FUNDAMENTALS OF 5. Reporting.
It involves the preparation of
ACCOUNTANCY BUSINESS AND
MANAGEMENT
What is accounting ?
According to American Institute of
Accountants (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” . It is also is the process of identify
ing, recording and communicating economic
events of an organization to interest ed users
(Weygandt, J. et. al).
Functions of Accounting
1. Identifying. This involves selecting
economic events that are relevant to a
particular business transaction. The
economic events at an organization are
referred to as transactions. Transactions and
events are generally supported by documen
tary evidences or proofs. Like sales
transactions supported by Sales Invoice to
gether with Delivery Receipt.
2. Recording. It involves the writing and
effects of the transactions and events hat
have been analyzed using different books of
accounts from General Journal, Special
Journals and General Ledger.
3. Classifying. It is the sorting or grouping
of similar transactions and events in a
specific period of time.
4. Summarizing. It is the process that
involves grouping of various accounts re
ferred to the classifying process where the
accounts are grouped into assets, lia bilities,
owner's equity, revenue, cost and expenses
taken from the general ledger.
the financial statements such as statement of
financial position, statement of
comprehensive income, statement of owner's
equity and statement of cash flows.
6. Interpreting. This is the final function in
the accounting process. The data from the
financial reports is being used as basis for
the future plan and framing of business
policies.
Brief History of Accounting:
I. Early Development in Mesopotamia
 People followed a system of writing
and counting money. The
development of accounting may be
related to the taxation and trading
activities of temples.
II. Development in the Roman Empire
 The reign of Emperor Augustus
(63BC-14AD) provided more
evidence about the development of
accounting.
 The Roman government kept
detailed financial information of the
deed of Emperor Augustus regarding
the stewardship of Roman resources.
 Roman historian Suetonius and
Cassius Dio recorded that in 23BC,
Au gustus prepared rationarium
(account) which listed public
revenues, the amounts of cash in the
aerarium (treasury), in the provincial
fisci (tax offi cials), and in the hands
of the publican (public contractors);
and that it included the names of the
freedmen and slaves from whom a
detailed account could be obtained.
III. Dissemination of double-entry
bookkeeping the 14th century Italy
  Most important event in accounting
history
 Luca Pacioli is acknowledged as the
father of modern accounting because
of this. His "Summa de Arithmetica,
Geometria, Proportioni et
Proportional ita" (Everything about
Arithmetic, Geometry and
Proportion) is the first book printed
with a treatise on bookkeeping.
IV. Signing of Charter by Queen Victoria
 The modern profession of the
chartered accountant originated in
Scotland in the 19th century when
Queen Victoria granted a royal
charted to the In stitute of
Accountants in Glasgow.
V. Harmonization of Accounting
Standards
 PAS-Philippine Accounting
Standards corresponding to
International Accounting Standards
(IAS);
 PFRS-Philippine Financial Reporting
Standards corresponding to
International Financial Reporting
Standards (IFRS);
 Interpretation of the PFRS/PAS
corresponding to interpretations of
IFRS/IAS.
THE ACCOUNTING EQUATION
ASSETS = LIABILITIES + OWNER’S
EQUITY
LIABILITIES = ASSETS – OWNER’S
EQUITY
OWNER’S EQUITY = ASSETS –
LIABILITIES
5 MAJOR ACCOUNTS
Assets: Properties owned and controlled by
the entity as result of past events and from
cial Position which economic benefits are
expected to: flow.
Liabilities : These are existing obligation of
the entity arising from past events the
settlement of which is expected to result in
an out flow from the resources embodying
eco nomic benefits
Equity/ Owners' Equity: It is simply an
assets less liabilities.
Income: When an increase in future benefits
relat ed to an increase in an asset or a de
Statement of Com crease of a liability has
arisen that can be prehensive Income
measured reliably.
Expenses :A decrease in future economic
benefits related to a decrease in an asset or
an increase of a liability has arisen that can
be measured reliably