3. Accounting is a system designed to identify, collect, process, measure and communicate economic information about the business
entity to those users having interest in the financial affairs of the entity. Information produced by accounting serves as a service
activity which informs users as to its financial status, condition and other quantifiable measures of a business. The need for effective
and efficient information as the end product of accounting cycle becomes more in- demand today.
“
.”
Definition
5. definition
1
According to the Accounting Standards Council
(ASC), accounting is a service activity. Its
function is to provide quantitative information,
primarily financial in nature, about finances,
about economic entities, that is intended to be
useful in making economic decision.
“
.”
6. definition
2
On the other hand, Committee on Accounting Technology of the
American Institute of Certified Public Accountants define
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 the
results thereof.
“
.”
7. definition
3
Lastly, American Accounting Association (AAA) in its Statement
Basic Accounting Theory describes accounting as the method of
recognizing, appraising and communicating economic details to
permit informed judgment and decision by users of the information.
“
.”
12. FUNCTIONS OF ACCOUNTING
RECORDING
This is the simple and basic
function of accounting. It is
essentially focus on not just
ensuring all business
transactions of at least financial
in nature are completely recorded
but also they are recorded in
manner acceptable to both users
of financial information.
Recording is done in the books of
original entry, the “Journal”.
“
.”
CLASSIFYING
SUMMARIZING
ANALSIS AND
INTERPRETS
COMMUNICATE
13. FUNCTIONS OF ACCOUNTING
RECORDING
CLASSIFYING
Classification is concerned
with the systematic analysis
of the journalized data, in
view to group of transactions
or entries of one nature at
one a certain account. The
work of classification is
completed in a book known
as the “Ledger”.
“
.”
SUMMARIZING
ANALSIS AND
INTERPRETS
COMMUNICATE
14. FUNCTIONS OF ACCOUNTING
RECORDING
CLASSIFYING
This involves presenting and
condensing the classified data in a
system manner which is
understandable and useful to the
internal as well as external end users
of accounting statements. This
procedures leads to the preparations
of the following statements:
1.Trial Balance
2.Income Statement
3.Capital Statement
4.Cash Flow Statement
5.Statement of Financial Position
“
.”
SUMMARIZING
ANALYSIS AND INTERPRETS
COMMUNICATE
15. FUNCTIONS OF ACCOUNTING
RECORDING
CLASSIFYING This is the final end-function of
accounting. The recorded, classified
and summarized financial data is
analyzed and interpreted in a manner
that the end-users can make a
meaningful judgment about the
conditions, stability, and profitability of
the business operation. The data is also
used for preparing the future plan and
developing of policies and procedures in
executing financial and non-financial
plans.
“
.”
ANALYSIS AND INTERPRETS
COMMUNICATE
SUMMARIZING
16. FUNCTIONS OF ACCOUNTING
RECORDING
CLASSIFYING
The accounting information after
being meaningfully analyzed and
interpreted has to be
communicated in a proper form
and manner to the proper person.
This is done through preparation
and distribution of accounting
reports, which include besides
the usual income statement and
the balance sheet, additional
information in the form of
accounting ratios, graphs,
diagrams, funds flow statements
etc.
“
COMMUNICATE
SUMMARIZING
ANALYSIS AND INTERPRETS
18. Financial Accounting
This branch of accounting is mainly concerned
on the reports on the entity’s financial position
(its resources and claims), financial
performance (income and expenses), and the
changes in a particular owners’ equity.
“
.”
1
19. The main objective of management accounting
is to provide assistance to the internal users of
financial information particularly the
management in doing economic decisions such
as planning, controlling, and strict
implementation of the plan.
“
2
Management Accounting
20. Government Accounting
This branch of accounting is mostly focused on
the allocation of the resources and funds of the
National Government.
“
.”
3
21. External primarily focuses on the systematic,
coherent and critical examination of financial
statements by an independent Certified Public
Accountant.
“ 1
AUDITING
4
22. Internal Auditing
deals with determining the operational
efficiency and effectiveness of the company
regarding protection and safeguarding of the
company’s assets, accuracy and reliability of
the accounting data, and adherence to
prescribed managerial policies set by the Board
of Directors.
“
.”
5
23. The proper collection and valuation of
taxes depends on the use of one of the
branches of accounting – tax accounting.
It is concerned on the proper
measurement of the amount to be paid by
one entity or individual.
“
6
Tax Accounting
24. Cost Accounting
Basically speaking, cost accounting deals
with the valuation of the materials, labor
and other cost incorporated in producing
one product. It is mainly oriented on
manufacturing business.
“
.”
7
25. One of the professional fields one
Certified Public Accountant can engage
with is the Accounting Education. One of
the requirements before one CPA
candidate can take the licensure
examination is to have a degree of
Bachelor of Science in Accountancy.
“
1
Accounting Education
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