Professional Documents
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Intro To Acctng
Intro To Acctng
Intro To Acctng
NATURE OF ACCOUNTING
• Accounting is a PROCESS
• Accounting is an ART
• Accounting deals with FINANCIAL INFORMATION and TRANSACTIONS
• Accounting is a MEANS not an END
• Accounting is an INFORMATION SYSTEM
FUNCTIONS OF ACCOUNTING
• Accounting is the process of identifying, measuring, and communicating economic information to permit
informed judgments and decisions by the users of information. (American Accounting Associations)
• 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 a financial character and interpreting the
results thereof. (American Institute of Certified Accountants)
• Keeping systematic record of business transactions
• Protecting Properties of the Business
• Communicating Results to various parties in or connected with the business
• Meeting legal requirements
HISTORY OF ACCOUNTING
Who was the first accountant?
o Someone who needed to keep track of what was stored in temple or king‘s granary
Ancient Greece
The public economy of the Athenians had a highly developed system of accounting & auditing
o Treasurer or manager of Public Revenue
o Accounts kept by clerks and controlled by ―checking clerks‖
o Accountability assured by public exposure of accounts on stone
Ancient Rome
o Transactions were first entered in a ―day book‖ (memorandum or ―adversaria‖ in Latin)
o Monthly, the entries were transferred to the ledger (―codex tabulae‖)
The codex could be used in court to substantiate contracts and claims
19th Century
The Industrial Revolution catapulted England into unrivaled prosperity.
Great Britain became the financial center of the civilized world.
Men with some experience in bookkeeping became accountants.
Prior to 1981, the Philippines had adopted the Generally Accepted Accounting Principle (GAAP), which were
principally US-GAAP based.
In 1973, the International Accounting Standards Council was formed to develop a body of accounting
standards suitable to use around the world.
Currently, the Philippines is one of the countries worldwide that has fully adopted the International
Financial Reporting Standards. (IFRSs)
BRANCHES OF ACCOUNTING
Accounting is a broad field of study. It ranges from the usual recording of company transactions to case-
solving activities.
There are eight different branches of accounting and each branch rendered different type of service.
FINANCIAL ACCOUNTING
- it is a branch of accounting primarily handling the recording of financial transactions of a business.
- accounting reports known as Financial statements gathered within a specified period
- Philippine Financial Reporting Standards (PFRS)
- Philippine Accounting Standards (PAS)
- Standardized financial statements allow users to compare the results of operations of different
companies.
- useful also for creditors to assess the riskiness of a company
- Financial accounting‘s main goal is to provide the information needs of external users that have no
capability to request information directly from management. (General Purpose Financial Statements)
MANAGEMENT ACCOUNTING
- It focuses on the preparation of financial reports used by managers in their day-to-day decision-making.
- used by internal users only.
- done whenever managers require a specific report.
- it contains forecasted information used by managers in planning
GOVERNMENT ACCOUNTING
- It is an accounting system which ―encompasses the process of analyzing, recording, classifying,
summarizing and communicating all transactions involving the receipt and disposition of government fund
and property of and interpreting the result thereof‖ (Sec 109, Presidential Decree 1445)
- In accordance with Section 2, Chapter 1,Title XVII, Book IV of the Administrative Code
the Philippines, ―The Department of Budget and Management shall be responsible for formulation and
implementation of the National Budget with the goal of attaining our national socio-economic plans
and objectives. The Department shall be responsible for the efficient and sound utilization of
government funds and revenues to effectively achieve the country‘s development objectives:‘
- The BTr is responsible for the safekeeping of the national funds. It serves like a bank
where the funds are kept. Although its main role is the safekeeping of funds, the BTr is also
responsible for the management and control of the disbursements of such funds. Furthermore, the
agency is also responsible in maintaining accounts of financial transactions
AUDITING
- Auditing is an unbiased examination and evaluation of the financial statements of an organization
(lnvestopedia.com).
- It is a process that includes numerous steps to determine whether or not a company‘s financial statements
are presented truthfully.
Accountants that perform the auditing procedure are specifically called auditors.
- Independent auditors have no connection with the company.
- Financial statements that underwent the process of auditing are called audited financial statements.
- Audited financial statements are accompanied by the auditor‘s opinion. The auditor‘s opinion will be the
basis whether or not the financial statements are prepared truthfully and without any material errors.
TAX ACCOUNTING
- Taxes are the lifeblood of the government.
- Tax accounting records some financial transactions in a different manner. It adheres to some
guidelines in the PFRS and PAS, but it is not required to implement everything written in such
standards.
- Tax accounting follows the pronouncements of the National Internal Revenue Code (NIRC).
- The NIRC is to tax accounting as the PFRS and PAS are to financial accounting.
- tax accounting enables the taxing authorities to collect taxes that differ from the amount due
computed using the financial accounting standards.
- Another key difference lies in the type of report generated. Financial accounting generates reports
known as the financial statements while tax accounting produces tax returns to be filed to the
appropriate government agencies.
COST ACCOUNTING
- Cost accounting is a branch of accounting that provides information for management
accounting and financial accounting (Horngren et al. 2011).
- Terms Used in Cost Accounting
ACCOUNTING EDUCATION
- The Bachelor of Science in Accountancy (BSA) in the Philippines is normally a 5-year program composed of
subjects in accounting, audit, administration, and business laws and taxation.
- The subjects usually highlight the business environment; the scope of the topics in BSA also covers other
fields such as banking and finance, government, non-profit organizations, and the academe.
ACCOUNTING RESEARCH
- It is a branch of accounting that deals with the creation of new knowledge
- Combining the models produced by the hard sciences in research and testing with financial statements,
stock prices, surveys, and experiments, one can gain a specific perspective and basis on the following:
In the world of business, accounting plays an important role to aid in making decisions. The
more complex the decision, the more detailed the information must be. Individuals and companies need
different kinds of information to make their business decisions.
The basic function of accountants is to provide useful economic information to external and
internal decision makers (users)
EXTERNAL DECISION MAKERS include present and potential owners, investors, customers, legislators, trade
associations and others, who lacked direct access to the information generated by the internal operations
of the business.
Investors
The providers of risk capital and their advisers are concerned with the risk inherent n, and
return provided by, their investments. They need information to help them determine whether they should
buy, hold or sell. Shareholders are also interested in information which enables them to assess the ability of
the enterprise to pay dividends.
Lenders
Lenders are interested in information that enables them to
determine whether their loans, and the interest attaching to them will be paid when due.
Customers
Customers have an interest in information about the continuance of an enterprise, especially
when they have a long-term involvement with, or are dependent on, the enterprise.
General Public
Enterprises affect members of the public in a variety of ways. For example, enterprises may
make a substantial contribution to the local economy in many ways, including the number of people they
employ and their patronage of local suppliers. Financial statements may assist the public by providing
information about the trends and recent developments in the prosperity of the enterprise and the range of
its activities.
INTERNAL DECISION MAKERS are the managers of a business entity, responsible for managing efficiently and
effectively, and who have the power and authority to obtain whatever economic information they need.
Management
Management is composed of employees within the company that can implement decisions
affecting the company‘s operation. Members of the Board of Directors, Top Management, Middle-level
managers and supervisors are the common classes of employees belonging to the management group.
Employees
Employees and their representative groups are interested in information about the stability and
profitability of their employers. They are also interested in information which enables them to assess the
ability of the enterprise to provide remuneration retirement benefits and employment opportunities.
CAREERS IN ACCOUNTING
Initial Employment
Accounting Clerk
Businesses with large quantities of accounting tasks to perform daily often employ accounting
clerks to record, sort, and file accounting information. An accounting clerk may specialize in cash, payroll,
accounts receivable, accounts payable, inventory, or purchases. As a result, they are involved with only a
small portion of the total accounting responsibilities for the firm. Accounting clerks must usually have at
least one year of accounting education.
Bookkeeper
Bookkeepers generally supervise the work of accounting clerks, help with daily accounting
work, and summarize accounting information. In small to medium-sized businesses, the bookkeeper may
also help managers and owners interpret the accounting information. Bookkeepers must usually have one to
two years of accounting education and experience as an accounting clerk.
Accountant
The difference between accountants and bookkeepers is not always clear, particularly in
smaller firms where bookkeepers also help analyse the accounting information. In large firms, the
distinction is clearer. Bookkeepers focus on the processing of accounting data. Accountants design the
accounting information system and focus on analysing and interpreting information; they also look for
important trends in the data and study the impact of alternative decisions.
Professional Level
Public Accounting
o Auditing. Auditing involves reviewing and testing to be certain that accounting policies and
practices have been followed. The purpose of the audit is to provide an independent opinion that
the information about a business is fairly presented.
o Taxation. Tax specialists advise on tax planning, prepare tax returns, clients before governmental
agencies such as the Internal Revenue Services.
o Management Consulting. Given the financial training and business experience of public
accountants, many businesses seek their advice on a wide variety of managerial issues.
Private Accounting
Many accountants are employees of private business firms. The controller oversees the entire accounting
process and is considered the principal accounting officer of the company. Private or managerial
accountants perform a wide variety of services for the business.
o Accounting Information Systems. Accountants in this area design and implement manual and
computerized accounting systems.
o General Accounting. Based on the accounting data period prepared by the bookkeepers and
accounting clerks, the accountant prepares various reports and financial statements.
o Cost Accounting. The cost of producing specific products or providing services must be determined.
Further analysis is also done to determine whether the products and services are produced in the
most cost effective manner.
o Budgeting. In the budgeting ‗process, accountants help managers develop a financial plan for the
future.
o Tax Accounting. Instead of hiring a public accountant, a firm may have its own accountants to
focus on tax planning, preparing tax returns, and dealing with the Internal Revenue Service and
other governmental agencies.
o Internal Auditing. The main functions of an internal auditor are to review the operating and
accounting control procedures adopted by management and to see that accurate and timely
information is provided.
Practice in Education/Academe
Growth is some areas will be much greater than in other areas. Notice in newspapers
advertisements that accountants and accounting clerks are expected to have computer skills. Computer
skills definitely increase your opportunities in your career. Almost every business needs accountants,
accounting clerks, and bookkeepers.
References:
Fundamentals of Accountancy, Business and Management 1, Florendo, Joselito G., 1st ed, Rex
Bookstore, Inc, Manila
Fundamentals of Accountancy, Business and Management Volume 1, Cabrera, Ma. Elinita. B.,
Fundamentals of Accounting Textbook for Beginners, Ong, Flocer Lao, 3rd ed, C & E Publishing, Inc,
Quezon City