Basic Finance

MODULE MATERIALS
List of Modules

No. MODULE
MODULE TITLE
CODE

1 The Philippine Financial System BFin 313-1

2 Banking Key Concepts BFin 313-2

3 The Principles of Stock Market BFin 313-3

4 The Concept and Development of Money BFin 313-4

5 Introduction to Finance BFin 313-5

6 Introduction to Managerial Finance BFin 313-6

7 Finance and Accounting BFin 313-7

8 Understanding Financial Statements BFin 313-8

9 Financial Statement Tools for Decision Making BFin 313-9

10 The Financial Environment BFin 313-10

11 Financial Intermediation BFin 313-11

12 Interest Rate and Its Role in Finance BFin 313-12

13 Financial Assets BFin 313-13

14 Basic Capital Market BFin 313-14

 MODULE #7-BFin 313-7
Finance and Accounting

MODULE MATERIALS

Bachelor of Science in Bulacan Date Developed:

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Polytechnic Date Revised:
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Basic Finance Document No. Developed by:
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 FINANCE
AND
ACCOUNTING

(BFIN 313-7)

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 MODULE CONTENT

COURSE TITLE: Basic Finance

MODULE TITLE Finance and Accounting

NOMINAL DURATION: 3 Hours

SPECIFIC LEARNING OBJECTIVES:

At the end of this module you MUST be able to:
1. Explain the distinction between finance and accounting.
2. Seek to expand knowledge of mathematics through combination of
practical and theoretical study of financial statements.
3. Understand the distinction between tangible and intangible assets,
human and non-human capital, and money market and capital market.
4. Apply accounting and finance to the business world.
5. Have an understanding on financial accounting, managerial accounting,
and financial management.
TOPICS: (Sub-Topics)
1. Definition of accounting
2. Financial statements
3. Definition of finance
4. Human and non-human capital
5. Tangible and intangible assets
6. Growth in sales
7. Financial markets
8. Money market and capital market
9. Finance and accounting
10. Profit maximization
11. Accounting for profits
12. Financial accounting and managerial accounting
13. Financial management
ASSESSMENT METHOD/S:
Quiz-Multiple Choice
REFERENCE/S:
1. Leuterio, M.M. & Estepa, C.B.
Banking Theory & Practice (Revised Edition), 2018
Pasig City: Anvil Publishing, Inc.
2. Fajardo, Feliciano R. & Manansala, Manuel M.
Money, Credit and Banking 4th Edition, 2018
Mandaluyong City: National Book Store
3. A) Mejorada, N.D.
Introduction to Management Accounting, 2018 Edition
Makati City: Goodwill Trading Co., Inc.
B) Edlagan and Mercado
Management Advisory Services (Concepts, Methods and
Applications) Volume 1, 2017 Edition
Makati City: Goodwill Trading Co., Inc.
4. Shapiro, A.C.
Foundations of Multinational Financial Management, 2008
Edition
New York: John Wiley & Sons
Bachelor of Science in Bulacan Date Developed:
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Polytechnic Date Revised:
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Basic Finance Document No. Developed by:
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 5. A) Sollenberger and Schneider
Managerial Accounting, 9th Edition 2016
Hoboken, New Jersey, USA: John Wiley and Sons
B) Homgren, Sundem and Stratton
Introduction to Management Accounting 10th Edition, 2017
Upper Saddle River, New Jersey, USA: Pearson Prentice Hall

Information Sheet BFIN 313-7

Finance and Accounting

Learning Objectives:
After reading this INFORMATION SHEET, YOU MUST be able to:
1. Provide specialist education in accounting and finance.
2. Give a global perspective on investment markets and asset classes.
3. Provide practical as well as theoretical knowledge on the processes
and mechanics underlying investment.
4. Build existing numerical skills to be able to understand and practice
investment-related mathematics.

INTRODUCTION
Financial accounting is a specialized branch of accounting that keeps
track of a company’s financial transactions. In the Philippines, the Financial
Accounting Standards Board is the organization that develops the accounting
standards and principles. Using standardized guidelines, the transactions are
recorded, summarized, and presented in a financial report or financial
statements such as income statement and balance sheet.
Companies issue financial statements on a routine schedule. The
statements are considered external because they are given to people outside of
the company, with the primary recipients being the users of financial
information. If a corporation’s stock is publicly traded, its financial statements
tend to be widely circulated, and information will likely reach secondary
recipients. Its purpose is to provide enough information for others to assess the
value of a company for themselves.

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ACCOUNTING
▪ is the art of recording, classifying and summarizing transactions and
events, which are in part at least, of a financial character and
interpreting the results thereof. (AICPA)
▪ provides financial information needed by decision makers.

FINANCIAL STATEMENTS

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 • Show the results of operation of a firm (Statement of Comprehensive
Income or Income Statement),
• the firm’s financial condition or position (Statement of Financial
Condition or Statement of Financial Position or Balance Sheet),
• the changes that occurred in the owner’s equity, and/or the sources
and uses of funds.
• Ultimate or final product of the accounting cycle

INCOME STATEMENT

• it shows firm’s revenues and expenses and

• if the firm is earning a profit or incurring a loss.
• it shows the firm’s profitability which is an indication of stability for
the firm.

BALANCE SHEET
• it shows the firm’s assets, liabilities and capital or owner’s equity.
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 • it also shows a firm’s stability, liquidity and solvency.

STATEMENT OF CHANGES IN OWNER’S EQUITY

• shows how the owner’s equity changed.
• For a sole proprietorship and for a partnership, investments and
withdrawals are detailed and the profit is added or the loss is
deducted from the owner’s/partners’ capital. This shows whether
the capital has increased or decreased.
• For a corporation, it details if additional capital stocks are issued,
whether the stocks were sold at a premium and the amount of
retained earnings (accumulated profit) the business has.

STATEMENT OF CASH FLOWS OF FUND FLOWS STATEMENT

• a statement of the sources and uses of the company’s cash/funds.
• it details from where the funds came from and where the cash went.
• It consists of three activities- operating, financing and investing.

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Basic Finance Document No. Developed by:
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FINANCIAL STATEMENTS
• Are not only for internal users but also for external users.
• Internal users: owners, managers and employees
• External users: government and other regulatory agencies, the
suppliers, the creditors, the competitive firms and the community
the business is in.
FINANCE
• The management of money or the money resource itself.
NON-HUMAN CAPITAL
• Includes tangible and intangible resources needed by a company to
attain its goal.

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TANGIBLE AND INTANGIBLE ASSETS
• Tangible assets include financial assets such as cash and
marketable securities that help in maintaining a healthy working
capital position. They also include real assets as property, plant and
equipment.
• Intangible assets include goodwill, copyrights, trade names and
brands, among others.

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HUMAN CAPITAL
• includes human resources, i.e., the employees, including the rank
and file employees, the managerial employees, consultants,
auditors, among others are utilized by the company to attain its
goals and objectives.
• The intellectual and entrepreneurial skills of managers are
intangible assets of the company.
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GROWTH IN SALES
• Means additional investment in assets, which, in turn, requires the
need for additional capital or funding.

FINANCIAL MARKETS
• Are institutions and systems that facilitate transactions in all types
of financial claims.

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MONEY MARKET AND CAPITAL MARKET
• Money market – where companies and individuals obtain short-
term financing.
• Capital market – where long-term financing is obtained.

FINANCE AND ACCOUNTING

• While finance deals with sources and uses of funds, accounting
deals with recording financial transactions to determine results of
operation and financial condition of the business which will
determine if funds were acquired and utilized effectively.

PROFIT MAXIMIZATION
• the ultimate objective of any business firm because it is the best way
to increase owners’ wealth and the value of the company.

ACCOUNTING for PROFITS

• the measure managers and owners use to measure performance of
firms. Hence, financial statements, which are the products of

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Polytechnic Date Revised:
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 accounting, are indispensable tools to management, especially to
financial managers.

FINANCIAL ACCOUNTING
• the branch of accounting that deals with the recording of business
transactions and ultimately the preparation of the financial
statements.
• The basic objective of financial accounting is to provide the objective
financial information about how the business is performing and how
stable the company is.

MANAGERIAL ACCOUNTING
• the branch of accounting which deals with providing internal users,
primarily the managers, with the financial information they need to
be able to perform their duties efficiently and effectively and make
the necessary decisions to improve operation.

FINANCIAL MANAGEMENT
• (Managerial Finance) is concerned with efficient and effective
allocation, acquisition and utilization of funds. Financial managers
are responsible for forecasting and planning, making major
investment and financing decisions, coordination and control and
dealings with the financial markets.

Bachelor of Science in Bulacan Date Developed:

Accounting Information June 2020
Polytechnic Date Revised:
Page 107 of 204
System
College
Basic Finance Document No. Developed by:
Revision # 02
BFIN 313 40-BFIN 313 Eugene A. Ruano
 Bachelor of Science in Bulacan Date Developed:
Accounting Information June 2020
Polytechnic Date Revised:
Page 108 of 204
System
College
Basic Finance Document No. Developed by:
Revision # 02
BFIN 313 40-BFIN 313 Eugene A. Ruano