Introduction to

Accounting

Prepared by:
AL-ZHAMILL M. SAHIAL
Intended Learning Outcomes

 define accounting
 describe the nature of accounting
 explain the functions of accounting in
business
 narrate the history/origin of accounting
 Accounting

 Is the process of IDENTIFYING,

RECORDING, and COMMUNICATING
economic events of an organization to
interested users.” (Weygandt, J. et. al)
IDENTIFYING – this involves selecting
economic events that are relevant to a
particular business transaction
The economic events of an organization
are referred to as transactions.
Examples of economic events or
transactions - In a bakery business:
 RECORDING – this involves keeping a
chronological diary of events that are
measured in pesos. The diary referred to in
the definition are the journals and ledgers

 COMMUNICATING – occurs through the

preparation and distribution of financial and
other accounting reports.
 Nature of Accounting
 According to Accounting Theory
(http://accountingtheory.weebly.com/natur
e-and-scope-of-accounting.html):
“Accounting is a systematic recording of
financial transactions and the presentation
of the related information to appropriate
persons.”
 Basic Features of Accounting

 Accounting is a service activity.

 Accounting is a process
 Accounting is both an art and a
discipline.
 Accounting deals with financial
information and transactions
 Accounting is an information system.
Is Accounting considered as
the language of business?
 The Language of Business

 It is the means that business information is communicated to

the stakeholders in the business.
 Accounting information allows business owners to assess
the efficiency and effectiveness of their business
operations.
 It will help you succeed in business
History of Accounting
 Accounting is as old as civilization

 It was initiated in Babylonia and Egypt around

4000 BC. Clay tablets was used to record the
transaction.

 Egyptians used account to record the

safekeeping of gold and the valuables in
treasures. Day wise reports were sent to wizard’
by the in charges and Month wise report to Kings.
 Babylonia was known as the city of commerce.
Accounts was used for business to uncover
losses due to fraud and to cover losses due to
inefficiency.

 In Greece, accounts was used to apportion the

revenue received maintaining total
receipts/payments and balance of government
financial transaction. Coined money was
introduced in about 600 BC.
 Romans used memorandum or day book
(adversaria) to record receipts and payments and
posted to ledgers or cash books (codex acepti et
expensi) on monthly basis (700 BC – 400 AD).

 China used sophisticated governments accounts

during the Chao Dynasty (1122-256 BC).
Father of Accounting
 Luco Pacioli is the father of accounting who
introduced Double entry system in 1494 at
Venice in Italy.

 Pacioli declares that a successful merchant

needs three things: cash or credit, good
keepers and an accounting system which
allows him to view his finances at a glance.
 The trial balance (summa summarium) is the
end of Paciolis’s accounting cycle. If the
total of left side and right side does not tally
Pacioli says:
“ that would indicate a mistake in your ledger, which mistake you will have
to look for diligently with the industry and intelligence God gave you.”
Double entry bookkeeping was develop in the
14th century in Italy. The 7 “key ingredients”
which led to its creation as described by A C
Littleton are

 Power to change ownership

 Employing wealth productively
 Widespread interchange of goods
 Present use of future goods
 Recording due to limits of human brain
 Money as the common denominator of exchange
 Arithmetic – means of computing
Continuation…

 Conditions not found in a natural setting can be

created in an experimental setting, where the
independent variable is manipulated by
investigator.
 In the experimental approach, we can often create
conditions in a short period of time that may take
years to occur naturally. When the experiment is
conducted in a laboratory, experimental unit, or
other specialized research setting, it is removed
from the pressure & problems of real-life situations
& the researcher can pursue his or her studies in a
more leisurely, careful, & concentrated way.
 DISADVANTAGES OF TRUE EXPERIMENTAL
DESIGN
 Most of the times, the results of experimental
research designs cannot be replicated in studies
conducted on human beings due to ethical
problems.
 For certain research problems, because of the
danger to physical & psychological health of the
human subjects, it is not possible to conduct
experiments on human beings.
 In experimental studies conducted in natural
settings like hospitals or community, it is not
possible to impose control over extraneous
variables.
Continuation…

 Many of the human variables neither have valid

measurable criteria nor instruments to measure
them. For example, patient welfare or level of
wellness cannot be measured on any scale or by any
instrument. In these situations, if a refined
experimental design is used, there may be a
mismatch of research design & the variable
measuring instruments.
 Another disadvantage of the experimental research
design is that it is very difficult to get cooperation
from the study participants, because it may involve
medical or surgical treatment or intervention, which
may make the prospective subjects reluctant to
participate in research study.
Thank You…