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Accounting and It's Environment

Accounting provides qualitative financial information to aid decision making. Key characteristics include relevance through predictive or confirmatory value, and faithful representation through completeness, neutrality, and freedom from error. Businesses are organized as services, merchandising, or manufacturing. Sole proprietorships, partnerships, and corporations are common forms of business organization. Financial activities involve financing, investing, and operating activities. Financial statements include the statement of financial position, statement of financial performance, statement of changes in owner's equity, and cash flow statement. The statement of financial position shows assets, liabilities, and owner's equity. The statement of financial performance reports income, expenses, and losses. The accounting equation balances assets with liabilities

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Erra Peñaflorida
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79 views

Accounting and It's Environment

Accounting provides qualitative financial information to aid decision making. Key characteristics include relevance through predictive or confirmatory value, and faithful representation through completeness, neutrality, and freedom from error. Businesses are organized as services, merchandising, or manufacturing. Sole proprietorships, partnerships, and corporations are common forms of business organization. Financial activities involve financing, investing, and operating activities. Financial statements include the statement of financial position, statement of financial performance, statement of changes in owner's equity, and cash flow statement. The statement of financial position shows assets, liabilities, and owner's equity. The statement of financial performance reports income, expenses, and losses. The accounting equation balances assets with liabilities

Uploaded by

Erra Peñaflorida
Copyright
© © All Rights Reserved
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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Accounting as a service activity

• To provide qualitative information, primarily


financial in nature, about economic activities,
that is intended to be useful in decision making.
Qualitative Characteristics of Financial
Information
• Relevance
• Faithful Representation
What makes the information relevant?
• Predictive Value- when it is used to confirm
or correct decision-maker’s earlier expectations
• Confirmatory Value- when it is used to make
decisions of, for instance, future cash flows or
income.
Faithful representation
• Completeness
• Neutrality
• Freedom from error
Types of Business
• Service- Selling people’s time
• Merchandising- Buying or selling of products
• Manufacturing- Designing products,
aggregating components and assembling
finished products
Forms of Business organization
• Sole Proprietorship
• Partnership
• Corporation
Activities in Business Organization
• Financing Activities
• Investing Activities
• Operating Activities
Financing Activities
• Methods an organization uses to obtain financial
resources from financial markets and how it
manages these resources.
Investing Activities
• Involve the selection and management including
disposal and replacement of long-term resources
that will be used to develop, produce and sell
goods and services.
Operating Activities
• Involves the use of resources to design, produce,
distribute, and market goods and services.
Elements of Financial Statements
• Statement of Financial Position
• Statement of Financial Performance
• Statement of Changes in Owner’s Equity
• Cash Flow Statement
• Notes to Financial Statement
Financial Position
• Asset
• Liability
• Owner’s Equity
Asset
• Resource controlled by an enterprise as a result
of past events and from which future economic
benefits are expected to flow to the enterprise.
• Assets includes cash, cash equivalents, notes
receivable, accounts receivable, inventories,
prepaid expenses, property plant and
equipment, investments, intangible assets and
other assets.
Liability
• Present obligation of the enterprise arising from
past events, the settlement of which is expected
to result in an outflow from the enterprise of
resources embodying economic benefits.
• Liabilities include notes payable, accounts
payable, accrued liabilities, unearned revenues,
mortgage payable, bonds payable and other
debts of the enterprise.
Equity
• Residual interest in the assets of the enterprise
after deducting all its liabilities.
Financial Performance
• Income
• Expenses
• Losses
Income
• Increases in economic benefits during the
accounting period in the form of inflows or
enhancements of assets or decreases of liabilities
that result in increases in equity.
• Revenue arises in the course of ordinary
activities of an enterprise.
• Gains represent items that meet the definition of
income and ,may, or may not, arise in the
course of ordinary activities of an enterprise.
Expenses
• Decreases in economic benefits during the
accounting period in the form of outflows or
depletions of assets or incurrences of liabilities
that result in decreases in equity.
Losses
• Items that meet the definition of expense and
may, or may not, arise kin the course of ordinary
activities of an enterprise.
• Decreases in the economic benefits and such are
no different in nature from other expenses.
The Accounting Equation

ASSETS = LIABILITIES + OWNER’S EQUITY

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