UNIVERSITY OF MAKATI

J. P. Rizal Ext., West Rembo, Makati City

HIGHER SCHOOL NG UMAK
ABM AND LANGUAGE DEPARTMENT
Course Title Title
Fundamentals of Module
1
Accountancy, Business & No. Introduction to Accounting
Management 1
Learning Objectives 1. define and describe the nature of accounting;
At the end of the lesson, the 2. explain the nature of accounting in business ; and
students should be able to: 3. narrate the history/origin of accounting.

Definition of Accounting
Accounting is a process of identifying, recording and communicating economic information that is
useful In making economic decisions.
I
N Nature of Accounting
Accounting is the process of with the basic purpose of providing information about economic
T activities that is intends to be useful in making economic decisions.
R
O Functions of Accounting in Business
D Accounting is often referred to as the “language of business” because it is fundamental to the
communication of financial information.
U
C Accounting as science and art
T 1. As a social science, accounting is a body of knowledge which has been systematically gathered,
classifies and organized
I 2. As a practical art, accounting requires the use of creative skills and judgement
O
N Accounting as an Information System
A system is one that consist of an I-P-O (Input – Process – Output). In accounting system, the inputs
are the identified accountable events; the process are recording, classifying and summarizing; and the output is
the accounting report communicated to the users.

● Essential elements of the definition of accounting

1. Identifying – The accountant analyzes each business transaction and identifies whether the transaction is
an “accountable event” or “non-accountable event”. This is because only accountable events are
recorded in the books of accounts.
“Accountable events (or ‘economic events’) are those that affect the assets, liabilities,
equity, income or expenses of a business. Sociological and psychological matters are outside the scope
C of accounting
O
2. Recording – the accountant recognizes (i.e. records) the identified “accountable events”. This process is
N called “journalizing”.
T After journalizing, the accountant classifies the effects of the event on the “accounts”. This
process is called “posting”.
E
“Account” is the basic storage of information in accounting. e.g., “cash”, “accounts
N receivable”, “Accounts payable”, “sales”, etc.
T
3. Communicating – At the end of each accounting period, the accountant summarizes the information
processed in the accounting system, in order to produce meaningful reports. This is important because
information processed in the accounting system is useless unless it is communicated to intended users.
Accounting information is communicated to interested users through accounting reports, the most
common form of which is the financial statements.
C
O ● Types of information provided by accounting
N 1. Quantitative information – information expressed in numbers, quantities, or units.
T 2. Qualitative information – information expressed in words or descriptive form. Qualitative Information
is found in the notes to financial statements as well as on the face of the other components of financial
E statements.
N 3. Financial Information – information expressed in money. Financial Information is also quantitative
information because monetary amounts are normally expressed in numbers.
T

 Bookkeeping and Accounting

Although bookkeeping function is part of accounting, bookkeeping and accounting are NOT the same.

 Bookkeeping refers to the process of recording accounts or transactions of an entity. Bookkeeping

normally ends with the preparation of trial balance. Unlike accounting, bookkeeping does not require the
interpretation of the significance of the information processed.

 Accounting, on the other hand, covers the whole process of identifying, recording and communicating
information to intended users.

 Managing A Business
Good management is the key to a business’ success. On the other hand, mismanagement is, one way or
another, the cause every business’s failure. Management therefore is no laughing matter. It cannot be
taken lightly. To be a good manager, one must equip himself or herself with the right management tools
– and one important management tool is accounting!

Management is a process of establishing common objectives, coordinating efforts towards those

objectives, and efficiently and effectively utilizing available resources to achieve certain goals.

Managing a business requires more than just technical skills. A business manager is likened to a musical
conductor who leads a group of musician to perform a musical piece to the best of his abilities.

A successful business manager sees the “bigger picture” and understand each detail. HE or she has the
ability to think “inside and outside of the box” and to make both long-term (strategic) and short-term
(tactical) plans. As a future business professional, you need to understand each of the following major
facets of business:

 Finance – refers to how a business generates and manages its funds. Finance is responsible in
providing adequate resources needed for the other facets to function properly.
 Production – refers to how goods are produced or services are rendered. Production is
responsible for the quality of goods and services and the efficiency by which it was produced or
rendered.
 Marketing – refers to how goods and services are communicated to customers. Marketing is
responsible creating value for customers and building strong customer relationship.
 Accounting – provides a measure of how well the other facets of the business are performing.
Accounting is responsible in providing useful information that aids in making economic
decisions.

A manager makes countless business decisions. Few examples of these decisions include:
 How much money need to be invested in the business?
 How much inventory is enough?
 Is the business spending too much in its marketing activities?
 Is the business earning profits?
 Shall the business continue or cease its existence?

The major facets work hand in hand. Each is mutually dependent on the others. Without any one of them,
the business will not fully achieve its goals.

 Accounting as a managerial tool

As mentioned earlier, accounting is an essential managerial tool. This is because accounting
provides information that helps a manger perform his or her managerial functions.
 Functions of a manager
1. Planning – involves process of mapping out or arranging in detail how a business goal is to
be achieved.
2. Organizing – after a plan if formulated, a manager is needed to organize his or her personnel
and other resources according to the plan. Organizing involves assigning responsibilities and
granting authority to personnel.
3. Staffing – involves the process of selecting, training and developing employees. This
function is commonly referred to as human resource management
4. Directing – after a plan is formulated and resources are organized and made available, a
manager needs to lead his personnel to ensure that each is performing his or her
responsibilities towards the organization’s common goal to the best of his or her ability.
5. Controlling – after the other elements are in place, a manager needs to continuously monitor
results against goals and take corrective actions necessary to ensure that the plan remains on
track.

 Brief history of accounting

Accounting can be traced as far back as the prehistoric times. Since the dawn of civilization, when
humankind began to engage in trade, perhaps more than 10,000 years ago, methods of record keeping
and accounting have been involved.

As early as 8500 B.C., accounting has already existed. Archeologist have found clay tokens as old as
8500 B.C., in Mesopotamia which were usually cones, disks, spheres and pellets. These tokens
corresponds to commodities like sheep, clothing or bread. They were used in Middle West in keeping
records. After some time, wet clay tablets replaced the tokens. During that time, experts concluded this
to be the start of writing.

On the ancient civilizations, keeping account records are Babylonia (4500 B.C.). Egypt (2250 B.C.),
China and Greece.

In the middle ages (13th and 15th centuries), trade flourished in places such as Florence, Venice and
Genoa. This has brought advancement in account keeping methods. In 1211 A.D., Florentine Banker
kept one of the systems in accounting. However, the system was primitive as the concept of equality for
entries was absent. Double entry records first came out during 1340 A.D. in Genoa.

In 1494, Fra Luca Pacioli, a Franciscan monk and mathematician, formulated the first systematic record
keeping dealing with the “double entry recording system”. The double entry recording system was
included in Pacioli’s bok entitled “Summa di Arithmetica Geometria Proportioni and Proportionista,”
published on November 10, 1494 in Venice.

The concept of double entry recording is being used to this day. Thus, Fra Luca Pacioli is considered as
the father of modern accounting.

A Identify each statement if it is true or not. If the statement is true, write “TRUE” in the space provided before
the number. If not, write the word(s) in the sentence that makes the sentence incorrect.
S _____________1. Accounting is a process of identifying, recording and communicating economic information
S that is useful in making economic decision.
E _____________2. Only accountable events are recorded in the books of accounts
S _____________3. Accountable events are those that affect the assets, liabilities, equity, income and expense of
the business.
S _____________4. Sociological and psychological matters are within the scope of accounting.
M _____________5. The basic purpose of accounting is to provide information that is useful in making economic
E decisions.
N _____________6. Bookkeeping and accounting are the same.
_____________7. Accounting is often referred to as the “language of the soul” because it is fundamental to the
T communication of financial information.
_____________8. Financial Information in accounting reports is also a quantitative information.
_____________9. Qualitative information is information expressed in numbers.
_____________10. All business transactions are recorded in the accounting records.
_____________11. Marketing is the facet of business that is responsible in creating value for customer and
building stronger customer relationships.
_____________12. You are an owner of the start-up business. Your duty of assigning responsibilities and
accountabilities to your employees refers to your management function of planning.
_____________13. You are a business manager. Your duty of leading your employees towards the achievement
of a common goal refers to your management function of directing.
 _____________14. Accounting is a process of establishing common objectives, coordinating efforts towards
those objectives, and efficiently and effectively utilizing available resources to achieve certain goals.
_____________15. The process in which the accountant recognizes the identified accountable events is
posting.

Directions: Look at your surroundings; either in your home or in your classrooms (just imagine that we are in
face-to-face set up). Gather different information then provide 3 quantitative, 3 qualitative and 3 financial
information.
A
S Quantitative information (Example: 3 – I have three siblings)
S 1._____________________________________________
2._____________________________________________
I 3._____________________________________________
G Qualitative information (Example: Slow – The internet connection is slow)
N 1._____________________________________________
2._____________________________________________
M 3._____________________________________________
E Financial information (P25 – P25 is my remaining load balance)
N 1._____________________________________________
T 2._____________________________________________
3._____________________________________________

R
E
F
E
R Millan and Ferrer, Fundamentals of Accountancy, Business & Management 1 (3 rd edition), Philippines:
E Bandolin Enterprise
N
C
E
S