Accounting is defined as the process of recording, classifying, and summarizing financial transactions to produce useful information for decision making. It is important because it allows people and businesses to track income, expenses, profits and losses. Following accounting standards and principles helps ensure financial statements accurately reflect a business's financial performance and position.
Accounting is defined as the process of recording, classifying, and summarizing financial transactions to produce useful information for decision making. It is important because it allows people and businesses to track income, expenses, profits and losses. Following accounting standards and principles helps ensure financial statements accurately reflect a business's financial performance and position.
Accounting is defined as the process of recording, classifying, and summarizing financial transactions to produce useful information for decision making. It is important because it allows people and businesses to track income, expenses, profits and losses. Following accounting standards and principles helps ensure financial statements accurately reflect a business's financial performance and position.
DEFINES ACCOUNTING AS FOLLOWS; “IT 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 DECISIONS.” DEFINITION OF ACCOUNTING BY THE COMMITTEE ON ACCOUNTING TERMINOLOGY OF THE AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS(AICPA):
“ACCOUNTING IS AN ART OF RECORDING,
CLASSIFYING, 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.” WHY IS ACCOUNTING IMPORTANT? PEOPLE ARE NOW LIVING IN AN ERA OF ACCOUNTABILITY HAVE TO PAY THE FOLLOWING: **INCOME TAXES **TUITION FEES **HOUSE RENTAL **SALARIES FOR HELPERS **TELEPHONE AND LIGHT BILLS ALL THESE INVOLVES ACCOUNTING PEOPLE'S LIVES INVOLVES ACCOUNTABILITY TO ONE'S SELF AND TO OTHERS SUCH AS THE IMPORTANCE OF KEEPING BUSINESS RECORDS GOVERNMENT REQUIREMENT - SPECIALLY BY THE BUREAU OF INTERNAL REVENUE(BIR). FOR ACCURATE DETERMINATION OF TAXES DUE' TO THE GOVERNMENT. OWNERS UPDATED ON THE INFORMATION ABOUT BUSINESS OPERATIONS. BOOKS OF ACCOUNTS - RECORDS KEPT BY THE BUSINESS. DATA KEPT ARE FINANCIAL IN NATURE. FINANCIAL STATEMENTS- REPORT ABOUT THE ACCOUNTING AND BUSINESS PROFIT - PRIMARY MOTIVE IN BUSINESS ACCOUNTING HELPS TO DETERMINE WHETHER THE BUSINESS EARNED A PROFIT (RESULT OF OPERATING A BUSINESS THREE POSSIBLE RESULTS OF OPERATION: 1. PROFIT 2. LOSS 3. BREAKEVEN RESULTS OF OPERATION: 1. PROFIT - INCOME ˃ EXPENSES EX. P 120,000 ˃ P 80,000
2. LOSS - INCOME ˂ EXPENSES
EX. P 80,000 ˂ P 120,000
3. BREAKEVEN- INCOME = EXPENSES
EX. P120,000 = P120,000 GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP)
THESE ARE UNIFORM SET OF ACCOUNTING
RULES, PROCEDURES, PRACTICES AND STANDARDS THAT ARE FOLLOWED IN PREPARING THE FINANCIAL STATEMENTS. REQUIREMENTS - PRINCIPLE TO BECOME A GAAP: 1. PRINCIPLE OF RELEVANCE 2. PRINCIPLE OF OBJECTIVITY 3. PRINCIPLE OF FEASIBILITY