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Fundamentals of Accountancy,
Business and Management 1
First Quarter-Module 1
Lesson 1: Define Accounting and
Describe the Nature of Accounting
Lesson 2: Narrate the History/Origin of Accounting
Lesson 3: Define External and Internal Users and
Give Examples

MELC Quarter : 1st Week No.: _1_ Code: ABM–FABM11–IIIa–1-2, 4, 7-8

Competency/ies: 1. Define Accounting
2. Described the Nature of Accounting
3. Narrate the History/Origin of Accounting
4. Define External Users and Give Examples
5. Define Internal Users and Give Examples
 2

Senior High School – ABM Strand – Grade 11

Supplementary Learning Material
Fundamentals of Accountancy, Business, and Management 1
Quarter 1 – Module 1

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DEVELOPMENT TEAM OF THE MODULE

Writer : Lloyd B. Pineda
Content Editor : Nelly D. De Leon, Ph.D
Language Editor : Baby Marilyn G. Gregorious
Layout and Design Editor: Hilarion Jr. P. Dela Cruz

Cover Layout Artist: Nemesio S. Cancan Jr., Ed.D

MANAGEMENT TEAM
OIC-SDS : Romela M. Cruz, CESE
CID Chief : Alyn G. Mendoza, PhDTE
SGOD Chief : Mrs. Emma G. Arrubio
PSDS-in-Charge : Elizabeth O. Gloriana, Ed.D
EPS-LRMS : Ruby E. Baniqued, Ed.D

Department of Education – Schools Division Office, Mandaluyong

Office Address: Calbayog St. Highway Hills, Mandaluyong City
Telephone number: CID- 79552557
E-mail Address: sdo.mandaluyong@deped.gov.ph ● www.depedmandaluyong.org
The following are some reminders in using this module:
1. Handle this module with care. Use a separate sheet in answering the
exercises.
2. Read the directions carefully before doing each task.
3. Activities in this module can be done individually or with the help of
your teacher, home learning partner or knowledge source partner.
4. Finish this module for the intended week.
Return this module to the authorized person in charge of retrieval.

MELC Quarter : 1st Week No.: _1_ Code: ABM–FABM11–IIIa–1-2, 4, 7-8

Competency/ies: 1. Define Accounting
2. Described the Nature of Accounting
3. Narrate the History/Origin of Accounting
4. Define External Users and Give Examples
5. Define Internal Users and Give Examples
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S.H.S.
ABM
Strand

Name: _______________________________Grade/Section: ______________________ Date:_________________

FUNDAMENTALS OF ACCOUNTANCY, BUSINESS AND MANAGEMENT 1

QUARTER 1 – MODULE 1
PRETEST

MULTIPLE CHOICE (5 points)

Directions: Encircle the letter corresponding to the correct answer.
1. Which of the following terms best defines as the process of identifying, measuring and
communication economic information to permit informed judgement and decision by users of the
information?
A. Account C. Financial Statements
B. Accounting D. Business Transactions
2. Luca Pacioli’s contribution to the accounting profession was first recognized during the
A. Earliest Period B. Middle Ages C. Roman Empire D. 21st Century
3. Accounting Standards Council defines accounting as a/an:
A. Art B. Process C. Service activity D. Provider of information
4. Which of the following is NOT an internal user of financial information?
A. Customers B. Employees C. Business owners D. Board of Directors
5. Which of the following is NOT an external user of financial information?
A. Investors B. Managers C. Tax authorities D. Potential investors

Lesson 1: Define Accounting and Describe the Nature of Accounting

OBJECTIVES:
After this lesson, you should be able to:
1. Recall the definition of accounting
2. Explain the definition of accounting; and
3. Describe the nature of accounting.

KEY CONCEPTS
Today’s business world should be very busy with different business transactions. All
business transactions should be supplemented by different important financial documents.
These financial documents should be evaluated and accounted based on their nature.
Financial information was very important in making decisions. This information plays
an important role in making economic decision that will be used by different users of
accounting information.
This information will undergo a validation through a systematic process to ensure
accountability and transparency of financial statements.
These financial statements are part of what we call accounting.
In this module, information about accounting will be presented.

INTRODUCTION OF NEW LESSON

According to Tugas et al (2016) accounting has three generally accepted definitions:
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 Public Accountants)

MELC Quarter : 1st Week No.: _1_ Code: ABM–FABM11–IIIa–1-2, 4, 7-8

Competency/ies: 1. Define Accounting
2. Described the Nature of Accounting
3. Narrate the History/Origin of Accounting
4. Define External Users and Give Examples
5. Define Internal Users and Give Examples
 4

Accounting is a service activity. Its function is to provide quantitative information,

primarily financial in nature, about economic entities, that is intended to be useful in
making economic decision. (Accounting Standards Council)
Accounting is the process of identifying, measuring and communication economic
information to permit informed judgement and decision by users of the information. (American
Accounting Association)
Therefore, based on the definitions accounting it has three inherent features or nature: (1) it’s
an art, (2) it’s a service and (3) it’s a process. As a process, all business transactions must follow a
series of steps from validation of financial documents to interpretation of financial information
gathered to obtain result that will help users in making decisions.
As a process, Tugas et al (2016) enumerated the components of financial statements:
1. Statement of Financial Position (Balance Sheet);
2. Statement of Profit or Loss (Income Statement);
3. Statement of Changes in Equity;
4. Statement of Cash Flows, and
5. Notes to financial statements, contains the important supplemental information about the
accounting policies of the business.

ACTIVITY
Directions: Discuss with your assigned group, then list and draw three (3) words that best
describe the definition of accounting. Each word should be aligned with the definition stated in
this module, and it must not be repeated. (5pts each → 15 pts.)
1._____________________ 2._____________________ 3._____________________

CHECK YOUR UNDERSTANDING

Directions: Define accounting in your own words. Your answer must be aligned and related to
the definition and nature of accounting given in this module, with a minimum of 10 words.
(10 points)
____________________________________________________________________________________________________
____________________________________________________________________________________________________
____________________________________________________________________________________________________

Lesson 2: Narrate the History/Origin of Accounting

OBJECTIVES:
After this lesson, you should be able to:
1. Recall the history or origin of accounting; and
2. Explain the development of accounting.

REVIEW
Directions: Why is accounting considered an “art” and a “process”? (10 points)
____________________________________________________________________________________________________
____________________________________________________________________________________________________
____________________________________________________________________________________________________

INTRODUCTION OF NEW LESSON

According to the Commission on Higher Education in collaboration with the Philippine
Normal University, Teaching Guide for Senior High School FUNDAMENTALS ON ACCOUNTANCY,
BUSINESS, AND MANAGEMENT 1 SPECIALIZED SUBJECT│ABM, published by the Commission
on Higher Education (CHED, 2016) the history of accounting is discussed as follows:
Accounting is as old as civilization itself. It has evolved in response to various social and
economic needs of men. Accounting started as a simple recording of repetitive exchanges. The
history of accounting is often seen as indistinguishable from the history of finance and business.
Following is the evolution of accounting:
MELC Quarter : 1st Week No.: _1_ Code: ABM–FABM11–IIIa–1-2, 4, 7-8
Competency/ies: 1. Define Accounting
2. Described the Nature of Accounting
3. Narrate the History/Origin of Accounting
4. Define External Users and Give Examples
5. Define Internal Users and Give Examples
 5

• The Cradle of Civilization

Around 3600 B.C., record-keeping was already common from Mesopotamia, China and India to
Central and South America. The oldest evidence of this practice was the “clay tablet” of
Mesopotamia which dealt with commercial transactions at the time such as listing of accounts
receivable and accounts payable.
• 14th Century - Double-Entry Bookkeeping
The most important event in accounting history is generally considered to be the dissemination of
double entry bookkeeping by Luca Pacioli (‘The Father of Accounting’) in 14th century Italy. Pacioli
was much revered in his day, and was a friend and contemporary of Leonardo da Vinci. The Italians
of the 14th to 16th centuries are widely acknowledged as the fathers of modern accounting and
were the first to commonly use Arabic numerals, rather than Roman, for tracking business
accounts. Luca Pacioli wrote Summa de Arithmetica, the first book published that contained a
detailed chapter on double-entry bookkeeping.
• French Revolution (1700s)
The thorough study of accounting and development of accounting theory began during this period.
Social upheavals affecting government, finances, laws, customs and business had greatly influenced
the development of accounting.
• The Industrial Revolution (1760-1830)
Mass production and the great importance of fixed assets were given attention during this period.
• 19th Century – The Beginnings of Modern Accounting in Europe and America
The modern, formal accounting profession emerged in Scotland in 1854 when Queen Victoria
granted a Royal Charter to the Institute of Accountants in Glasgow, creating the profession of the
Chartered Accountant (CA).
In the late 1800s, chartered accountants from Scotland and Britain came to the U.S. to audit
British investments. Some of these accountants stayed in the U.S., setting up accounting practices
and becoming the origins of several U.S. accounting firms. The first national U.S. accounting
society was set up in 1887. The American Association of Public Accountants was the forerunner to
the current American Institute of Certified Public Accountants (AICPA).In this period rapid changes
in accounting practice and reports were made. Accounting standards to be observed by accounting
professionals were promulgated. Notable practices such as mergers, acquisitions and growth of
multinational corporations were developed. A merger is when one company takes over all the
operations of another business entity resulting in the dissolution of another business. Businesses
expanded by acquiring other companies. These types of transactions have challenged accounting
professionals to develop new standards that will address accounting issues related to these
business combinations.
• The Present - The Development of Modern Accounting Standards and Commerce
The accounting profession in the 20th century developed around state requirements for financial
statement audits. Beyond the industry's self-regulation, the government also sets accounting
standards, through laws and agencies such as the Securities and Exchange Commission (SEC). As
economies worldwide continued to globalize, accounting regulatory bodies required accounting
practitioners to observe International Accounting Standards. This is to assure transparency and
reliability, and to obtain greater confidence on accounting information used by global investors.
Nowadays, investors seek investment opportunities all over the world. To remain competitive,
businesses everywhere feel the need to operate globally. The trend now for accounting
professionals is to observe one single set of global accounting standards in order to have greater
transparency and comparability of financial data across borders.

ACTIVITY
Directions: With your assigned group, create a timeline on the important details regarding the
development of accounting. The timeline should include at least one essential development
during the earliest period, during the Roman Empire, during the Middle Ages and the accounting
methods today in a one straight line with marking points each period. (15 points)

MELC Quarter : 1st Week No.: _1_ Code: ABM–FABM11–IIIa–1-2, 4, 7-8

Competency/ies: 1. Define Accounting
2. Described the Nature of Accounting
3. Narrate the History/Origin of Accounting
4. Define External Users and Give Examples
5. Define Internal Users and Give Examples
 6

CHECK YOUR UNDERSTANDING

Directions: What is the vital role of accounting in business? (10 points)
____________________________________________________________________________________________________
____________________________________________________________________________________________________
____________________________________________________________________________________________________

Lesson 3: Define External and Internal Users and Give Examples

OBJECTIVES:
After this lesson, you should be able to:
1. Define internal and external users; and
2. Describe examples of internal and external users of financial information

REVIEW

Directions: Who is the father of modern accounting and what are his contributions to the accounting
profession? (5 points)
____________________________________________________________________________________________________
____________________________________________________________________________________________________
____________________________________________________________________________________________________

INTRODUCTION OF NEW LESSON

External Users are individuals who take an interest in the account information of an organization,
but they are not part of the organization’s administrative process. (Iedunote, 2017). According the
Florendo (2016) the following are external users of financial information:
Customers ● main source of company’s income
● obtain goods and services for a fee
Creditors ● sources of additional funds
● lend capital to company in the form of money
Potential ● sources of additional funds
Investors ● invest resources in the business hoping to earn an investment return
Government ● an external user whose primary function is to regulate businesses
● studies financial statements to assess the amount of taxes payable
General ● citizens and residents of the country even though they do not wish to transact with
Public the business
● use financial statements to determine the condition of the economy

Internal Users are those who administer, manages, and operates the day-to-day activities within the
organization. (Iedunote, 2017). According to Florendo (2016) the following are internal users of
financial information:
Management ● employees who can make decisions for the organization
● considered the brain of the business.
Employees ● Persons in the business other than executives and owners or shareholders
Owners or ● existing investors of the firm
stockholders ● mainly concerned with the profits of the company

ACTIVITY NO.1
Directions: Collaborate with your groupmates and come up with a list of 5 “specific names” of
internal users. (2 points each → 10 points)
__1.___________________________________________4._____________________________________________
__2.___________________________________________5._____________________________________________
__3.__________________________________________________________________________________________

ACTIVITY NO.2
Directions: Cut and paste five (5) pictures of an example of external users. Picture should be
clear and aligned with the given definition and/or examples of each type of external users of
financial information. (2 points each → 10 points)

MELC Quarter : 1st Week No.: _1_ Code: ABM–FABM11–IIIa–1-2, 4, 7-8

Competency/ies: 1. Define Accounting
2. Described the Nature of Accounting
3. Narrate the History/Origin of Accounting
4. Define External Users and Give Examples
5. Define Internal Users and Give Examples
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1. 2. 3. 4. 5.

ACTIVITY NO.3
Directions: What is the difference between internal and external users of financial information.
Answer should be a minimum of 10 words. (10 points).
____________________________________________________________________________________________________
____________________________________________________________________________________________________

CHECK YOUR UNDERSTANDING

Directions: Identify if the underlined word/s is an internal or external user of financial

information. (5 points)
1. The Bureau of Internal Revenue is a gov’t agency that collects taxes
from the taxpayers.
2. Age Company borrows money from the SY Banko to finance operating
expenses.
3. Adelfa bought a Samsung mobile phone from C Mobile, Inc for personal
use.
4. J. dela Cruz purchased a computer set in his manufacturing company.
5. Chloe hired Mina in her accounting firm as her assistant secretary.

POSTTEST
MULTIPLE CHOICE: (5 points)
Directions: Encircle the letter corresponding to the correct answer.
1. Which of the following professional organization defines accounting as a service activity?
A. Accounting Standards Council
B. American Accounting Association
C. Philippine Institue of Certified Public Accountants
D. Amercian Institute of Certified Public Accountants
2. Laborer, field workers and non-managerial employees are examples of what users of financial
information?
A. General Public C. Employees
B. Government D. Management
3. Which of the following internal users of financial information that is considered as existing
investors of the company and concerned mostly with the profits of the company?
A. Managers C. Business Owners
B. Employees D. Management
4. The period when the double entry bookkeeping started.
A. Earliest Period C. Roman Empire
B. Middle Ages D. 21st Century
5. Which of the following is NOT a components of financial statements?
A. Statement of Financial Position C. Statement of Changes in Equity
B. Statement of Profit or Loss D. Statment of Cash

REFERENCES:
1) Accountingverse (2020). Business Transaction. Retrieved June 2020, from
https://www.accountingverse.com/dictionary/b/business-transaction.html
2) Florendo, Joselito G. (2016). Fundamentals of Accountancy, Business and Management 1. Rex
Book Store, pages 44-45
3) Florendo, Joselito G. et al (2016). Teaching Guide for Senior High School, Fundamentals of
Accountancy, Business and Management 1. Commission on Higher Education, pages 4-5
4) Iedunote (2017). Users of Accounting Information (Internal and External Explained). Retrieved
July 2020, from https://www.iedunote.com/users-of-accounting-information
5) Tugas, F., Salendrez, H., and Rabo, J. (2016). Fundamentals of Accountancy, Business and
Management 1. Vibal Group, Inc., page 5
MELC Quarter : 1st Week No.: _1_ Code: ABM–FABM11–IIIa–1-2, 4, 7-8
Competency/ies: 1. Define Accounting
2. Described the Nature of Accounting
3. Narrate the History/Origin of Accounting
4. Define External Users and Give Examples
5. Define Internal Users and Give Examples
 8

For inquiries or feedback, please write or call:

Department of Education – Schools Division Office-

Mandaluyong

Calbayog Street, Highway Hills, Mandaluyong City 1500

Telefax: (632) 79552557

Email Address: sdo.mandaluyong@deped.gov.ph

●www.depedmandaluyong.org

MELC Quarter : 1st Week No.: _1_ Code: ABM–FABM11–IIIa–1-2, 4, 7-8

Competency/ies: 1. Define Accounting
2. Described the Nature of Accounting
3. Narrate the History/Origin of Accounting
4. Define External Users and Give Examples
5. Define Internal Users and Give Examples