INTRODUCTION TO ACCOUNTING

THE WORLD OF ACCOUNTING

Introduction to Accounting
Accountings evolution: i.

In response to social and economic needs of society. Ever changing concepts and techniques.

ii.

iii. To make INFORMED choices for decision makers. iv. Accounting as a language of business.

Definitions of Accounting

ACCOUNTING
is 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.

Definitions of Accounting

ACCOUNTING
is a service activity. Its function is to provide quantitative information primarily financial in nature, about economic entities that is intended to be useful in making economic decisions.

Definitions of Accounting

ACCOUNTING
is an information system that measures, processes and communicates financial information about an identifiable economic entity.

Definitions of Accounting

ACCOUNTING
is the process of identifying, measuring and communicating economic information to permit informed judgments and decisions by users of the information.

Development of Accounting
Primitive Accounting i.

The origin of keeping accounts has been traced as far back as 8500 B.C. Account records date back to the ancient civilizations of China, Babylonia, Greece and Egypt.

ii.

Development of Accounting
iii. Code of Hammurabi- required merchants who are trading goods to give buyers a sealed memorandum containing the agreed price before the sale can be enforced. Scribes (predecessors of our modern accountants) recorded it in a mound of clay and affixed their signatures and left it out to dry. iv. 3,600 B.C in Babylonia- clay tablets for recording wages. v. Accounting is one of our oldest skill.

Development of Accounting
Middle Ages i.

More formal account-keeping methods by the merchants and bankers of Florence, Venice and Genoa. Double entry bookkeeping was developed in the process.

ii.

Development of Accounting
iii. Fra Luca Pacioli, one of the most celebrated mathematician of Italy and a Franciscan monk published Everything about Arithmetic, Geometry, Proportions and Proportionality where double entry bookkeeping was explained in detail. *Though he made no claim in the art of bookkeeping, he has been regarded as the FATHER OF DOUBLE ENTRY ACCOUNTING.

Development of Accounting
Industrial Revolution and Corporate

Organization
i.

Accounting profession is closely tied to the rise of modern industrial society in Britain (late 18th century). Change of method during the mid 18th and 19th century revolution in England paved way for the emergence of Cost Accounting (Factory costing).

ii.

Development of Accounting

iii. Expansions lead to the development of the corporation form of organization. Thus creating a need for an independent report to provide assurance that managements financial representations are reliable.

Development of Accounting
Information Age i.

Technological advancements (speed, accuracy,automatic) Tailored fit systems for businesses

ii.

iii. Online and E-commerce

Paciolis Double-Entry Bookkeeping

Adapted since 15th Century.

Why is it still working and can adapt to modern

conditions?

Paciolis Double-Entry Bookkeeping

In essence, the system provides answer to the

following:
What profit has the business made? ii. How much does the business owe? iii. How much is owed to it?
i.

Paciolis Double-Entry Bookkeeping

Paciolis system should be adapted so that it can

satisfy demand for two main sources:

From owners (to know how the business is doing) ii. From the managers (information to help plan and control the business)
i.

Paciolis Double-Entry Bookkeeping

Owners and managers do not necessarily requires

the same information and so based on that, accounting was developed into two specializations:
i.

Financial Accounting- for the owners (purely QUANTITATIVE) Management Accounting- for the managers (QUANTITATIVE AND QUALITATIVE)

ii.

Accounting and The Non-Accountant

2 Main Reasons Why You Should Study Accounting: i.

It is useful and beneficial in whatever field you are in. To help you do a better job at things.

ii.

Branches of Accounting
Accountancy- refers to the profession. Accounting- refers to the subject.

Auditing- checking of accounts and the reporting

after it is completely prepared.

External auditors 2. Internal auditors

1.

Branches of Accounting
Bookkeeping- mechanical task involving the

collection of basic financial data.

Cost Bookkeeping, Costing and Cost

Accounting- process that involves the recording of cost in books of account.

Financial Accounting- more specific term applied

to the preparation and subsequent publication of highly summarized financial information.

Branches of Accounting
Financial Management- relies on non financial

data to set financial goals, obtaining a specific financial need to achieve plans and safeguard financial resources of the entity.

Management Accounting- incorporates all types

of financial and non-financial information from a wide range of sources to aide management in making decisions for the business.

Taxation- highly complex branch of accounting.

Accountancy in The Philippines

Enforced by Act No. 3105 on March 17, 1923. From 43 registered Accountants in 1923, it is now

125,000 and growing 2,500 every year.

SGV & Co. (Ernst & Young)- biggest of the local firms

Competitive pay scale

Characteristics of the Accountancy Profession

All members are Certified Public Accountants (CPAs)

which means they earned a degree in B.S in Accountancy and passed the CPA Licensure Exams.

CPAs have their own body of language (jargons). CPAs adhere to code of ethics.

CPAs are members of national organization, the

PICPA.

Scope of Practice
Republic Act. 9298 or the Philippine Accountancy

Act of 2004, signed by Pres. Arroyo. It includes but not limited to:
Practice of Public Accountancy ii. Practice in Commerce and Industry iii. Practice in Education/Academe iv. Practice in Government
i.

Code of Ethics for CPAs

Accepted the responsibility to act on public interest. Fundamental Principles:

Integrity ii. Objectivity iii. Professional Competence and Due Care iv. Confidentiality v. Professional Behavior
i.

Accounting Standards in The Philippines

Accounting Standards are authoritative

statements of how particular types of transaction and other events should be reflected in financial statements.

Accounting Standards in The Philippines

International Accounting Standards

Committee (IASC)- formed in 1973 and was succeeded by IASB in 2001. Statements issued are called International Accounting Standards (IAS).

International Accounting Standards Board

(IASB)- independent private sector body. Its objective is to achieve convergence in the accounting principles that are used by businesses and other organizations for financial reporting around the world. Statements issued are called International Financial Reporting Standards (IFRS).

Accounting Standards in The Philippines

Accounting Standards Council (ASC)- to

establish and improve accounting standards that will be generally accepted in the Philippines
Financial Reporting Standards Council

(FRSC)- the new accounting standard setting body replacing ASC. (Through the Philippine Accountancy Act of 2004)

Accounting Standards in The Philippines

Philippines standards now conform to IAS/IFRS. Philippine Association of Collegiate Schools

of Business (PACSB)- improves the business education in the Philippines through seminars, trainings, dialogues, grants, etc.

Philippine Council of Deans and Educators in

Business (PCDEB)- aims to advance the quality of business education through proactive and strategic plans.