Accounting Basics and Types of Businesses

Study Notes

Accounting

Accounting provides financial information to aid in economic decision-making.
Considered the language of business.

Father of Accounting

Fra Luca Bartolomeo de Pacioli, an Italian mathematician.

Types of Business

Services: Businesses that primarily sell people's time.
Trader: Businesses involved in buying and selling products.
Manufacture: Businesses that convert raw materials into finished goods.
Raw materials: Businesses that grow or extract raw materials.
Infrastructure: Businesses that deal with large assets.
Financial: Businesses that handle deposits, loans, and investments.
Insurance: Businesses that provide insurance services.

Forms of Business Organizations

Sole Proprietorship: Owned and operated by a single individual.
Partnership: Owned and operated by two or more individuals who contribute resources and share profits.
Corporation: Owned by its stockholders.

Activities in Business Organizations

Operating Activities: Involve the production, distribution, and marketing of goods and services.
Investing Activities: Focus on acquiring and managing long-term resources for business operations.
Financing Activities: Involve obtaining the financial resources needed for business operations.

Accountancy Act of 2004

Republic Act No. 9298, known as the Philippine Accountancy Act of 2004, signed into law in 2004.

Scope of Practice

Practice of Public Accountancy: Professionals offering accounting services to the public.
Practice in Commerce and Industry: Accountants working within businesses using their professional knowledge.
Practice in Government: Accountants holding accounting positions in government agencies.
Practice in Education/Academe: Accountants involved in teaching accounting, auditing, business law, and taxation.

Fundamental Principles

Integrity: Requires honesty and straightforwardness.
Objectivity: Requires impartiality, avoiding conflicts of interest and undue influence.
Professional Competence and Due Care: Requires acting diligently and adhering to professional standards.
Confidentiality: Requires maintaining the confidentiality of client information.
Professional Behavior: Requires complying with laws and regulations and avoiding actions that discredit the profession.

Branches of Accounting

Auditing: Services provided by the accountancy profession to ensure financial statements are accurate.
Bookkeeping: The recording of basic financial data.
Cost bookkeeping, Costing, and Cost Accounting: Capturing the total cost of production.
Financial Accounting: Recording business transactions and preparing reports on financial position and performance.
Management Accounting: Using cost accounting data for specific management decisions.
Financial Management: Applying management concepts to financial resources.
Taxation: Preparing tax returns.
Government Accounting: Accounting for resources in government entities.

Description

This quiz covers fundamental concepts in accounting, including its significance in economic decision-making and the contributions of Fra Luca Bartolomeo de Pacioli. Additionally, explore different types of business organizations and their activities, focusing on service, trading, and manufacturing sectors.