FUNDAMENTALS OF

ACCOUNTANCY, BUSINESS AND

MANAGEMENT 1
I. Introduction to Accounting
Introduction to Accounting
 Accounting is the process of IDENTIFYING,
RECORDING, and COMMUNICATING economic
events of an organization to interested
users.” (Weygandt, J. et. al)

 “Accounting is a systematic recording of

financial transactions and the presentation of
the related information to appropriate
persons.” (Accounting Theory)
Introduction to Accounting
 Accounting is the process of Identifying,
Measuring, and Communicating economic
information to permit informed judgment and
decisions by users of the information. (AAA)
 Accounting as the art of Recording, Classifying,
and Summarizing in a significant manner and in
terms of money, transactions and events which
are in part at least of financial character, and
interpreting results thereof. (AICPA)
 Accounting provides quantitative information,
primarily financial in nature, about economic
entities, that is needed to be useful in making
economic decisions. (ASC)
Introduction to Accounting
 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
 sales of bread and other bakery products
Introduction to Accounting
 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.
Introduction to Accounting
 Nature of Accounting
◦ Accounting is a service activity. Accounting
provides assistance to decision makers by
providing them financial reports that will guide
them in coming up with sound decisions.

◦ Accounting is a process: A process refers to the

method of performing any specific job step by step
according to the objectives or targets.
Introduction to Accounting
 Nature of Accounting
◦ Accounting is both an art and a discipline.
Accounting is the art of recording, classifying,
summarizing and finalizing financial data. Because
it follows certain standards and professional ethics,
it is also a discipline.

◦ Accounting deals with financial information and

transactions: Accounting records financial
transactions and data, classifies these and finalizes
their results given for a specified period of time, as
needed by their users.
Introduction to Accounting
 Nature of Accounting
◦ Accounting is an information system: Accounting is
recognized and characterized as a storehouse of
information.
Introduction to Accounting
 Function of Accounting in Business

◦ Accounting is the means by which business

information is communicated to business owners
and stakeholders. The role of accounting in
business is to provide information for managers
and owners to use in operating the business.
Introduction to Accounting
 Mr. Juan is a retired government employee who is good
at baking. One day he decides to put up a bakery shop
in your barangay. He renovates a portion of his house
to serve as the area for the production of bread. He
purchases baking equipment and raw materials to
produce five different types of bread. Mr. Juan also
hires Jose to help him with the baking and, at the same
time, to be in-charge of sales. Mr. Juan pays Jose on a
weekly basis. Every day, Mr. Juan’s wife deposits the
daily cash sales in their bank account at XY Savings
Bank. With the help of accounting, what possible
decisions or questions of Mr. Juan can accounting
provide an answer to?
Introduction to Accounting
 History of Accounting

◦ 1. The Cradle of Civilization (Around 3600 BC)

 Record-keeping was already common from
Mesopotamia, China and India to Central and South
America. The oldest evidence of this practice was the
“clay tablet” of Mesopotamia which dealt with
commercial transactions at the time such as listing of
accounts receivable and accounts payable.
Introduction to Accounting
 History of Accounting

◦ 2. 14th Century - Double-Entry Bookkeeping

 The most important event in accounting history is
generally considered to be the dissemination of double
entry bookkeeping by Luca Pacioli (‘The Father of
Accounting’) in 14th century Italy. Luca Pacioli wrote
Summa de Arithmetica, the first book published that
contained a detailed chapter on double-entry
bookkeeping.
Introduction to Accounting
 History of Accounting

◦ 3. French Revolution (1700s)

 The thorough study of accounting and development of
accounting theory began during this period. Social
upheavals affecting government, finances, laws,
customs and business had greatly influenced the
development of accounting.

◦ 4. The Industrial Revolution (1760-1830)

 Mass production and the great importance of fixed
assets were given attention during this period.
Introduction to Accounting
 History of Accounting

◦ 19th Century – Beginnings of Modern Accounting in

Europe and America
 The modern, formal accounting profession emerged in
Scotland in 1854 when Queen Victoria granted a Royal
Charter to the Institute of Accountants in Glasgow,
creating the profession of the Chartered Accountant
(CA)
Introduction to Accounting
 History of Accounting

◦ The Present - The Development of Modern

Accounting Standards and Commerce
 The accounting profession in the 20th century
developed around state requirements for financial
statement audits. Beyond the industry's self-
regulation, the government also sets accounting
standards, through laws and agencies such as the
Securities and Exchange Commission (SEC).
QUIZ
Introduction to Accounting
 Evaluation:

◦ 1. Define Accounting
◦ 2 – 3. Give 2 examples of questions that can be
answered by accounting.
◦ 4 – 5. Give 2 examples of economic event.