1. Chapter 1: Introduction to Accounting (FAR by: Millan) Presented by: Reymond I Domingo

2. Chapter 1 Introduction to Accounting Learning Objectives 1.Define accounting. 2.Describe the nature and purpose of accounting. 3.Give examples of branches of accounting. 4.State the function of accounting in a business. 5.Differentiate between external and internal users of accounting information. 6.Narrate the history/origin of accounting. 7.State the forms of business organization. 8.State the types of business according to their activities. Chapter 1: Introduction to Accounting (FAR by: Millan)

3. WHAT IS ACCOUNTING? Chapter 1: Introduction to Accounting (FAR by: Millan)

4. WHAT IS ACCOUNTING? Accounting has been called the “language of business.” Chapter 1: Introduction to Accounting (FAR by: Millan)

5. Definition of accounting As a Service Activity As an Art As a Process Chapter 1: Introduction to Accounting (FAR by: Millan)

6. Definition of accounting The Accounting Standards Council defines accounting as a service activity. Its function is to provide quantitative information, primarily financial nature, about economic entities, that is intended to be useful in making economic decision. Chapter 1: Introduction to Accounting (FAR by: Millan)

7. 1.Quantitative information 2.Qualitative information Chapter 1: Introduction to Accounting (FAR by: Millan) Types of information provided by accounting

8. 1.Quantitative information 2.Qualitative information Chapter 1: Introduction to Accounting (FAR by: Millan) Types of information provided by accounting

9. Quantitative information information expressed in numbers, quantities, or units. Chapter 1: Introduction to Accounting (FAR by: Millan) Types of information provided by accounting

10. 1.Quantitative information 2.Qualitative information Chapter 1: Introduction to Accounting (FAR by: Millan) Types of information provided by accounting

11. 1.Quantitative information 2.Qualitative information Chapter 1: Introduction to Accounting (FAR by: Millan) Types of information provided by accounting

12. Qualitative information information expressed in words or descriptive form. The notes to financial statements is very rich with qualitative information. Chapter 1: Introduction to Accounting (FAR by: Millan) Types of information provided by accounting

13. Definition of accounting As a Service Activity As an Art As a Process Chapter 1: Introduction to Accounting (FAR by: Millan)

14. Definition of accounting The American Accounting Association in its Statement of Basic Accounting Theory defines accounting as the process of identifying, measuring and communicating economic information to permit informed judgment and decision by users of the information. Chapter 1: Introduction to Accounting (FAR by: Millan)

15. Definition of accounting The American Accounting Association in its Statement of Basic Accounting Theory defines accounting as the process of identifying, measuring and communicating economic information to permit informed judgment and decision by users of the information. Chapter 1: Introduction to Accounting (FAR by: Millan)

16. Definition of accounting Identifying – This element deals with the analysis of the accountant on each business transactions whether the transaction is to be recognized as “accountable event” or “non- accountable event.” This is because not all business activities are “accountable events”, and only “accountable events” are recognized and recorded in the book of accounts. Chapter 1: Introduction to Accounting (FAR by: Millan)

17. Definition of accounting An event is accountable when it has an effect on assets, liabilities, equity, income and expenses of the business. In other words, economic substance of a transaction is an important factor in determining accountable or non-accountable event. Economic activity is the subject matter of accounting. Sociological and psychological matters are beyond the scope of accounting. Chapter 1: Introduction to Accounting (FAR by: Millan)

18. Definition of accounting The American Accounting Association in its Statement of Basic Accounting Theory defines accounting as the process of identifying, measuring and communicating economic information to permit informed judgment and decision by users of the information. Chapter 1: Introduction to Accounting (FAR by: Millan)

19. Definition of accounting Measuring – This is the process of determining and allocating monetary amount to the economic transaction or events which will be carried and recognized in the financial statements. It is important that accounting information be expressed in terms of common financial denominator for it to be comprehensible and useful. Here in the Philippines, Philippine peso is currency normally used as a unit of measurement of accountable transactions. Chapter 1: Introduction to Accounting (FAR by: Millan)

20. Definition of accounting The American Accounting Association in its Statement of Basic Accounting Theory defines accounting as the process of identifying, measuring and communicating economic information to permit informed judgment and decision by users of the information. Chapter 1: Introduction to Accounting (FAR by: Millan)

21. Definition of accounting Communicating – This element is the process of preparing and issuing accounting reports to the interested users of accounting information. Processed accounting information is useless if not communicated to its prospective users. This is the very reason why accounting has been called the “language of business”. Accounting information is communicated to prospective users through accounting reports where financial statement is the most common. Chapter 1: Introduction to Accounting (FAR by: Millan)

22. Definition of accounting The American Accounting Association in its Statement of Basic Accounting Theory defines accounting as the process of identifying, measuring and communicating economic information to permit informed judgment and decision by users of the information. Chapter 1: Introduction to Accounting (FAR by: Millan)

23. Definition of accounting As a Service Activity As an Art As a Process Chapter 1: Introduction to Accounting (FAR by: Millan)

24. Definition of accounting The Committee on Terminology of the American Institute of Accountants defines accounting as an art of recording; classifying; summarizing, in a significant manner and in terms of money, transactions and events which are in part at least of a financial character and interpreting the results thereof. Chapter 1: Introduction to Accounting (FAR by: Millan)

25. Definition of accounting The Committee on Terminology of the American Institute of Accountants defines accounting as an art of recording; classifying; summarizing, in a significant manner and in terms of money, transactions and events which are in part at least of a financial character and interpreting the results thereof. Chapter 1: Introduction to Accounting (FAR by: Millan)

26. Definition of accounting Recording – This is the process of systematically and chronologically recording of business transactions and events after they have been identified and measured by the accountant. This process is also called journalizing. Systematic because it is a step by step process guided by prescribed rules and principles of accounting. Chronological because it has to be sequentially recorded base on date of discovery or occurrence of the business transactions and events. Chapter 1: Introduction to Accounting (FAR by: Millan)

27. Definition of accounting The Committee on Terminology of the American Institute of Accountants defines accounting as an art of recording; classifying; summarizing, in a significant manner and in terms of money, transactions and events which are in part at least of a financial character and interpreting the results thereof. Chapter 1: Introduction to Accounting (FAR by: Millan)

28. Definition of accounting Classifying – This element is the process of grouping together or sorting similar items under the same name. This process is called posting as it is done by posting to the ledger. Chapter 1: Introduction to Accounting (FAR by: Millan)

29. Definition of accounting The Committee on Terminology of the American Institute of Accountants defines accounting as an art of recording; classifying; summarizing, in a significant manner and in terms of money, transactions and events which are in part at least of a financial character and interpreting the results thereof. Chapter 1: Introduction to Accounting (FAR by: Millan)

30. Definition of accounting Summarizing – means grouping and summarizing unprocessed accounting data for the preparation of report to users of accounting information. This usually involves summarizing and closing of the books and the preparation of financial statements which include statement of financial position, statement of financial performance, statement of changes in equity and statement of cash flows. Chapter 1: Introduction to Accounting (FAR by: Millan)

31. Definition of accounting The Committee on Terminology of the American Institute of Accountants defines accounting as an art of recording; classifying; summarizing, in a significant manner and in terms of money, transactions and events which are in part at least of a financial character and interpreting the results thereof. Chapter 1: Introduction to Accounting (FAR by: Millan)

32. Definition of accounting Interpreting – This is the preparation of additional analytical reports to explain and interpret accounting reports which are sometimes too technical. This is to provide guidance to the users of accounting information. Chapter 1: Introduction to Accounting (FAR by: Millan)

33. Definition of accounting The Committee on Terminology of the American Institute of Accountants defines accounting as an art of recording; classifying; summarizing, in a significant manner and in terms of money, transactions and events which are in part at least of a financial character and interpreting the results thereof. Chapter 1: Introduction to Accounting (FAR by: Millan)

34. Nature of accounting Accounting is a process with the basic purpose of providing information about economic activities intended to be useful in making economic decisions. Chapter 1: Introduction to Accounting (FAR by: Millan)

35. Bookkeeping vs. Accounting Bookkeeping and Accounting are common interchangeably used by many. But bookkeeping is not the same with accounting, although bookkeeping function is an integral part of accounting. Bookkeeping process starts from the recording of accounting transaction and events and ends with the preparation of trial balance and financial statements while accounting encompasses bookkeeping, interpretation and communication of the accounting reports and information. Chapter 1: Introduction to Accounting (FAR by: Millan)

36. 1.To provide external users with information that is useful in making investment and credit decisions; and 2.To provide internal users with information that is useful in managing the business. Chapter 1: Introduction to Accounting (FAR by: Millan) Functions of Accounting in Business

37. 1.To provide external users with information that is useful in making investment and credit decisions; and 2.To provide internal users with information that is useful in managing the business. Chapter 1: Introduction to Accounting (FAR by: Millan) Functions of Accounting in Business

38. external users – Creditors – Investors – Government – Public – Employees Chapter 1: Introduction to Accounting (FAR by: Millan) Functions of Accounting in Business

39. 1.To provide external users with information that is useful in making investment and credit decisions; and 2.To provide internal users with information that is useful in managing the business. Chapter 1: Introduction to Accounting (FAR by: Millan) Functions of Accounting in Business

40. 1.To provide external users with information that is useful in making investment and credit decisions; and 2.To provide internal users with information that is useful in managing the business. Chapter 1: Introduction to Accounting (FAR by: Millan) Functions of Accounting in Business

41. internal users – Business owners, – Board of directors, – Management Chapter 1: Introduction to Accounting (FAR by: Millan) Functions of Accounting in Business

42. Accounting provides information that helps a business manager perform the following management functions: 1.Planning 2.Organizing 3.Staffing 4.Directing 5.Controlling Chapter 1: Introduction to Accounting (FAR by: Millan) Accounting as a managerial tool

43. Accounting can be traced as far back as the prehistoric times, perhaps more than 10,000 years ago. Archaeologists have found clay tokens as old as 8500 B.C. in Mesopotamia which were usually cones, disks, spheres and pellets. These tokens correspond to commodities like sheep, clothing or bread. They were used in the Middle West in keeping records. After some time, the tokens were replaced by wet clay tablets. During such time, experts concluded this to be the start of the art of writing. (Source: http://EzineArticles.com/456988) Double entry records first came out during 1340 A.D. in Genoa. In 1494, the first systematic record keeping dealing with the “double entry recording system” was formulated by Fra Luca Pacioli, a Franciscan monk and mathematician. The “double entry recording system” was included in Pacioli’s book titled “Summa di Arithmetica Geometria Proportioni and Proportionista,” published on November 10, 1494 in Venice. The concept of “double entry recording” is being used to this day. Thus, Fra Luca Pacioli is considered as the father of modern accounting. Chapter 1: Introduction to Accounting (FAR by: Millan) Brief history of accounting

44. Common Branches of Accounting Chapter 1: Introduction to Accounting (FAR by: Millan)

45. Common Branches of Accounting Chapter 1: Introduction to Accounting (FAR by: Millan)

46. Common Branches of Accounting Chapter 1: Introduction to Accounting (FAR by: Millan)

47. Common Branches of Accounting Chapter 1: Introduction to Accounting (FAR by: Millan)

48. Users of Accounting Information 1.Internal users – those who are directly involved in managing the business. Examples: Business owners who are directly involved in managing the business Board of directors Managerial personnel 2.External users – those who are not directly involved in managing the business. Examples: Existing and potential investors (e.g., stockholders who are not directly involved in managing the business) Lenders (e.g., banks) and Creditors (e.g., suppliers) Non-managerial employees­ Public Chapter 1: Introduction to Accounting (FAR by: Millan)

49. Forms of Business Organizations Chapter 1: Introduction to Accounting (FAR by: Millan)

50. Advantages and Disadvantages Chapter 1: Introduction to Accounting (FAR by: Millan)

51. Advantages and Disadvantages

52. Chapter 1: Introduction to Accounting (FAR by: Millan) Advantages and Disadvantages

53. Chapter 1: Introduction to Accounting (FAR by: Millan) Advantages and Disadvantages

54. Chapter 1: Introduction to Accounting (FAR by: Millan) Advantages and Disadvantages

55. Chapter 1: Introduction to Accounting (FAR by: Millan) Advantages and Disadvantages

56. Chapter 1: Introduction to Accounting (FAR by: Millan) Advantages and Disadvantages

57. Types of Business According to Activities 1.Service business 2.Merchandising (Trading) 3.Manufacturing Chapter 1: Introduction to Accounting (FAR by: Millan)

58. Advantages and Disadvantages

59. Chapter 1: Introduction to Accounting (FAR by: Millan) Advantages and Disadvantages

60. Chapter 1: Introduction to Accounting (FAR by: Millan) Advantages and Disadvantages

61.  QUESTIONS????  REACTIONS!!!!! Chapter 1: Introduction to Accounting (FAR by: Millan)

62. END Chapter 1: Introduction to Accounting (FAR by: Millan)