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Accounting and Its Environment

This document provides an overview of accounting fundamentals including: - Definitions of accounting as a service activity and art of recording financial transactions. - Users and forms of accounting information including financial statements and reports. - Branches of accounting such as financial, management, and cost accounting. - Regulatory bodies that oversee accounting standards and practices. - Fundamental accounting concepts and principles like business entity, going concern, and accrual basis. It also includes examples of classifying business types and accounting elements, as well as problems testing the accounting equation and calculations involving changes to assets, liabilities, and equity.

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Eunice Martinez
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© © All Rights Reserved
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Download as DOCX, PDF, TXT or read online on Scribd
21 views

Accounting and Its Environment

This document provides an overview of accounting fundamentals including: - Definitions of accounting as a service activity and art of recording financial transactions. - Users and forms of accounting information including financial statements and reports. - Branches of accounting such as financial, management, and cost accounting. - Regulatory bodies that oversee accounting standards and practices. - Fundamental accounting concepts and principles like business entity, going concern, and accrual basis. It also includes examples of classifying business types and accounting elements, as well as problems testing the accounting equation and calculations involving changes to assets, liabilities, and equity.

Uploaded by

Eunice Martinez
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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2.

Statement of financial position


3. Statement of changes in owner’s
equity
Integrated Accounting Fundamentals 4. Statement of cash flows
5. Notes to the financial statements

Accounting and its environment Fundamental concerns in


accounting

Definition and nature


Today’s accounting landscape in the
“Accounting is a service activity. Its international and Philippine setting
function is to provide quantitative
information, primarily financial in nature, Accountants may engage in the following
about economic entities that is intended to specialized fields:
be useful in making economic decisions, in 1. Public Accounting
making reasoned choices among 2. Private Accounting
alternative courses of action.” 3. Government Accounting
-Accounting Standards Council 4. Accounting Education

Accounting is also defined as the art of Branches of accounting


recording, classifying and summarizing, in 1. Financial accounting
significant manner, and in terms of money, 2. Management accounting
transactions and events which are in part at 3. Cost accounting
least of a financial character and 4. Auditing
interpreting the results thereof. 5. Tax Accounting
Users of accounting information 6. Fund Accounting
7. Forensic Accounting
1. Internal Users
2. External Users Regulatory bodies in the Philippines

Forms of business organization 1. Professional Regulation


Commission
1. Sole Proprietorship 2. Board of Accountancy
2. Partnership 3. Financial Reporting Standards
3. Corporation Council
Types of business operations
1. Service Framework of Financial Reporting
2. Merchandising
3. Manufacturing
Financial reports and financial Fundamental concepts and principles of
statements accounting and underlying assumptions

1. Statement of comprehensive The generally accepted accounting


income principles defines what is accepted
accounting practice and they are like laws Classify the following business as :
that must be followed in financial Service, Merchandising, Manufacturing
reporting. Company.
Some GAAP are: 1. Textile Mill
2. Shoe factory
1. Business entity concept
3. Repair Shop
2. Going concern
4. Pharmacy
3. Time period assumption
5. Medical Clinic
4. Unit of measurement
6. Laundry shop
5. Accrual basis
7. Grocery
6. Matching principle
8. Hardware
Qualitative characteristics of financial 9. Schools
information 10. Tailoring Shop

1. Understandability Test 2.
2. Reliability
Classify the following as to: Assets,
3. Relevance
Liabilities, Capital, Revenue and Expense.
4. Comparability
1. Accounts Receivable
Elements of the financial statements
2. Accounts Payable
1. Assets 3. Advertising expenses
2. Liabilities 4. Supplies Expense
3. Owners equity 5. Service Revenue
4. Revenue 6. Sales
5. Expenses 7. Land
8. Furniture and fixtures
Accounting equation 9. Mortgage Payable
Assets = Liabilities + Owners Equity 10. Prepayments
11. Salaries Payable
12. Unearned Revenue
END OF LECTURE 13. Accumulated Depreciation
14. Allowance for Doubtful Accounts
15. Drawing
16. Capital
17. Franchise
18. Cash
19. Inventory
20. Taxes payable
Test 3.
True of False
1. Financial accounting is the process
of identifying, measuring,
analyzing, and communicating
financial information needed by
Test 1. management to plan, evaluate, and
control an organization's amount of total assets at the end of the
operations. year?
2. Financial statements are the
(c) If total assets decreased P80,000 and
principal means through which
stockholders’ equity increased P120,000
financial information is
during the year, what is the amount of total
communicated to those outside an
liabilities at the end of the year?
enterprise.
3. Users of financial statements are
assumed to have no knowledge of
business and financial accounting
matters by financial statement
preparers.
4. The economic entity assumption
means that economic activity can
be identified with a particular legal
entity.
5. The matching principle states that
debits must equal credits in each
transaction.
Test 4. Problems
PROBLEM 1. Presented below is the basic
accounting equation. Determine the
missing amounts.
No. Assets Liabilitie Equity
s
1 78,000 50,000 ?
2 ? 45,000 70,000
3 94,000 ? 60,000
4 ? 75,000 60,000
5 84,000 17,000 ?

PROBLEM 2. At the beginning of the


year, Canon Company had total assets of
P870,000 and total liabilities of P500,000.
Answer the following questions.
(a) If total assets increased P150,000
during the year and total liabilities
decreased P80,000, what is the amount of
stockholders’ equity at the end of the year?
(b) During the year, total liabilities
increased P100,000 and stockholders’
equity decreased P66,000. What is the

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