Accounting Basics and Types of Businesses

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.