Lesson 001:

Accounting Process:

002: Intro to Accounting

Accounting is (Acc. To Accounting Standards Council; Re: American Accounting Institute and Public
Accountants):

- A service activity: We provide service, which is an accounting service.

- Its function is to provide quantitative information primarily financial in nature: We answer the
question, “How much”, by this, we can directly determine the magnitude of a particular
business activity and it’s result to the business in financial and numeric terms.
a. Revenue – earnings, Expenses –
spendings
b. Rule: R > E = Net Income; E > R = Net
Loss

- About economic entities: About businesses, but not limited to. It could also provide services to:
NGOs that require recordkeeping.
 - Intended to be useful in making economic decisions: The information accounting provides them
guides in making decisions.
- -and making reasoned choices among alternative courses of action.

Nature of Accounting:

1. Art: a designed process that produces an output.

2. Financial: answers “how much?”
3. Process: follows procedures
4. Information System: as a warehouse of financial information and its recordkeeping
methodology.

Functions of Accounting:

1. Provide financial information to guide economic entities

2. Maintenance of systematic records
3. Financial results of an entity and/or operation can be communicated (Re: entity): It
communicates financial information to business owners; as a communication tool, it is the
language of business.
4. Meeting legal requirements: Tax, etc.
5. Protecting assets of a business: assets/resources can protect and keep track of them.
6. Assistance to management.

History of Accounting:

- Dates back to more than 7,000 years in Mesopotamia. Other records are also found in Babylon,
Assyria, and Sumeria. This may have been caused by economic needs of the commerce industry
in these early civilizations.
- Roman empire: The deeds of the Divine Augustus; Records of cash, commodities, and
transactions were kept by Military Personnel.
- Merchants during the Goryeo Dynasty kept track of their business through record-keeping
methodologies.
- Luca Bartolomeo de Pacioli: “The Father of Accounting”, “Summa de ar (S: Book)

Lesson 4: Branches of Accounting

1. Financial Accounting – Recording of business transactions, summarized and production of final
output which is a financial statement.
- Accounting Process: Recording – classifying – summarizing – producing financial statements –
used by company owners, public, and the government.
- We communicate the financial results of an entity through financial statements.
2. Management Accounting – We collect information to be used by the management. For
managerial decision making (what to strengthen, and what to not do, stop doing).
(F – Reflects a total/ generalized report of a company’s operations; M – Reflects a detailed,
differentiated report for separate and differentiated decision-making)

3. Cost Accounting – Accounts the financial sacrifices, paid for, products purchased for resale, or
the cost incurred to operate a business.
4.