Accounting Nature of Accounting

• It is a service activity. Its function is Accounting is a process

to provide quantitative information,
A process that composed of multiple steps
primarily financial in nature, about
that lead to a common end goal.
economic entities that is intended to
be useful in making economic Accounting is an art

decisions. It entails creativity and skills to help us

• Is an information system that attain some objectives. Accounting is the art
measures, processes and of recording, classifying, summarizing, and
communicate financial information finalizing financial data.
about economic entity.
Accounting deals with financial
According to American Accounting information and transactions

Association (A.Α.Α.) Accounting deals only with quantifiable

financial transactions. These are the only
Is the process of identifying, measuring and
events identified by the accountant, recorded
communicating economic information to
in the books, and communicated to different
permit informed judgments and decisions by
parties.
users of the information.
Accounting is a means and not an end
According to Association of
Accounting is a tool to achieve specific
International Certified Professional
objectives. It is not the objective itself.
Accountants (A.I.C.P.A)
Accounting is an information system
It is an art of recording, classifying. and
Accounting is recognized and characterized
summarizing in a significant manner and in
as a storehouse of information. As a service
terms of money. transactions and events
function, it collects processes and
which are, in part at least, of a financial
communicates financial information of any
character, and interpreting the results thereof
entity.
Functions of Accounting in Communicating results to various parties
in or connected with the business
Business
• The accounting reports produced at
Keeping systematic record of business
the end of each period are not only
transactions
used by external parties (e.g.,
• Recording transactions does not only potential investors, government
involve entering the transactions in agencies), but also by the
the accounting books. management in their decision-
• The records should be systematic making function.
enough to enable easy understanding • Communication of the results of
of readers. No matter how operations of a company is essential
comprehensive the records are, if for all concerned parties to enable
they are not produced systematically, them to take well-informed
then they provide little to no value. decisions.

Protecting properties of the business Meeting legal requirements

• The accounting records serve as the • In the Philippines, the government

evidence that properties of a business requires some companies
do exist or how much of a particular (particularly those with public
resource does a company have. If the accountability) to provide financial
accounting records show that the reports quarterly, semi-annually, or
amount of cash should be 1 000 000, annually. This procedure aims to
any excess and deficiency will be protect the public by providing them
noticed immediately. Moreover, the the necessary information to make
accounting system helps in sound decisions. The government
preventing employee fraud and also requires reports from heavily
misappropriation of company regulated industries such as the
resources. energy and oil industries.
3 Function of Accounting the deeds of Emperor Augustus
regarding the stewardship of Roman
1. To fulfill the stewardship function of the
resources.
management (or owners)

2. To help interested users comp up with • This is evidenced by the Res Gestae

informed decisions; and Divi Augusti (The Deeds of the

Divine Augustus). The Roman
3. To support daily operation of the business
historians Suetonius and Cassius Dio
recorded that in BBC, Augustus
prepared a rationarium (account)
History of Accounting
which listed public revenues, the
I. Early Development in Mesopotamia amounts of cash in the aerarium
• Early development of accounting can (treasury), in the provincial nsci (tax
be dated back to ancient officials), and in the hands of the
Mesopotamia. During those times, publicani (public contractors); and
people followed a system of writing that it included the names of the
and counting money. freedmen and slaves from whom a
• The development of accounting may detailed account could be obtained.
be related to the taxation and trading
• The closeness of this information to
activities of temples.
the executive authority of the
• Bulla (plural Bullae) found in
emperor is attested by Tacitus
Mesopotamia. Experts consider this
statement that it was written out by
stage of record keeping the
Augustus himself. (Oldroyd 1995)
beginning of the art of writing

• The reign of Emperor Augustus

(63ac- 14Ao) provided more
evidence about the development of
accounting. The Roman government
kept detailed financial information of
II. Development of Roman Empire Italy is the most important
• The reign of Emperor Augustus event in accounting history.
(63BC- 14AD) provided more
evidence about the development • In fact, Luca Pacioli is

of accounting. The Roman acknowledged as the father of

government kept detailed modern accounting because of

financial information of the this. The double- entry

deed of Emperor Augustus bookkeeping system is defined

regarding the stewardship of as any bookkeeping system that

Roman resources. has a debit and a credit for each

transaction.

• Roman historian Suetonius and

• Luca Pacioli's Summa
Cassius Dio recorded that in
de'Arithmetica, Geometric,
23BC, Augustus prepared
Proportioni et Proportionalita
rationarium (account) which
(Review of Arithmetic
listed public revenues, the
Geometry, Ratio, and
amounts of cash in the acrarium
Proportion) is the first book
(treasury), in the provincial fisci
printed with a treatise on
(tax officials), and in the hands
bookkeeping. The double-entry
of the publican (public
bookkeeping system is the
contractors); and that it
system being used to this very
included the names of the
day. (Sangster et al. 2007)
freedmen and slaves from
whom a detailed account could
be obtained.

• Many consider the

dissemination of the double-
entry bookkeeping of Luca
Pacioli in the fourteenth century
III. Dissemination of double-entry IV. Signing of charter by Queen Victoria
bookkeeping the 14th century Italy • The modern profession of the
• Most important event in chartered accountant originated in
accounting history. Luca Scotland in the 19th century when
Pacioli is acknowledged as the Queen Victoria granted a royal
father of modern accounting charter to the Institute of
because of this. His "Summa de Accountants in Glasgow.
Arithmetica, Geometria,
Proportioni et Proportionalita" V. Formation of accounting standards
(Everything about Arithmetic, such PAS and PFRS
Geometry and Proportion) is
the first book printed with a
treatise on bookkeeping.

• The modern profession of the

chartered accountant originated
in Scotland in the nineteenth
century when Queen Victoria
granted a royal charter to the
institute of Accountants in
Glasgow at present times,
accounting standards are
already available to guide
accountants in their practice of
the profession. Some of these
standards include the PFRS
(Philippine Financial Reporting
Standard) and the PAS
(Philippine Accounting
Standards).