Fundamentals of ABM

I
Chapter I – Introduction to
Accounting
 What is Accounting?
Accounting is, broadly speaking, a system
that helps businesses track events that
affect them. This process involves
identifying the events that affect a
business, recording these events, and
communicating the summarized results of
all events within a particular period to
interested parties.
 Accountant

The Accountant will record this

transaction and consolidate all
records by the end of the month.
Accounting involves the processes
of Identifying, Recording, and
Communicating financial
information to internal and
external users alike.
Numbers is the language of
business. In order to efficiently
manage your business, you
need to know numbers.
 The Accounting Process
1. Identification of Economic Events
Relevant to a Business.
2. The Recording of Relevant Economic
Events.
3. Summarizing of all the recorded
economic events into accounting
reports.
 Nature of Accounting
1. Accounting is a Process
2. Accounting is an Art
3. Accounting deals with financial
information and transactions.
4. Accounting is a means and not an end.
5. Accounting is an information system.
 Accounting is a Process
A process is composed of multiple
steps that lead to a common end
goal. Likewise, accounting is a
process because it performs the
functions of identifying, recording,
and communicating economic
events.
 Accounting is an Art
Art refers to a way of performing
something. It entails creativity and
skills to help us attain some
objectives. Accounting is a
combination of techniques and its
application requires applied skill and
expertise.
Accounting deals with financial information
and transactions

Accounting deals only with

quantifiable financial transactions.
These are the only events identified by
the accountant, recorded in the books,
and communicated to different
parties.
Accounting is a means not an end

Accounting is a tool to achieve

specific objectives. It is not the
objective itself.
 Accounting is an information system

Accounting is recognized and

characterized as a storehouse of
information. As a service function,
it collects processes and
communicates financial
information of an entity.
 Functions of Accounting
1. Keeping systematic record of business
transactions.
2. Protecting properties of the business.
3. Communicating results to various
parties in or connected with the
business
4. Meeting legal requirements
 Keeping Systematic Record of Business
Transactions

Recording transactions does not only

involve entering the transactions in the
accounting books. The records should
be systematic enough to enable easy
to enable easy understanding of
readers.
 Protecting Properties of the Business

The accounting records serves as

evidence that properties of a
business do exist or how much of a
particular resource does a
company have.
 Communicating Results to Various Parties in
or Connected with the Business

The accounting reports produced at

the end of each period are not only
used by external parties, but also by
the government in their decision-
making function.
 Meeting Legal Requirements
In the Philippines, the government
requires some companies to provide
financial reports quarterly, semi-
annually, or annually. This procedure
aims to protect the public by providing
them the necessary information to
make sound decisions.
 History of Accounting
accounting or accountancy can be traced
to ancient civilizations. The early
development of accounting dates back to
ancient Mesopotamia, and is closely
related to developments in writing,
counting and money and early auditing
systems by the ancient Egyptians and
Babylonians.
 Luca Pacioli
Luca Pacioli, was a Franciscan friar
born in Borgo San Sepolcro in what is
now Northern Italy in 1446 or 1447. It
is believed that he died in the same
town on 19 June 1517. he is also
known as the “Father of Modern
Accounting”.