the
following
Chapter 1: basic features of accounting:
INTRODUCTION TO ACCOUNTING
WHAT IS ACCOUNTING?
It is a system that helps businesses
track events that affect them.
Accounting is a service activity
It is the process of IDENTIFYING, Accounting is a process.
RECORDING, and Accounting is both an art and a
COMMUNICATING economic events discipline.
of an organization to interested users. Accounting deals with financial
information and transactions.
Accounting is a means and not
THE ACCOUNTING PROCESS an end.
Accounting is an information
IDENTIFYING system.
- this involves selecting economic
events that are relevant to a
particular business transaction. The ACCOUNTING IS A SERVICE
economic events of an organization ACTIVITY.
are referred to as transactions.
Accounting helps decision-makers by
RECORDING providing financial reports that guide
good decisions.
- this involves keeping a chronological
diary of events that are measured in ACCOUNTING IS A PROCESS.
pesos. The diary referred to in the
definition are the journals and ledgers Because it involves a series of steps
which will be discussed in future to handle financial information. It
modules. starts by collecting financial data,
then recording and organizing it,
COMMUNICATING summarizing the key details, and
finally creating reports. These reports
-occurs through the preparation and help in understanding and making
distribution of financial statements decisions about finances
and other accounting reports.
ACCOUNTING IS BOTH AN ART
NATURE OF ACCOUNTING AND A DISCIPLINE.
According to Accounting Theory It’s the art of recording, classifying,
“Accounting is a systematic recording summarizing, and finalizing financial
of financial transactions and the data, requiring creativity, skill, and
presentation of the related expertise. As it follows specific
information to appropriate persons.” standards and ethics, accounting is
Based on this definition we can derive also considered a discipline.
ACCOUNTING DEALS WITH Accounting began with basic record-
FINANCIAL INFORMATION AND keeping in early civilizations and
TRANSACTIONS. evolved to meet social and economic
needs, closely linked to the
Accounting deals exclusively with development of finance and business.
financial information and
transactions. It records, classifies,
and finalizes financial data for a
specified period, focusing solely on
monetary aspects. Non-financial
The Cradle of Civilization
information is not included in
14th Century - Double-Entry
accounting.
Bookkeeping
ACCOUNTING IS A MEANS AND French Revolution (1700s)
NOT AN END. The Industrial Revolution (1760-
1830)
Accounting is a means to an end, not 19th Century – The Beginnings
the end itself. It’s a tool used to of Modern Accounting in Europe
achieve specific financial objectives. and America
Imagine that you dream to go to Paris The Present - The Development
someday. Accounting can be thought of Modern Accounting
of as the plane that will bring you to Standards and Commerce
your destination. Summarize and
make it direct to the poin. THE CRADLE OF CIVILIZATION
ACCOUNTING IS AN INFORMATION Record-keeping was common
SYSTEM. by 3600 B.C. across several
ancient civilizations.
Accounting is an information system The oldest evidence is a
that collects, processes, and Mesopotamian “clay tablet”
communicates financial data. It detailing commercial
serves as a storehouse of transactions.
information, evolving to meet the Accountants in this era were
needs of different stakeholders for highly regarded as the "eye and
financial insights. ear of the king.“
FUNCTION OF ACCOUNTING IN 14TH CENTURY - DOUBLE-ENTRY
BUSINESS BOOKKEEPING
o Accounting communicates Dissemination of double-entry
business information to owners bookkeeping by Luca Pacioli.
and stakeholders. Pacioli wrote "Summa de
o It provides essential information Arithmetica," which was the
for managers and owners to run first book to include a detailed
the business. chapter on double-entry
o It helps assess the efficiency and bookkeeping.
effectiveness of business Luca Pacioli, known as 'The
operations. Father of Accounting.'
The Italians of the 14th to 16th
HISTORY OF ACCOUNTING centuries are considered the
fathers of modern accounting,
and they adopted Arabic
numerals for business accounts ACCOUNTING STANDARDS AND
instead of Roman numerals. COMMERCE
The 20th-century accounting
profession developed around
state-mandated financial
statement audits.
Government bodies, like the
Securities and Exchange
Commission (SEC), set accounting
FRENCH REVOLUTION (1700S) standards in addition to industry
self-regulation.
The detailed study and
Globalization has led to a
development of accounting
requirement for accounting
theory started during a time
practitioners to follow
when major social and financial
International Accounting
changes were occurring, which
Standards.
had a significant impact on how
The goal of these standards is to
accounting evolved.
ensure transparency, reliability,
THE INDUSTRIAL REVOLUTION and investor confidence in
(1760-1830) accounting information globally.
Investors now seek global
Mass production and the great investment opportunities, and
importance of fixed assets were businesses need to operate
given attention during this period. internationally to stay
competitive.
19TH CENTURY – THE The trend is towards one global
BEGINNINGS OF MODERN set of accounting standards for
ACCOUNTING IN EUROPE AND better comparability.
AMERICA
The accounting profession started
in Scotland in 1854 with
Chartered Accountants (CA).
Scottish and British CAs
influenced the development of
the U.S. accounting profession.
The first U.S. national accounting
society was founded in 1887,
leading to the AICPA.
Rapid changes in accounting
practices and standards
happened during this time.
The rise of multinational
corporations and mergers
required new accounting
standards.
THE PRESENT - THE
DEVELOPMENT OF MODERN
