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The Basic Accounting Environment
The Basic Accounting Environment
THE BASIC
ACCOUNTING
ENVIRONMENT
Introduction to Accounting and Business
• Is an economic unit
• It control resources
• Engages in buying and selling of
goods and services
How Do we measure the success
of the business?
• Main source
-Owner
• Other sources
-Creditors (financing institutions, relatives or friends)
There
There are
are three
three types
types of
of
business
business organizations
organizations
Proprietorship
Partnership
Corporation
Advantages
A
A proprietorship
proprietorship • Ease and low cost in
isis owned
owned by
by one
one organizing
individual.
individual. • All profit goes to the
owner
Disadvantage
• Limited source of
financial resources
• Unlimited liability
Advantages
A partnership isis • More financial
A partnership
owned
owned by
by two
two or
or resources than a
more
more individuals.
individuals. proprietorship.
• Additional
management skills.
• Division of labor
Disadvantage
• Unlimited liability.
• Limited life
• Mutual agency
Advantage
A
A corporation
corporation isis • The ability to obtain
organized
organized as
as aa large amounts of
separate
separate legal
legal entity
entity resources by issuing
from
from the
the owners.
owners. stocks.
• Limited liability
• Unlimited life- 50
yrs
Disadvantage
• Subject to rigid
government control
• Costly to organize
Types of Business
Operations
Service
Service
Product
Product
Enchanted
Enchanted Kingdom
Kingdom Entertainment
Entertainment
Phil.
Phil. Air
Air Lines
Lines Transportation
Transportation
Shangrila
Shangrila Hotel
Hotel Hospitality
Hospitality and
and lodging
lodging
Smart/Globe
Smart/Globe Telecommunication
Telecommunication
Types of Business
Operations
Merchandising
Merchandising
Product
Product
Savemore
Savemore General
Generalmerchandise
merchandise
Watson
Watson Medicine
Medicineandandbeauty
beautyproducts
products
Abenson
Abenson Consumer
Consumerelectronics
electronics
Uniqlo
Uniqlo Apparel
Apparel
Amazon
Amazon Internet
Internetbooks,
books,music,
music,video
video
retailer
retailer
Types of Business Operations
Manufacturing
Manufacturing
Product
Product
Toyota
Toyota Cars,
Cars, trucks,
trucks, vans
vans
Purefoods
Purefoods Processed
Processed food
food
Boeing
Boeing Jet
Jet aircraft
aircraft
Nike
Nike Athletic
Athletic shoes
shoes and
and apparel
apparel
Coca-Cola
Coca-Cola Beverages
Beverages
Samsung
Samsung Appliances,
Appliances, mobile
mobile phones
phones
What is accounting?
• 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
decisions.
“Accounting is the language of
business”
COMPANY
ACCOUNTING
INFORMATION
STAKEHOLDERS
Business
Business Stakeholders
Stakeholders
• Owner or Investor
• Manager
• Lender/Creditor
• Supplier
• Government
• Employee
• Customer
CHANNELS OF ACCOUNTING INFORMATION FLOW
Management
Managerial
Reports
Certain
BIR/Taxing Tax
Reporting process
Special
Returns Reports Regulatory
Agencies
Agencies
Financial
reports
Audited
• Father of Accounting
-Fr. Luca Pacioli wrote the Summa Aritmetica, Geometria,
Proportioni et Proportinalita in 1494.
-Particularis de Computis et Scripturis (Details of Calculation
and Recording) a section of Summa which made Pacioli famous.
-this is where the modern accounting system evolved
HISTORY OF ACCOUNTING
• 15 th Century
-Italian Merchants entrusted their properties to their
servants/employees who were required to prepare reports:
-daily activities
-properties owned
-debts owed
-Creditor and debtor
• 16th Century
-Trading in foreign ports started
-Profit and loss report was prepared after a trip or voyage
Continuation of History of
Accounting
• 19 th Century
-massive development of trade & industry
-from simple to a more complex structure of a business
-mergers, combinations, consolidations
-from manual data processing to electronic data
processing
Continuation of History of
Accounting
Companies
• 1923-first CPA licensure exam
• 1929-establishment of PICPA
Accounting Information System
• It involves an orderly way of accumulating and
reporting business transactions through a process of:
-analyzing
-measuring
-recording
-classifying
-summarizing
Decision
Makers
FUNDAMENTAL SYSTEM
PRINCIPLES
The
The End
End