2. OBJECTIVES
• Define accounting
• Describe its nature and functions in business
• Able to narrate the history/origin of
accounting
3. Accounting is the systematic process of measuring and reporting
relevant financial information about the activities of an economic
organization or unit.
The American Institute of Certified Public Accountants (AICPA)
defines accounting as the art of recording, classifying, and
summarizing in a significant manner in terms of money, transaction
and events which are in part at least of a financial character and
interpreting the result thereof.
The Philippine Institute of Certified Public Accountants (PICPA)
defines accounting as a service activity. Its function is to provide
quantitative information, primarily financial in nature, about
economics entities, that is intended to be useful in making
economic decisions.
4. The Nature of Accounting
1. Accounting is a systematic process.
Process is a series of actions that produce something or that lead
to a particular result.
2. Accounting is an art.
Art is a skill acquired by experience, study, or observation. It is
also define as an occupation requiring knowledge or skill.
3. Accounting is a service activity.
Service is the occupation or function of serving.
5. Four Aspects of Accounting
1. Recording – writing down of business transactions chronologically in
the books of accounts as they transpire
2. Classifying – sorting similar and related business transactions into
three categories of assets, liabilities and owner’s equity.
3. Summarizing – preparing the financial statements from the
transactions recorded in the books of account that are designed to meet
the information needs of its users.
4. Interpreting - representing the qualitative and quantitative financial
information about the business transactions in a language
comprehensible to the users of financial statements.
6. Answer the following.
1. What are the four aspects of accounting.
Discuss it in your own word.
2. What is the basic function of accounting in
business?
7. The Business Environment
OBJECTIVES
• differentiate branches of accounting
• Explain the types of services rendered in each branch of accounting
• Know the different types of business organizations
• Know the legal requirements in the formation of a business
• Classify the different types of business operations
8. The Different Branches of
Accounting
1. Financial Accounting – deals with the theoretical framework
covering accounting principles and concepts relative to
measurement and valuation as applied to assets, liabilities,
stockholder’s equity, retained earnings, revenue, and expense
accounts in relation to preparation and presentation of financial
statement.
The financial information provided by financial accounting is used
for decision making by both internal and external users.
2. Management Accounting
The Institute of Management Accountant(IMA) defines
management accounting as a profession that involves partnering in
management decision making, devising planning and performance
management systems and providing expertise in financial reporting
and control to assist management in the formulation and
implementation of an organization’s strategy.
9. 3. Government Accounting
Section 109 of PD No. 1445 states that government accounting
encompasses the process of analysing, classifying, summarizing and
communicating all transactions involving the receipt and disposition of
government funds and property, interpreting the result thereof.
4. Auditing is the examination and review of accounting reports in order
to ascertain their fairness, propriety and reliability.
5. Tax Accounting
Tax services provided by accountants include the preparation of
monthly value added tax, percentage tax, expanded withholding tax
returns, quarterly and annual tax returns and any other taxes applicable
to business.
10. 6. Cost Accounting includes the collection, determination, allocation,
assessment, interpretation and control of cost data, particularly the cost
of production in a manufacturing concern.
7. Accounting Education
Accounting Education involves planned grading and formal
teaching in an educational institution. The professional accountant
imparts knowledge to students enrolled in accounting subject either in
basic accounting or higher accounting subjects.
8. Accounting Research
Accounting Research involves conducting a careful & diligent
study aimed at discovering and interpreting facts, revising accepted
theories in the light of new facts, or the practical application such new
or revised theories for generation of new knowledge.
