Accounting *Accounting deals with

INFORMATION and TRANSACTION: for it

FINANCIAL

records financial transaction and data,

- Is the process of IDENTIFYING,
needed to be finalize and give to the users as
RECORDING, and COMMUNICATING
needed. Does NOT deal with non- monetized
economic events of an organization to
aspects.
interested users.
- The process of communicating financial
information about a business entity to users *Accounting is an INFORMATIONAL SYSTEM:
such as shareholders and managers. recognized as the storehouse of information.
As it collects processes and communicates
- ECONOMIC EVENTS referred as
financial information to any entities.
TRANSACTIONS.

BRANCHES:
⚫ IDENTIFYING
1. FINANCIAL ACCOUNTING
- involves selecting economic events relevant
to a particular business transaction. - the broadest and focused on the needs of
external users. Provide timely and relevant
⚫ RECORDING
information to internal users for decision-
- keeping a sequence list of events. making. Concerned with recognition,
measurement, and communication of
⚫ COMMUNICATING
economic activities.
- the preparation and distribution of
- prepares 4 Financial Statement:
financial and other accounting reports.
STATEMENT OF FINANCIAL POSITION,
ACCOUNTING IS A LANGUAGE OF STATEMENT OF CASH FLOW,
STATEMENT OF COMPREHENSIVE
BUSINESS INCOME, and STATEMENT OF CHANGES
IN EQUITY.
BASIC FEATURES:
*Accounting as SERVICE ACTIVITY: helps
who made decisions by means of providing 2. MANAGEMENT ACCOUNTING
them financial or accounting reports.
- emphasizes the preparation and analysis
of accounting information and provide timely
and relevant information to internal users for
*Accounting is a PROCESS: because it
decision-making.
performs specific tasks like identifying,
recording and communicating. It follows - these are sensitive information and is not
definite steps. distributed to those outside the business such
as prices, plans to open business/ branches,
customers list, etc.
*Accounting is both an ART and DISCIPLINE:
- involves financial analysis, budgeting,
an art of identifying, recording, classifying
forecasting, cost analysis, evaluation of
and communicating financial data; refers to
business decision.
something how it performed. Discipline for it
follows professional ethics and standard.

3. GOVERNEMENT ACCOUNTING
- deals with how the funds of the - means by which business information is
government are recorded and reported. communicated to business owners and
stakeholders.
- provide information for managers and
4. AUDITING
owners to use in operating the business.
- External: those who does not work in the
- allows business owners to assess the
company. An independent CPA examining
efficiency and effectiveness of their business
financial statements with the purpose of
operation.
expressing an opinion as to fairness of
presentation and compliances with the GAAP.
- Internal: those who work in the company. HISTORY OF ACCOUNTING
Deals with determining the operational
efficiency of the company in having accuracy *2500 BC
and reliability of accounting data and - historical accounting records have been
adherence to certain policies. found in ancient civilization. Back then, rulers
are keeping accounting records for taxing and
spending on public works.
5. TAX ACCOUNTING
- helps clients to follow rules set by tax *1000 BC
authorities. Includes tax planning and - the Phoenicians created an alphabet with
preparation of tax returns.
accounting for them not to be cheated in
trading with Egyptians.
6. COST ACCOUNTING *500 BC
- refers to the recording, presentation and - Egyptians carried on with accounting
analysis of manufacturing costs. Sometimes
records and invented the first bead and wire
considered as subset of MANAGEMENT
abacus.
ACCOUNTING.
*423 BC

7. ACCOUNTING EDUCATION - auditing profession was born to double

check storehouses as to what came in and
- deals with developing future accountants
out the door. The reports that were taken by
by creating relevant accounting curriculum.
these accountants were given orally hence
the name “auditor”
8. ACCOUNTING RESEARCH
*1200-1493 BC
- focuses on the search for new knowledge
- the first requirement for business to keep
on the effects of economic events on the
process of accounting & reporting accounting records spread across many of
standardized financial information and on the the Italian Republics in the 13th century.
effects of reported information in economic These records were mainly taken to keep
events. track of day to day transactions and credit
accounts with other businesses.

*1494

FUNCTION:
- LUCA PACIOLI “Father of Accounting” to issue, suspend, revoke or reinstate CPA
writes the famous paper Everything about certificates for the practice of the profession
Arithmetic, Geometry and Proportion (Suma • The Board is composed if a chairman
de Arithmetica, Geometria, Proportioni et and 6 members, all of whom are
Proportionalita). appointed by the President of the
Republic of the Philippines
*1500-1700

- double entry records have progressed,

FORMS OF BUSINESS ORGANIZATION
changed in financial accounting and
managerial accounting. 1. SINGLE/ SOLE PROPRIETORSHIP
- It is owned by 1 person. Known as the
*1700-1900
simplest and common form of business
- really became important for the title and organization. The owner is called
professional license of the Certified Public PROPRIETOR, operated by the
Accountants followed shortly in this year Department of Trade and Industry
1896. (DTI).
*1920-1940 *ADVANTAGES:
- became important to reduce the amount - the owner keeps all the profits.
of FRAUDS and SCANDALS. Just like what
- the owner makes all the decisions.
happened on the Lehman Brothers in 1939.
- easy to form and operate.
*1940-Present
*DISADVANTAGES:
- have been centrally located into what is
known as codification. The CODIFICATION - the life of the business is limited to the life
reveals all the current practices and of the owner.
standards.
- the amount of capital is limited only by the
wealth of the proprietor.
The Accountancy Act of 2004
Republic Act No. 9298, the Philippine 2. PARTNERSHIP
Accountancy Act of 2004 - It is owned by 2 or more persons.
Objectives: Profits are divided among partners
based on their agreed sharing. The
• Standardization and regulation of
accounting education owner is called PARTNER and
• Examination for registration of certified operated by DTI.
public accountants
*ADVANTAGES:
• Supervision, control, and regulation of
the practice of accountancy in the - higher capital because 2 or more persons
Philippines will contribute.
Article II creates Professional
-easy to operate like proprietorship.
Regulatory Board of Accountancy which
enforces the provisions of the Philippine *DISADVANTAGES:
Accountancy Act. It is also granted the right
- profits are divided among partners
- partners can be held liable for the acts of - promotes the concept of sharing resources.
the other partner.
*DISADVANTAGES:
- in a lawsuit, the personal properties of the
- limited distribution of surplus.
partners can be held beyond their
contributions and maybe used to answer for -requires continuous programs for members.
any liability of the partnership. PRINCIPLES OF ACCOUNTING

1. GOING CONCERN PRINCIPLES

3. CORPORATION 2. BUSINESS ENTITY PRINCIPLES
- Separate legal entity under the 3. OBJECTIVITY PRINCIPLES
corporation law. The owners are called 4. TIME PERIOD PRINCIPLES
STOCKHOLDERS/ 5. MONETARY UNIT PRINCIPLES
SHAREHOLDERS. The word 6. DISCLOSURE PRINCIPLES
“corporation, incorporation, corp inc” 7. ACCRUAL ACCOUNTING
appears in the name of the entity. PRINCIPLES
8. COST PRINCIPLES
*ADVANTAGES:
9. MATCHING PRINCIPLES
- can easily race additional funds by selling 10. CONSERVATIVE PRINCIPLES
stocks to the public. 11. MATERIALITY PRINCIPLES

- shareholders are not personally liable for ACCOUNTING EQUATION:

the debts of the entity.
ASSET = LIABILITY + EQUITY
- operated by Securities and Exchanges
Commission (SEC); 5 or more to 15; but TYPES OF ACCOUNTS
revised corporation code.
1. ASSETS
*DISADVANTAGES:
- what the company owns.
- relatively complicated set up.
(EXAMPLE: Cash, Supplies, Account
- subjected to several legal restrictions as receivables)
listed in the corporation Code of the
2. LIABILITY
Philippines.
- what the company owes.
4. COOPERATIVES
- A duly registered association of person, (EXAMPLE: Loans payable, Account
with a common bond of interest, payable, Notes payable, Unearned
voluntarily joined on their social, Income)
economic and cultural goal. Owners 3. OWNER’S EQUITY
are called MEMBERS who contribute
equitably to the capital of the - company’s net worth.
cooperatives. The word “cooperatives’ (EXAMPLE: Capital, Investments,
appears in the same of entity. Withdrawal)
*ADVANTAGES: 4.REVENUE
- enjoys certain tax exemption privilege. - the amount the company earns.
(EXAMPLE: Sales Revenue, Service 2.LEDGER – Known as the T-accounts
revenue)
- book of final accounts because all the
5.EXPENSES balance in the ledger are used in the
preparation of financial statement.
- expenditures of the business
JOURNALIZING PROCESS:
(EXAMPLE: Utilities, Supplies, Rent,
Advertising expense) 1. Label the parts of the general journal
2. Record the year of the transaction
3. Record the month and the date of
BOOK OF ACCOUNTS transaction
1. JOURNAL 4. Record the debit account followed by
- The book of original entry the amount debited.
- Journal entries is what is written for 5. Record the credit account followed by
each transaction record debit and the amount credited
credit 6. Write a brief explanation about
- Records should be transaction.
CHRONOLOGICAL
3.WORKSHEET – conveniently arranged the
TYPES: accounting transaction happened

1. GENERAL JOURNAL- most basic type - source of preparing financial statement

of journal
4.ADJUSTING ENTRIES -to update journal
- contains data, account title, description,
entries
reference no., debit and credit.
- Provides chronological record of - for income and expenses
transactions. -to follow accrual accounting and matching
- Helps prevent or locate errors because principles.
debit and credit is easily compared.
2. SPECIAL JOURNAL- use for frequent
transaction in a business. Used to Possible effects of business
facilitate efficient and practical transactions:
recording of similar and practical A. Increase in assets= increase in
recording of similar and recuring liabilities
transaction. B. Increase in assets = increase in equity
• CASH RECEIPTS JOURNAL C. Increase in one asset= decrease
in another asset
- Use to record all cash that has been
D. Decrease in assets= decrease in
received. liabilities
• CASH DISBURSEMENT E. Decrease in assets= decrease in equity
JOURNAL F. Increase in liabilities= decrease in
- Use to record all transactions involving equity
cash payments G. Increase in equity = decrease in
liabilities
• SALES JOURNAL H. Increase in one liability= decrease in
- Use to record all sales on credit another liability
• PURCHASE JOURNAL I. Increase in one equity= decrease in
- Use to record all purchases on credit one equity
Steps in Accounting Cycle:
1. Analyzing business transactions
through source documents
2. Journalizing, or the recording of
transactions in a journal
3. Posting or transferring of the entries
from the journal to the ledger
4. Preparing the trial balance
5. Preparing the 10-column worksheet
and making the necessary adjusting
journal entries
6. Preparing the financial statements
based on adjusted account balances
7. Recording adjusting entries to the
journal and posting the same to the
ledger
8. Recording and posting of closing
entries
9. Ruling and balancing real and nominal
accounts
10. Preparing post-closing trial balance
11. Preparing reversing entries