ICT-ED INSTITUTE OF SCIENCE AND TECHNOLOGY LIPA

2/F Mercedes Bldg. P. Torres St. Lipa City, Batangas

(043) 757-4445 / (043) 757-5944

ACTIVITY 1

Name: _Kristle Joy Dimayuga_____________________

Answer the following questions:

1. Discuss the 3 important activities included in the definition of accounting.

The 3 important activities included in the definition of accounting are identifying, measuring and
communicating. In identifying we analize events first in the transaction, in order for us to determine in
which of those events will be recognize or not. It is said that only accountable events are recognized.
This accountable event are the events that can affects the assets, liabilities, owner’s equity, income
and expenses of the business or the events that is related to financial activities and non accountable
events are not recognized but if it has relevance in accounting it will be disclosed in notes or maybe
recorded in memorandum entry. In mesuring it involves assigning numbers, normally in monetary
terms, to the economic transactions and events. We mesure money and the value of resources. The
most common measurement basis is the historical cost which pertains to the former price of the land
when it was purchased. Through measuring it allows the business to compare certain variables over
a period of time. In communicating, it is the process of transforming economic data into useful
accounting information through financial statements and other accounting reports such as balance
sheet, the income statement, the statement of owner’s equity and the statement of cash flows which
is usually expressed by numbers but it is very useful to those who use it which is the external and
internal parties as basis in order for them to make better decisions.

Conceptual Framework and Accounting Standards 1

 ICT-ED INSTITUTE OF SCIENCE AND TECHNOLOGY LIPA
2/F Mercedes Bldg. P. Torres St. Lipa City, Batangas
(043) 757-4445 / (043) 757-5944

2. Explain the different types of events or transactions.

The different types of events or transactions are external and internal events. The
external events are the events that involve an entity which is the business and another external
party for example is customer. There are types of external events and these are Exchange
(reciprocal transfer), Non-reciprocal transfer and External event other than transfer. In
exchange (reciprocal transfer) there is a reciprocal giving and receiving economic resources
between an entity and the external party. One example of this is sale, when the business sold
their products to their customers there is a reciprocal transfer in which the business will give
their products in exchange to the cash that the customer will give. The second one is the non-
reciprocal transfer where there is only one-way transaction and that means that if the entity will
give something it is expected that it does not receive anything in return and the same as when
the external party receive something it does not also give nothing back. One example of this is
donation. Ofcourse if we donate something, we do not expect anything in return that is why it is
non-reciprocal transfer. The last type of external event is the external event other than transfer.
It is an event that includes changes, but does not require transferring resources or obligations,
to the economic resources of an organization caused by external party. One example of this is
changes in fair values and price levels, it involes changes but there is no exchange or
transferring of resources.
The second type of events or transaction is the internal event which means that the
event or transaction is within the business that is why the external party are not involve. This
event has 2 types which is the production and the casualty. The production is the process of
converting the raw materials into useful products which is ussualy happen within the business
and the casualty are the unexpected calamity loss within the business and one example of this
is loss from fire.

Conceptual Framework and Accounting Standards 1

 ICT-ED INSTITUTE OF SCIENCE AND TECHNOLOGY LIPA
2/F Mercedes Bldg. P. Torres St. Lipa City, Batangas
(043) 757-4445 / (043) 757-5944

3. Discuss the three aspects of communicating process of accounting

The three aspects of communicating process of accounting are recording, classifying,

and summarizing. In recording, after we identify and analyze events, the process of recording
occurs which we only record accountable events in the journal through journal entries. It is also
known as bookkeeping. Second aspect is the classifying, after the recording we classify the
accounts by sorting and grouping those similar items under designated name or account. It
uses systematic analysis of recorded data in which all transactions are grouped and post in
one place in general ledger. The third aspect is summarizing, after classifying we now
summarize those recorded and classified transactions and events and put them together in
trial balance. This includes the preparation of financial statements and other accounting
reports.

Conceptual Framework and Accounting Standards 1