INTRODUCIN

G
ACCOUNTING
AND
FINANCIAL
STATEMENTS
WHAT IS ACCOUNTING?

Accounting is the language of business. It is

the process of recording , classifying,
summarizing, analyzing, and reporting
financial transactions of a business or
organization. It involves the systematic and
comprehensive recording of financial
transactions pertaining to a business, and it
also includes the interpretation of these
transactions. The primary purpose of
accounting is to provide stakeholders with
accurate and timely financial information that
can be used for decision-making, planning
and control.

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 TYPES OF INFORMATION PROVIDED BY
ACCOUNTANTS

• Information prepared exclusively by people within a company

(managers, employees, or owners) for their own sake.

• Financial information required by various government

agencies such as the Internal Revenue Service (IRS),
Securities and Exchange Commission (SEC), and the Federal
Trade Commission (FTC).

• General information about companies provide to people

outside the firm such as investors, creditors, and labor
unions.
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 ACCOUNTING AND
BOOKKEEPING

Sample Footer Text 4

BOOKKEEPING
Bookkeeping is primarily concerned with the recording of financial
transactions. It involves the systematic recording of financial
transactions including purchases, sales, receipts, and payments in a
company’s accounting system. Bookkeepers are responsible for
maintaining the accurate records of daily financial activities such as
posting debits and credits, reconciling bank statements and
generating invoices.
 KEY TASK OF BOOKKEEPING

• Recording • Posting
financial debits and • Generating • Maintaining ledge
transactions credits invoices

Note: Bookkeeping provides the foundation of accounting process by

organizing and categorizing financial data. It focuses on the day-to-day
financial operations of a business and ensures that all transactions are
accurately recorded.

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 ACCOUNTING
Accounting encompasses a broader scope of
activities compared to bookkeeping . While
bookkeeping focuses on recording financial
transactions, accounting involves interpreting,
classifying, analyzing, summarizing and reporting
financial data to stakeholders. Accountants use the
information provided by bookkeepers to produce
financial statements , analyze business performance
, and make strategic financial decisions.

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KEY FUNCTIONS OF ACCOUNTING

• INTERPRETING • ANALYZING
• CLASSIFYING
FINANCIAL DATA FINANCIAL
TRANSACTIONS PERFORMANCE

• PREPARING • PROVIDING FINANCIAL

INSIGHTS &
FINANCIAL
RECOMMENDATIONS
STATEMENTS

NOTE: Accounting provides a comprehensive view of a company’s financial health and

performance. It involves interpreting the recorded data to provide meaningful insights
for decision-making purposes.
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WHO USES ACCOUNTING
INFORMATION?

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INTERNAL USERS
Internal users of accounting information includes management,
employees, and owners. Employees may use accounting information to
make informed decisions about the company’s operations, investments,
and financial strategies. Employees may use accounting information to
assess the financial health of the organization and understand how their
individual roles contributes to the overall success of the company.
Owners , such as shareholders or partners , rely on accounting
information to evaluate the performance of the business and make
decisions about its future direction.
AREAS IN WHICH MANAGERS USE ACCOUNTING INFORMATION

• MARKETING (which line of goods should the company emphasize?)

• PRODUCTION (should the company produce its food in the United States or open a new
plant in Mexico?)

• RESEARCH AND DEVELOPMENT (How much money should be set aside for new product
development?)

• SALES (Should the company expand the advertising budget and take money away from some
other part of the marketing budget?
EXTERNAL USERS
External users of accounting information consist of investors, creditors,
government agencies, and other stakeholders. Investors use accounting
information to assess the financial performance and potential risks of investing in
a company. Creditors, such as banks or suppliers, utilize accounting information
to evaluate the creditworthiness of a business and make lending or supply
decisions. Government agencies may require access to accounting information
for regulatory purposes, tax assessment, or economic policy formulation. Other
stakeholders, including customers and competitors, may also use accounting
information to gauge the stability and competitiveness of a company.
AREAS IN WHICH BANKERS USE ACCOUNTING INFORMATION

• Granting loans to individuals and companies.

• Investing clients’ money.

• Setting interest rates.

• Meeting federal regulations for protecting your money.

 ACCOUNTABILITY IN ACCOUNTING

A business's financial statements can also be of great interest to other members

of the local or national community. Labor groups might be interested in what impact
managements' financial decisions have on their unions and other employees. Local
communities have an interest in how business’s financial decisions (for example, lay offs
or plant closing) will impact their citizen.
as the economy becomes more complex, so do the transactions within a
business, and the process of reporting them to various users understandable becomes
more complex as well. A solid knowledge of accounting is helpful to individuals ,
managers, and business owners who are making their decisions based on the
information accounting documents provide.
FINANCIAL STATEMENTS
 WHAT IS A FINANCIAL STATEMENT?

A financial statement is a document that shows the financial activities of a business. It

is a collection of summary-level reports about an organization's financial results,
financial position, and cash flows. Financial statements are written reports created by a
company’s management to summarize the business’s financial condition over a certain
period. They are used by lenders and investors to check a business’s financial health
and earnings potential.
The financial statements are usually issued at least once a year. In many cases, they are
issued quarterly or more often where necessary. A set of rules called Generally
Accepted Accounting Principles (GAAP) governs the preparation of the financial
statement . GAAP has been defined as a set of objectives , conventions, and principles
to govern the preparation and presentation of financial statements. The rules can be
found in volumes of documents issued by the American Institute of Certified Public
Accountants (AICPA), the Financial Accounting Standards Boards (FASB) , the Internal
Revenue Service(IRS), the Securities and Exchange Commission (SEC), and other
regulatory bodies.
 THE BASIC FINANCIAL STATEMENTS

The statement that present the asset of the company.

BALANCE SHEET

Shows all the revenues of the company less the expense to

INCOME STATEMENT
get the net income

STATEMENT OF CASH A statement that shows how much cash you have on for
FLOWS a specific period.

STATEMENT OF RETANED Shows how the balance in Retained Earnings has

EARNINGS changed during the period of time (Year, quarter, month)
HOW DIFFERENT BUSINESS ENTITIES PRESENT
ACCOUNTING INFORMATION
 Businesses with single owner. The accounting for these proprietorships includes
PROPREITORSHIP only the records of the business- not the personal financial records of the
proprietor of the business.

Similar to proprietorship, but instead of one owner there are two or more
owners. In general most of these business are small to mediumized.
However there are some exceptions such as large national or even
PARTNERSHIP international accounting or law firms that may have thousands of partners.
As with the proprietorship, accounting treats these organizations records
as separate and distinct from those of the individual partners.
 Businesses that are owned by one or more stockholders, these
owners may or may not have a managerial interest in the company.
Many of these stock holders are simply private citizens who have
CORPORATIONS money invested in the company by way of stocks that they have
purchased. The accounting records of corporation are maintained
separately from those of the individual stockholders or owners.
 DIFFERENCES IN THE THREE TYPES OF
BUSINESSES

BUSINESS TYPE PROPRIETOR-SHIP PARTNERSHIP CORPORATION

NUMBER OF ONE TWO OR MORE ONE OR MORE

OWNERS
MAINTAINED MAINTAINED MAINTAINED
ACCOUNTING SEPARATELY FROM SEPARATELY FROM SEPARATELY FROM
RECORDS OWNERS RECORDS OWNERS RECORDS OWNERS RECORDS

OWNER HAS A
MANAGERAL YES USUALLY NOT USUALLY NOT
RESPONSIBILI-TIES
 GLOSSARY
• ACCOUNTING- the process or recording, classifying, and summarizing economic events through the preparation of
financial statements such as the Balance sheet, Income Statement, and Statement of Cash Flow.

• American Institute of Certified Public Accountants (AICPA): The professional organization of CPAs in the United State.
The AICPA is charge with preparation of the CPA Examination, the establishment and enforcement of the code of
professional ethics, and working with the Financial Accounting Standards Board in the proclamation of accounting
standards.

• Corporations: Business that are given the right to exist by an individual state in the United States. With this right to
exist, the corporation is then allowed to sell stock, Those buying this stock become owners of the corporation.
Corporations can be set up as for profit or not for profit, and make that decision when applying for their charter with
the state.
• Financial Accounting Standard Board (FASB): Sets the accounting standards to be followed for the preparation
of financial statements. All rulings from the FASB are considered to be GAAP.

• Financial Statements: Reports prepared by companies on the financial status of their business; examples
are Balance Sheet, Income Statement, Statement of Cash Flow, and Statement of Retained Earnings.

• Generally Accepted Accounting Principles (GAAP): The rules that govern the preparation of Financial
statement. These rules are developed by the American Institute of Certified Public Accountants, the
Financial Standard Board, the Securities and Exchange Commission, and other government agencies.

• Internal Revenue Service (IRS): The government agency charged with collection of federal taxes in the
United States. There are different accounting rules for the preparation of taxes in the United States than
for the presentation of financial statements.

• Partnership: A business entity with two or more owners. The accounting for partnership is similar to
that proprietorships.

• Proprietorship, Sole Proprietorship: Business with one single owner. Even though there is only one owner, the
records of the owner’s personal financial affairs are kept separate from those of the accounting records of
the business. Separate tax returns are prepared for the business and for the individual.
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 GROUP MEMBERS:

LEIA MARIE R. LAGDA

HAROLD CONDEZ
JAY ANN ARIOSA
THERESA PONS
JOCEL SANZ
NOEL LACAO LACAO
GAUDIOSO BAYNOSA
MADDEA OLIVEROS
THANK YOU SO MUCH!!

MWAAAAHHHH!!!