
B. It is the process of identifying, measuring, and communicating economic
information to permit informed judgments and the decision by the users
of the information.
C. It is an art of recording, classifying, and summarizing in a significant
manner and in terms of money, transactions, and events which are, in
part or at least, of a financial character and interpreting the results
thereof.
D. It is a systematic process of identifying, classifying, measuring, recording,
summarizing, verifying, analyzing, interpreting, and communicating
financial information of an organization to enable users to make
decisions.

2. It refers to the recognition or non-recognition of accountable events.

A. Identifying
B. Recording
C. Measuring
D. Communicating

3. It is described as putting an amount on the accountable events.

A. Identifying
B. Recording
C. Measuring
D. Communicating
 4. It refers to the cost of earning income.
A. Asset
B. Liability
C. Equity
D. Expense

5. It is an inflow of wealth of the business from dealings with clients or

customers.
A. Asset
B. Liability
C. Equity
D. Income

RECAP

Directions: On a sheet of paper, write YES if the statement is correct and NO if

otherwise.

1. Accounting is a system that measures business activities.

2. Accounting provides quantitative information, primarily financial in nature.

3. Accounting is part of business operation and operates in isolation.

4. By recording transactions, the information will be of unlimited use.

5. Accounting is both an art and a science.

LESSON

Accounting is relevant in the world of business especially these days that

business and society have become more complicated. No business could operate very
long without knowing how much it was earning and how much it was spending. The
core concepts behind accounting quantify business communication and drive
decisions among accounting information users. Accounting helps internal and
external users understand what is happening in the business and it is for this reason
that accounting is called the language of the business.

Definition of Accounting

Accounting has been defined by many scholars, researchers, authors, and

Accounting Institutes differently. Accounting is an information system that
measures, processes, and communicates financial information about an economic
entity (Financial Accounting Standards Board, 1978). It is important to note that
the sum and substance of accounting as a systematic process of identifying,
classifying, measuring, recording, summarizing, verifying, analyzing, interpreting,
and communicating financial information of an organization to enable users to make
decisions.

American Accounting Association (AAA) defines accounting as “the process of

identifying, measuring, and communicating economic information to permit
informed judgments and decisions by users of the information.

Accounting Standard Council (ASC) defines accounting as “It is a service

activity. Its function is to provide quantitative information, primarily financial in
nature, about economic entities, that are intended to be useful in making economic
decisions.

American Institute of Certified Public Accountants (AICPA) defines accounting

as “an art of recording, classifying, and summarizing in a significant manner and in
terms of money, transactions, and events which are, in part or at least, of a financial
character and interpreting the results thereof.

Illustration of the definition of accounting:

INPUT PROCESS OUTPUT

Identifying

Classifying
Measuring

Business Transaction Recording Financial Information

Summarizing
Analyzing

Interpreting

Communicating
The process of accounting underscores the following functions:

1. Identifying – involves assessing whether transactions or events that merit

recognition (recording) or not. Events that merit recognition are known as
accountable events. Events are accountable if they have an effect on the assets,
liabilities, and equity of the business enterprise.
2. Classifying - concerns with grouping together similar types of business
transactions in one place. The transactions recorded in the journals are classified
and posted onto ledgers.
3. Measuring - determines the monetary amounts at which the resources, debts,
capital, income, or expenses are to be recognized.

4. Recording – relates business transactions, in monetary terms, are recorded in an

orderly manner in the books of original entry. The accounting term for recording at
this stage is journalizing.

5. Summarizing – presents classified information in a form that is understandable

and useful to users of accounting information. A trial balance is prepared to
ascertain the accuracy of accounts.

6. Analyzing - establishes the relationship between the items in the financial

statements. The purpose of analyzing is to identify the financial strength and
weaknesses of the business. It provides the basis for interpretation.

7. Interpreting – concerns with explaining the meaning and significance of the

relationship established by the analysis. By interpreting, it can tell whether the
business performance is good or bad.

8. Communicates – communicates results obtained from the summarized, analyzed,

and interpreted information to the interested parties.
 ACTIVITIES

Directions: Put a checkmark (/) on column A if the statement is acceptable,

column B if otherwise.

STATEMENTS A B
1. Accounting is an information system that measures,
processes, and communicates financial information about a
non-economic entity.
2. Accounting is a service activity.
3. Accounting is an art because it requires knowledge and
experience.
4. Accountable is as old as barter that gradually evolved with
civilization.
5. Identifying is about the recognition of non-accountable
events.
6. The accounting term for identifying is journalizing.
7. ASC defines accounting as the process of identifying,
measuring, and communicating economic information.
8. Classified information are presented in a form that is
understandable to both internal and external users.
9. Interpreting as a function of accounting cannot tell whether
profitability is good or bad.
10. Summarizing includes the preparation of a worksheet.

WRAP–UP

To summarize what you have learned in the lesson, complete the statements below:

1. The Accounting Standards Council defines accounting as

___________________________________________________________________________
__________________________________________________________________________.

2. Accounting is the language of the business because

___________________________________________________________________________
__________________________________________________________________________.

3. To enable users of financial information make decisions, it is important to

___________________________________________________________________________
__________________________________________________________________________.
 VALUING

Directions: Discuss your answer in at least five sentences.

Is accounting important to you? Why yes or why not? How do you perceive
accounting now? ________________________________________________________________
__________________________________________________________________________________
__________________________________________________________________________________
_________________________________________________________________________________.

“You have to understand accounting and you have to understand the

nuances of accounting. It’s the language of business and it’s an imperfect
language, but unless you are willing to put in the effort to learn accounting–
how to read and interpret financial statements – you really shouldn’t select
stocks yourself.”

– by Warren Buffet

POSTTEST

Directions: Read the statements from Column A, then identify the best answer
from Column B. Write the letter of your choice on a separate sheet of paper.

A B

1. Accounting is the process of identifying, measuring, and A. Classifying

communicating economic information to permit informed
judgments and decisions by the users of the information.
2. Accounting is a service activity. B. Summarizing
3. Accounting is an art of recording, classifying and C. Recording
summarizing in a significant manner and in terms of money,
transactions and events which are in part, at least, of a
financial character and interpreting the results thereof.
4. It is determining whether the transaction has accounting D. Analyzing
relevance.
5. Journalizing is the accounting term for this stage. E. AAA Definition
6. Posting is the accounting term for this stage. F.ASC Definition
7. Financial statements are produced. G. PhilCPA
Definition
8. It provides the basis for interpretation. H. Communicating
9. It allows users to make rational financial decisions. I. Identifying
10. The results obtained are communicated to interested J. Interpreting
parties.
 KEY TO CORRECTION

10. A H 10.
9. B J 9.
8. A D 8.
5.YES D 5. 7. B B 7.
4.NO D 4. 6. B A 6.
3.NO C 3. 5. B C 5.
2.YES A 2. 4. A I 4.
1.YES A 1. 3. A G 3.
2. A F 2.
1. B E 1.
RECAP PRE-TEST ACTIVITY 1
POST-TEST

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2017.

Banggawan, RB. Asuncion, DJ. Fundamentals of Accountancy, Business, and Management 1. Real
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Ferrer, RC. Millan, CV. Fundamentals of Accountancy, Business, and Management 1. Bandolin
Enterprise. San Juan, DA. 2018. Fundamentals of Accounting. Elmoer Publishing. 2017.

Rabo, JS. Tugas,FC.Salendrez, HE. Fundamentals of Accountancy, Business, and Management 1.

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"Accounting Interview Questions - Top 14 Questions You Can Expect." Corporate Finance Institute.
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accounting/.

Tuovila, Alicia. "Accounting Definition." Investopedia. February 05, 2020. Accessed on June 20, 2020.
https://www.investopedia.com/terms/a/accounting.asp.

"Accounting: Concept, Objectives and Functions." Your Article Library. July 15, 2015.Accessed on
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https://www.yourarticlelibrary.com/accounting/accounting-concept-objectives-and-
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Stice, Jim, and Kay Stice. "The Importance of Accounting." Lynda.com - from LinkedIn. January 28,
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https://www.lynda.com/Business-tutorials/importance-accounting/777378/5027924-
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"Why Is Accounting Important." Wealth How. July 07, 2010. Accessed on June 20, 2020
https://wealthhow.com/why-is-accounting-important.