Scribd
Upload
0 views10 pages

Topic 1 Overview of Accounting

Accounting is the process of identifying, measuring, and communicating economic information to facilitate informed decision-making. It encompasses three key activities: identifying accountable events, measuring economic transactions in monetary terms, and communicating this information through financial statements. Accounting information can be classified into general purpose and special purpose categories to meet the varying needs of users.

Uploaded by

tongshie77
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
0 views10 pages

Topic 1 Overview of Accounting

Accounting is the process of identifying, measuring, and communicating economic information to facilitate informed decision-making. It encompasses three key activities: identifying accountable events, measuring economic transactions in monetary terms, and communicating this information through financial statements. Accounting information can be classified into general purpose and special purpose categories to meet the varying needs of users.

Uploaded by

tongshie77
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
You are on page 1/ 10

OVERVIEW OF

ACCOUNTING
ACCOUNTING
IS THE PROCESS OF IDENTIFYING, MEASURING, AND
COMMUNICATING ECONOMIC INFORMATION TO PERMIT
INFORMED JUDGMENTS AND DECISIONS BY USERS OF THE
INFORMATION. (AMERICAN ASSOCIATION OF ACCOUNTANTS)
THREE IMPORTANT ACITIVITIES INCLUDED IN
THE DEFINITION OF ACCOUNTING

1. Identifying - is the process of analyzing events and transactions


and determine whether or not they will be
recognized.
2. Measuring - involves assigning numbers, normally in monetary
terms, to the economic transactions and events.
3. Communicating - is the process of transforming economic data into
useful accounting information.
IDENTIFYING

• Recognition
- refers to the process of including effects of an accountable event in the statement of
financial positions or the statement of comprehensive income. Only accountable
events are recognized.
- An accountable event is one that affects the assets, liabilities, equity, income or
expense of an entity. It is known as economic activity. Only economic activities
are emphasized and recognized in accounting.
- Non-accountable events are not recognized but disclosed only in the notes, if they
have accounting relevance. A non-accountable event that has been an accounting
relevance may be recorded through a memorandum entry.
TYPES OF EVENTS OR TRANSACTIONS

• External Events – this are events that involves an entity and another external party.

Types of external events


1. Exchange (reciprocal transfer) - an event wherein there is a reciprocal giving
and receiving of economic resources or discharging of economic
obligations between an entity and an external party.
2. Non-reciprocal transfer - is a "one way" transaction in that the party giving
something does not receive anything in return while the party receiving does not
give anything in exchange.
3. External event other than transfer - an event that involves changes in the
economic resources or obligations of an entity caused by an external party
or external source but does not involve transfers of resources or
obligations
TYPES OF EVENTS OR TRANSACTIONS

• Internal Events - - are events that do not involve an external party.


Types of internal events
1. Production - the process by which resources are transformed
into finished goods.
2. Casualty - an unanticipated loss from disasters or other
similar events.
MEASURING

• Measuring involves assigning numbers, normally in monetary terms, to the


economic transactions and events.
• Several measurement bases are used in accounting which include, but not
limited to, historical cost, fair value, present value, realizable value, current
cost, and sometimes inflation- adjusted costs. The most commonly used is
historical cost. This is usually combined with the other measurement bases.
• Accordingly, financial statements are said to be prepared using a mixture of
costs and values. Costs include historical cost and current cost while
values include the other measurement bases
COMMUNICATING

• Communicating is the process of transforming economic data into useful accounting


information, such as financial statements and other accounting reports, for dissemination to
users. It also involves interpreting the significance of the processed information.
• The communicating process of accounting involves three aspects:

1. Recording - refers to the process of systematically committing into writing the


identified and measured accountable events in the journal through journal entries.
2. Classifying - involves the grouping of similar and interrelated items into their
respective classes through postings in the ledger.
3. Summarizing - putting together or expressing in condensed form the recorded and
classified transactions and events. This includes the preparation of financial statements and
other accounting reports.
TYPES OF INFORMATION PROVIDED BY
ACCOUNTING
Quantitative information - information expressed in numbers, quantities
or units.
Qualitative information - information expresses in words or descriptive
form. Qualitative information is found in the notes to
financial statements as well ass on the face of the other
financial statements
Financial information - information expressed in money. Financial
information is also quantitative information because
monetary amounts are normally expressed in numbers.
TYPES OF ACCOUNTING INFORMATION
CLASSIFIED AS TO USER’S NEEDS
• General purpose accounting information - designed to meet the
common needs of most statement users. This information is provided
under financial accounting. General purpose information is governed by
generally accepted accounting principles (GAP) represented by the
Philippine Financial Reporting Standards (PFRSs).
• Special purpose accounting information - designed to meet the
specific needs of particular statement users. This information is
provided by other types of accounting other than financial accounting,
e.g., managerial accounting, tax basis accounting.

You might also like