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CHAPTER 1 – INTRODUCTION TO ACCOUNTING

DEFINITIONS OF ACCOUNTING
 The process of identifying, recording, and
communicating financial information to various
parties.
 The process of identifying, measuring, and communicating economic
information to permit informed judgements and decisions by the users
of information. (American Accounting Association)
 The art of recording, classifying, and 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. (American Institute of Certified Public Accountants)

From this, I’ve learned that accounting is very beneficial to companies for
it helps them identify relevant economic events, record these events and
communicate the summarize results to both internal and external parties.
Besides, accounting helps the management to improve the business, identify
risks and problems, and attract potential investors.

ACCOUNTING PROCESS

Identifying
relevant
economic
events

Communicati
Recording
on of
of these
summarized
events
results
During our discussion, I’ve learned that accounting process starts with
identifying relevant economic events. For the event to be identified as
‘relevant’, there should be transfer of things with value. For example, you
purchased an oven for your bakeshop. You will record this as a relevant
economic event because there is a transfer of things with value. In this
situation, money was exchanged for the oven (equipment). Recording of
relevant economic events is the next step in accounting process. After
identifying the events relevant to the business, they will be recorded in
accounting books. Recording of events should be done systematically for
easy interpretation, tracking and understanding. The last step is the
communication of results. After a specific period, the recorded events will
be summarized into accounting reports and will be communicated to both
internal and external parties.

NATURE OF ACCOUNTING
 A c c o u n t i n g
A process is a series of steps and actions taken in
order to achieve a particular goal. And as what we
have discussed, accounting is a process of identifying, recording and
communicating economic events with a goal of providing financial
information to external and internal users.
 Accounting is an art. Accounting requires skill and expertise. One
should be properly trained in order to perform the accounting process
very well.
 Accounting deals with financial information and transactions.
Quantifiable financial transactions are the only events being identified,
recorded and communicated to different parties.
 Accounting is a means not an end. Accounting is not the objective
itself but a tool or a means to achieve an objective.
 Accounting is an information system. Accounting is recognized as
a ‘storehouse’ of information. It records
financial transaction and communicates
financial information to various parties.

FUNCTIONS OF ACCOUNTING
 Keeping systematic records of business transactions. Records of
transactions should be done systematically for easy understanding.
 Protecting the properties of a business. Accounting records serve
as evidences if a property of a business exists or not. Accounting
system helps prevent employee fraud and misappropriation of
resources.
 Communicating results to various parties. Accounting information
is not only used by external users but also the internal users
(management) for making business decisions.
 M e e t i
The government requires some companies to
provide financial report to protect the public
and help them to make decisions.

ACRONYMS

 A A A – American Accounting Association


 P A S – Philippine Accounting Standards
 A I C P A – American Institute o
 P F R S – Philippine Financial Reporting St

HISTORY OF ACCOUNTING
 The early development of accounting can be dated back in ancient
Mesopotamia.
 People follow a system of writing and counting of money. They also
have taxation and trading activities.
 All the deeds of Emperor Augustus regarding the stewardship of
Roman resources was kept by the government, which is evident in the
book Res Gestae Divi Augusti (The Deeds of the Divine
Augutus).
 Suetonius & Cassius Dio were the historians who recorded the
deeds of the emperor.
 aerarium – treasury
rationarium – account
fisci – tax officials
publicani – public contractors
 Luca Pacioli (14th century) – Father of Modern Accounting
 Summa de Arithmetica, Geometria, Proportioni et
Proportionalita (A Review on Arithmetic, Geometry, Ratio &
Proportion) – The first book printed with a treatise on bookkeeping
that was written by Luca Pacioli.
 Amatino Manucci – The person who invented the double-entry

bookkeeping system.
 Double-entry bookkeeping system has a
debit and credit for each transactions.
 In 19th century, Queen Victoria granted a
royal charter to the Institute of Accountants in
Glasgow.

Mesopotamia Luca PacioliTemple Record Queen Victoria


E. Augustus

PERFORMANCE TASK # 1: JINGLE (45%)


 The class was divided into groups with 3-4 members each. Each group.
 All groups were asked to present a jingle on the use of accounting in
their daily lives.