Introduction to

Accounting
Session 1
House Rules
Participation is encouraged from everyone.
During the lecture, use “raise hands” button
when you have something to say. You may
ask questions or provide comments
throughout the whole class.
Mute your microphone when you’re not
talking.
The class has been made to be inclusive and
a safe space for everyone. In case you are
not comfortable, or you have any other
concerns, don’t hesitate to let me know.
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Learning Objectives 1.
2.
Define accounting and explain its history.
Describe the role accountants play in business and
branches/area of specialization.
3. Identify and describe the forms and purpose of business
organization. *
4. Distinguish between financial and managerial accounting. *
5. Identify users of accounting information and how they apply
information. *
6. Explain why accounting is important to business
stakeholders. *

* - important Slide 3 of 98
LECTURE

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What is Accounting?

It involves quantitative
It is a process (systematic information, primarily
way of doing something). financial in nature, related
to economic events.

It involves communication “Language of business” -

and reporting of results. Warren Buffet

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Types of Information Provided by Accounting

Quantitative Information Qualitative Information Financial Information

- expressed in numbers, quantities or units – expressed in words or descriptive form – expressed in terms of money

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Accounting versus
Bookkeeping
• Bookkeeping is a mechanical process that
records the routine economic activities of a
business.
• Accounting includes bookkeeping but goes
well beyond it in scope.
• Accountants analyze and interpret financial
information, prepare financial statements,
conduct audits, design accounting systems,
prepare special business and financial
studies, prepare forecasts and budgets, and
provide tax services.

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Practice Question

An agent of the Bureau of Internal Revenue has

contacted you with questions regarding your
company’s tax return. Which aspect of your
business do you expect them to be most
interested in?
A. human resource records
B. vendor files
C. accounting records
D. customer records

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Practice Question

An agent of the Bureau of Internal Revenue has

contacted you with questions regarding your
company’s tax return. Which aspect of your
business do you expect them to be most
interested in?
A. human resource records
B. vendor files
C. accounting records
D. customer records

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Functions of Accounting

1. Identification - The accounting process of recognition or nonrecognition of business activities as accountable events or
economic activity or whether has accounting relevance.
Criteria for accountable event:
a. It must affect a financial element of accounting (increasing or decreasing asset, liability or equity)
b. It is the result of a past activity.
c. Its cost can be measured reliably.
2. Measurement - The accounting process of assigning of peso amounts or numbers to the economic transactions and events.
The unit of measure of accounting is money, expressed in prices.
3. Communication - The accounting process of preparing and distributing accounting reports to potential users of accounting
information and interpreting the significance of this processed information.
 Recording - the process of systematically committing to writing business transactions and events after they have been
identified and measured, in books of account in a systematic and chronological manner according to accounting rules.
 Classifying - the grouping of similar and interrelated items into their respective classes.
 Summarizing - putting together or expressing in condensed or brief form the recorded and classified statements in
financial statements.

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Practice Question

Statement I: Accounting is a science.

Statement II: Accounting is an art.

Which statement(s) is(are) true?

a. Only I is true.
b. Only II is true.
c. Both I and II are true.
d. Neither I and II are true.

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Practice Question

Statement I: Accounting is a science.

Statement II: Accounting is an art.

Which statement(s) is(are) true?

a. Only I is true.
b. Only II is true.
c. Both I and II are true.
d. Neither I and II are true.

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Accounting is a Accounting is a Science
Accounting has its own principles holes and techniques. On
Science and An Art the basis of these principles of injections recorded
systematically in order to know the results of a business.
That’s why it is regarded as a science.

Accounting is an Art
Every businessman records a business transaction in the
books of accounts as per rules, according to the nature of
the business and determine the results after analyzing, so
it’s an art.

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Questions?

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History of Accounting

https://youtu.be/HAL0sBd9oyg Slide 15 of 98
 History of Accounting

Source: oojeema.com
Source: fremont.edu
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History of Accounting

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History of Accounting

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History of Accounting

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Practice Question

As you start your new business, you have to

decide how to keep track of money coming in
and going out. Which of the following would be
your best option?
A. Use an Excel spreadsheet
B. Develop your own system of
accounting specifically to suit you.
C. Use historical accounting practices.
D. Rely on the bank to supply with you
the information you need.

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Practice Question

As you start your new business, you have to

decide how to keep track of money coming in
and going out. Which of the following would be
your best option?
A. Use an Excel spreadsheet
B. Develop your own system of
accounting specifically to suit you.
C. Use historical accounting
practices.
D. Rely on the bank to supply with you
the information you need.

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What is an
accountant?

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Accounting as a Career

https://youtu.be/G-J9Vh0TNvQ Slide 23 of 98
Accounting as a Career

https://youtu.be/RHlvcIFWgMs Slide 24 of 98
Branches of Accounting/Area of Specialization

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Branches of Accounting/Area of Specialization

1. Financial Accounting - The recording of transactions, preparation of financial statements and communication of financial
information to external user groups. Focuses on general purpose reports.
2. Management Accounting - Incorporates cost accounting data and adapts them for specific decisions which management may be
called upon to make. A management accounting system incorporates all types of financial and non-financial information from a
wide range of sources.
3. Auditing - The examination of financial statements by independent certified public accountant for the purpose of expressing an
opinion on the fairness of presentation of financial statements.
4. Taxation / Tax Accounting - Involves the preparation of tax returns and rendering of tax advice, such as determination of tax
consequences of certain proposed business endeavors.
5. Consulting - giving advice or guidance to managers and other decision makers on the impact (both financial and nonfinancial) of a
potential course of action
6. Government Accounting - Accounting for the national government and its instrumentalities, focusing attention on the custody of
public funds and the purpose or purposes to which such funds are committed.
7. Financial Management - Financial managers are responsible for setting financial objectives, making plans based on those objectives,
obtaining the finance needed to achieve the plans, and generally safeguarding all the financial resources of the entity.
8. Accounting Information Services - The goal of the accounting information system is to efficiently provide relevant information to
internal decision makers, and it is important for businesses to stay abreast of advances in technology and invest in those
technologies that help the business remain efficient and competitive.

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Major Categories of Employers

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Major Categories of Employers

1. Public Accounting Firms - Public accounting firms offer a wide range

of accounting, auditing, consulting, and tax preparation services to
their clients.

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Public Accounting Firms
Philippines:

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Public Accounting Firms

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Major Categories of Employers

1. Public Accounting Firms - Public accounting firms offer a wide range of

accounting, auditing, consulting, and tax preparation services to their clients.
2. Corporations - The primary responsibility of corporate accountants (which include
cost and managerial accountants) is to provide information for internal users and
decision makers, as well as implement and monitor internal controls.
3. Government Entities - Accountants in governmental entities perform many of the
same functions as accountants in public accounting firms and corporations. The
primary goal of governmental accounting is to ensure proper tracking of the
inflows and outflows of taxpayer funds using the proscribed standards.
4. Not-for-Profit Entities – include charitable organizations, foundations and
universities. Unlike for profit-entities, not-for-profit organizations have a primary
focus of a particular mission.

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Potential Certifications for Accountants

1. Certified Public Accountant (CPA) – PICPA

2. Chartered Accountant (CA)
3. Chartered Certified Accountants (ACCA)
4. Certified Management Accountant (CMA)
5. Certified Internal Auditor (CIA)
6. Certified Fraud Examiner (CFE)
7. Chartered Financial Analyst (CFA)
8. Certified Financial Planner (CFP)

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Questions?

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Forms of Business Organization

1. Sole Proprietorship
- This business organization has a single owner called the proprietor who generally is also manager.
The owner receives all profits, absorbs all losses and is solely responsible for all debts of the
business. From the accounting viewpoint, the sole proprietorship is distinct from its proprietor. Thus,
the accounting records do not include proprietor’s personal financial records.
2. Partnership
- A business owned and operated by two or more persons who bind themselves to contribute money,
property or industry to a common fund, with the intention of dividing the profits among themselves.
Each partner is personally liable for any debt incurred by the partnership, except limited partner.
3. Corporation
- A business owned by its stockholders. It is an artificial being created by operation of law, having the
rights of succession and the powers, attributes and properties expressly authorized by law or
incident to its existence. The stockholders are not personally liable for the corporation’s debt.

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Purpose of Business Organization

1. Service companies
perform services for a fee (e.g. law firms, accounting and law firms, stock
brokerage, beauty salons and recruitment agencies).
2. Merchandising companies
purchase goods that are ready for sale and then sell these to customers
(e.g. car dealers, clothing stores and supermarkets.
3. Manufacturing companies
buy raw materials, convert them into products and then sell the products
to other companies or to final consumers (e.g. paper mills, steel mills, car
manufacturers and drug manufacturers).
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Users of Accounting Information

Internal Users External Users

Those who make decisions directly affecting the Individuals or enterprises that have financial interest
internal operations of the business. in the business but they are not involved in the day
activities of the organization.

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Users of Accounting Information (Internal)

1. Managers
are directly involved in operation of the business. They need accounting data to improve the
efficiency and effective of the organization.
2. Employees
use financial data to assess whether they are receiving the right compensation and to check if
they bargain for higher remuneration, retirement benefits and employment opportunities.
3. Officers
also called as the company executives who are interested to know if the company is doing well
in its operation so they can plan for possible expansion or branching out to widen its geographical
and demographic market.
4. Internal Auditors
role is to protect and safeguard the resources of the company against fraud or irregularities.

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Users of Accounting Information (External)

1. Investors
are interested in information which enables them to assess the ability of the enterprise to pay dividends.
They need information on whether they should buy, hold or sell their shares in.
2. Lenders
are interested in information that enables them to determine whether their loans, and their interest
attaching to them will be paid when due.
3. Suppliers
are interested in information that enables them to determine whether amount owing to them will be paid
when due.
4. Customers
are interested in the quality of goods and services that they are getting from the entity.
5. Government and their agencies
require information in order to regulate the activities of the enterprise, determine taxation policies and
as a basis for national income and similar activities.

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Financial Accounting vs Management Accounting

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Questions?

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QUIZ

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Quiz

1. Accounting is sometimes called the “language of _____.”

A. Wall Street
B. business
C. Main Street
D. financial statements

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Quiz

1. Accounting is sometimes called the “language of _____.”

A. Wall Street
B. business
C. Main Street
D. financial statements

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Quiz

2. Financial accounting information ________.

A. should be incomplete in order to confuse competitors
B. should be prepared differently by each company
C. provides investors guarantees about the future
D. summarizes what has already occurred

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Quiz

2. Financial accounting information ________.

A. should be incomplete in order to confuse competitors
B. should be prepared differently by each company
C. provides investors guarantees about the future
D. summarizes what has already occurred

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Quiz

3. External users of financial accounting information include all of the following except ________.
A. lenders such as bankers
B. governmental agencies such as BIR
C. employees of a business
D. potential investors

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Quiz

3. External users of financial accounting information include all of the following except ________.
A. lenders such as bankers
B. governmental agencies such as BIR
C. employees of a business
D. potential investors

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Quiz

4. Which of the following groups would have access to managerial accounting information?
A. bankers
B. investors
C. competitors of the business
D. managers

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Quiz

4. Which of the following groups would have access to managerial accounting information?
A. bankers
B. investors
C. competitors of the business
D. managers

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Quiz

5. All of the following are examples of managerial accounting activities except ________.
A. preparing external financial statements in compliance with GAAP
B. deciding whether or not to use automation
C. making equipment repair or replacement decisions
D. deciding whether or not to use automation

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Quiz

5. All of the following are examples of managerial accounting activities except ________.
A. preparing external financial statements in compliance with GAAP
B. deciding whether or not to use automation
C. making equipment repair or replacement decisions
D. deciding whether or not to use automation

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Quiz

6. Which of the following is not true?

A. Organizations share a common purpose or mission.
B. Organizations have inflows and outflows of resources.
C. Organizations add value to society.
D. Organizations need accounting information.

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Quiz

6. Which of the following is not true?

A. Organizations share a common purpose or mission.
B. Organizations have inflows and outflows of resources.
C. Organizations add value to society.
D. Organizations need accounting information.

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Quiz

7. The primary purpose of what type of business is to serve a particular need in the community?
A. for-profit
B. not-for-profit
C. manufacturing
D. retail

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Quiz

7. The primary purpose of what type of business is to serve a particular need in the community?
A. for-profit
B. not-for-profit
C. manufacturing
D. retail

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Quiz

8. Which of the following is not an example of a retailer?

A. electronics store
B. grocery store
C. car dealership
D. computer manufacturer
E. jewelry store

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Quiz

8. Which of the following is not an example of a retailer?

A. electronics store
B. grocery store
C. car dealership
D. computer manufacturer
E. jewelry store

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Quiz

9. A governmental agency can best be described by which of the following statements?

A. has a primary purpose of making a profit
B. has a primary purpose of using taxpayer funds to provide services
C. produces goods for sale to the public
D. has regular shareholder meetings

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Quiz

9. A governmental agency can best be described by which of the following statements?

A. has a primary purpose of making a profit
B. has a primary purpose of using taxpayer funds to provide services
C. produces goods for sale to the public
D. has regular shareholder meetings

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Quiz

10. Which of the following is likely not a type of not-for-profit entity?

A. public library
B. community foundation
C. university
D. local movie theater

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Quiz

10. Which of the following is likely not a type of not-for-profit entity?

A. public library
B. community foundation
C. university
D. local movie theater

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Quiz

11. Which of the following is not considered a stakeholder of an organization?

A. creditors
B. lenders
C. employees
D. community residents
E. a business in another industry

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Quiz

11. Which of the following is not considered a stakeholder of an organization?

A. creditors
B. lenders
C. employees
D. community residents
E. a business in another industry

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Quiz

12. Stockholders can best be defined as which of the following?

A. investors who lend money to a business for a short period of time
B. investors who lend money to a business for a long period of time
C. investors who purchase an ownership in the business
D. analysts who rate the financial performance of the business

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Quiz

12. Stockholders can best be defined as which of the following?

A. investors who lend money to a business for a short period of time
B. investors who lend money to a business for a long period of time
C. investors who purchase an ownership in the business
D. analysts who rate the financial performance of the business

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Quiz

13. Which of the following sell stock on an organized stock exchange such as the New York Stock
Exchange?
A. publicly traded companies
B. not-for-profit businesses
C. governmental agencies
D. privately held companies
E. government-sponsored entities

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Quiz

13. Which of the following sell stock on an organized stock exchange such as the New York Stock
Exchange?
A. publicly traded companies
B. not-for-profit businesses
C. governmental agencies
D. privately held companies
E. government-sponsored entities

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Quiz

14. All of the following are sustainable methods businesses can use to raise capital (funding) except
for ________.
A. borrowing from lenders
B. selling ownership shares
C. profitable operations
D. tax refunds

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Quiz

14. All of the following are sustainable methods businesses can use to raise capital (funding) except
for ________.
A. borrowing from lenders
B. selling ownership shares
C. profitable operations
D. tax refunds

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Quiz

15. The accounting information of a privately held company is generally available to all of the
following
except for ________.
A. governmental agencies
B. investors
C. creditors and lenders
D. competitors

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Quiz

15. The accounting information of a privately held company is generally available to all of the
following
except for ________.
A. governmental agencies
B. investors
C. creditors and lenders
D. competitors

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Quiz

16. Which of the following skills/attributes is not a primary skill for accountants to possess?
A. written communication
B. verbal communication
C. ability to work independently
D. analytical thinking
E. extensive computer programing background

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Quiz

16. Which of the following skills/attributes is not a primary skill for accountants to possess?
A. written communication
B. verbal communication
C. ability to work independently
D. analytical thinking
E. extensive computer programing background

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Quiz

17. Which of the following is typically required for entry-level positions in the accounting profession?
A. bachelor’s degree
B. master’s degree
C. Certified Public Accountant (CPA)
D. Certified Management Accountant (CMA)
E. high school diploma

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Quiz

17. Which of the following is typically required for entry-level positions in the accounting profession?
A. bachelor’s degree
B. master’s degree
C. Certified Public Accountant (CPA)
D. Certified Management Accountant (CMA)
E. high school diploma

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Quiz

18. Typical accounting tasks include all of the following tasks except ________.
A. auditing
B. recording and tracking costs
C. tax compliance and planning
D. consulting
E. purchasing direct materials

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Quiz

18. Typical accounting tasks include all of the following tasks except ________.
A. auditing
B. recording and tracking costs
C. tax compliance and planning
D. consulting
E. purchasing direct materials

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Quiz

19. What type of organization primarily offers tax compliance, auditing, and consulting services?
A. corporations
B. public accounting firms
C. governmental entities
D. universities

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Quiz

19. What type of organization primarily offers tax compliance, auditing, and consulting services?
A. corporations
B. public accounting firms
C. governmental entities
D. universities

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Quiz

20. Which of the following is not part of Big Four accounting firms?
A. Arthur Andersen
B. Deloitte & Touche
C. Ernst & Young (EY)
D. KPMG
E. PricewaterhouseCoopers (PwC)

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Quiz

20. Which of the following is not part of Big Four accounting firms?
A. Arthur Andersen
B. Deloitte & Touche
C. Ernst & Young (EY)
D. KPMG
E. PricewaterhouseCoopers (PwC)

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Quiz

21. The following are Philippine member firms of Big Four except for the following?
A. SGV & Co.
B. Isla Lipana & Co.
C. Punongbayan & Araullo
D. R.G. Manabat & Co.
E. Navarro Amper & Co.

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Quiz

21. The following are Philippine member firms of Big Four except for the following?
A. SGV & Co.
B. Isla Lipana & Co.
C. Punongbayan & Araullo
D. R.G. Manabat & Co.
E. Navarro Amper & Co.

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Quiz

22. The following are examples of service business except:

A. SM Supermarket
B. Amana Hotel and Resorts
C. Cebu Pacific
D. Manila Water Inc.

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Quiz

22. The following are examples of service business except:

A. SM Supermarket
B. Amana Hotel and Resorts
C. Cebu Pacific
D. Manila Water Inc.

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Quiz

23. The following are examples of manufacturing business, except:

A. Toyota Motors, Inc.
B. Sony Philippines
C. Red Ribbon Bakeshop
D. Rolex Watch Repair Shop

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Quiz

23. The following are examples of manufacturing business, except:

A. Toyota Motors, Inc.
B. Sony Philippines
C. Red Ribbon Bakeshop
D. Rolex Watch Repair Shop

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GROUP
ACTIVITY

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REPORTING

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Questions

8. Use the internet to research one manufacturing, one retail (or merchandising), and one service
business. For each business, describe the following:
A. the primary purpose of the entity
B. the types of activities that accountants would record (hint: what is the source of the business’
funding, and what costs might the business have?)
C. the types of decisions that might be made in this organization and how financial and nonfinancial
information might help the decision-making process

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Questions

5. The following information was taken from the Netflix financial statements.

For Netflix, sales is the product of the number of subscribers and the price charged for each subscription.
What observations can you make about the previous three years of Netflix’s sales? Given this data, provide any
predictions you can make about the future financial performance of Netflix. What nonfinancial factors
influenced that prediction?

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Questions

3. Think about a recent purchase you made. Describe what financial and nonfinancial
factors went into
that purchase. Rank the factors, and explain how you made the final decision to purchase
the item.

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Reporting

The Crafty Coffee Crook

Scenario
Neeraj runs a respectable coffee shop in a small Pacific Northwest town. His friend, Janet, has been working for Neeraj on a part-time basis and always helps him close up shop. At the
end of each day, Janet takes the cash and checks from the day’s business and deposits them in the bank’s night deposit, which is basically a secured metal drawer in the wall of the bank.

Business is good, but Neeraj is always struggling to pay the bills. In addition, the IRS contacted him asking about past-due payroll and income taxes. Neeraj was half-joking with his
friend Rebeca, a fellow small business owner, about how he doesn’t understand money and finances, but makes a darn good cup of coffee and is good with people. Rebeca suggested that
it might be time for Neeraj to bring in an expert.
Despite the cost, Neeraj hired a CPA to help him with the taxes. The CPA noticed a discrepancy in the cash account, which led to the hiring of a forensic accountant who discovered that
for 18 months, Janet had been skimming the cash from the deposits, changing the deposit slips, and then making the smaller deposit into the bank account. The forensic accountant
determined that Janet had skimmed $42,828.96.

Discussion Questions

Discuss among your peers and come up with the best answers:
● How do you think Neeraj could have prevented this?
● Pretend that Neeraj hired you as his accountant in the beginning, what would you have established to prevent this scenario?
● Discuss the role of accounting in preventing these types of scenarios.

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Reporting

Creating a Budget
Casey just moved into his new apartment. He is creating a budget for August. He lives in a one-bedroom apartment. His monthly net pay is $2,000. His
monthly rent is $500 (25% of his net pay). Here is how he allocated his net monthly pay to create his budget.
●
Utilities = 7.5%
● Car Insurance = 10%
● Credit Card = 5%
● Food = 10%
● Entertainment = 2.5%
● Savings = 5%
● Fuel = 5%
● Dining Out = 2.5%
● Internet = 2.5%
● Car Loan = 25%

 
Fill out Casey’s budget and see how much cash he has at the end of the month.

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Learning Objectives Met 1. Define accounting and explain its history.
2. Describe the role accountants play in business and
branches/area of specialization.
3. Identify and describe the forms and purpose of business
organization. *
4. Distinguish between financial and managerial accounting. *
5. Identify users of accounting information and how they apply
information. *
6. Explain why accounting is important to business
stakeholders. *

* - important Slide 95 of 98
Assignments

(1) Download an annual

report or financial
statements from the
Internet for any company
in the Philippines. Explain
the significance of the
report.
(2) Answer one question from
Chapter 1 End Questions
except for# 3, 5 and 8.

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 CALCULATIONS
UPCOMING

IMPORTANT:
Bring your calculator
starting next week.

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Thank you.

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