Fundamentals of Accountancy, Business, and Management

• A comprehensive review of the fundamentals of accountancy, business, and management.

Introduction to Accounting

• Accounting is the art of recording, classifying, and summarizing transactions in terms of money.
• The Philippine Institute of Certified Public Accountants (PICPA) defines accounting as identifying, measuring, and communicating economic information for informed judgments.
• Accounting is a service activity providing quantitative, primarily financial, information about economic entities.
• Accounting functions serve to fulfill management's stewardship function, support daily operations, and aid users in making informed decisions.
• Accounting is broad, while bookkeeping is specific.
• Accounting refers to the nature of the work, while accountancy refers to the profession.
• Objectives of financial statements include providing information about the financial position, performance, and cash flows of an entity.
• Luca Pacioli introduced double-entry bookkeeping in 1494.
• The first Accountancy Law of the Philippines was Republic Act (RA) 3105, passed in 1923, creating the Board of Accountancy (BoA).
• The Accountancy Law in the Philippines was revised in 1975 under Presidential Decree No. 692.
• 1981: The Philippine Institute of Certified Public Accountants (PICPA) created the Accounting Standards Council (ASC)
• The Philippines transitioned from American-based to International Accounting Standards starting in 1997.
• 2004: The Financial Reporting Standard Council (FRSC) was created by the Professional Regulation Commission (PRC).
• The Philippine Accountancy Act of 2004, RA 9298, was passed into law.
• Identifying accountable events means recognizing their effect on assets, liabilities, and equity.
• Measuring determines the monetary amounts for recognizing financial statement elements.
• Communicating involves preparing and distributing accounting reports.
• Recording is called journalization and involves writing business transactions chronologically.
• Classifying involves sorting similar transactions and posting them to the ledger.
• Summarizing refers to the preparation of financial statements.

Branches of Accounting

• Public practice involves accountants offering business and accounting services to clients.
• External auditing, tax preparation, and management consultancy are services offered in public practice accounting.
• Accountants in private accounting can hold executive positions, work as internal auditors, or be budget officers within companies.
• Financial accounting, management accounting, tax accounting, cost accounting, budgeting, internal auditing, and accounting information systems are areas within private accounting.
• Government accounting involves CPAs in government agencies like the Bureau of Internal Revenue, Department of Budget and Management, etc.
• Accounting education involves accountants as instructors in colleges and universities.
• Financial accounting focuses on recording business transactions and preparing financial statements for internal and external users, adhering to GAAP.
• Management accounting focuses on preparing internal reports, dealing with management's needs rather than GAAP compliance.
• Government accounting analyzes, classifies, summarizes, and communicates transactions involving government funds.
• Auditing examines financial statements to express an opinion on their fairness, including both external and internal auditing.
• Tax accounting includes preparing tax returns and planning for tax consequences.
• Cost accounting determines the cost of projects/services.
• Accounting education involves teaching accounting and related subjects.
• Accounting research examines the use and consequences of accounting practices.

Users of Financial Information

• Existing and potential investors are concerned with investment risks and returns.
• Lenders and other creditors use information to determine if loans and interest will be paid when due.
• Employees are interested in the stability and profitability of the entity.
• Customers have an interest in information about the entity's continuance.
• Government and their agencies use information to regulate the entity and determine taxation policies.
• The public is assisted by information about trends and activities of the entity.
• Internal users have direct access to financial information.
• Owners use data to assess profitability and strategies.
• Managers use data to plan, manage, and evaluate performance.
• Employees rely on data to understand salaries, benefits, and company performance.
• External users lack direct connection.
• Investors analyse data to evaluate company performance.
• Creditors assess the ability to repay loans without access to internal data.
• Auditors examine data independently to ensure compliance, lack permanent access to internal information.
• Public accesses public information and don't have direct interaction with financial operations.
• Consumers rely on public information.
• Suppliers use data to determine payment obligations.
• Members of non-profit organizations use internal reports to understand how funds are being used.

Forms of Business Organizations

• Business organizations are categorized by the number of owners.
• Sole proprietorship is owned by one person.
• The owner has unlimited liability, meaning personal assets may be used to pay the debts
• Easy to establish and terminate.
• Requires little capital.
• Has freedom and control in business operations.
• Has ownership of everything.
• There is a limited amount of capital.
• Has limited life.
• Has unlimited liability.
• Has difficult day-to-day operations.
• The organization of a sole proprietorship involves registering with DTI, Barangay Office, Mayor's Office, and BIR.
• Partnership is a contract where two or more people contribute money, property, etc
• Limited supervision of all the partnerships activities.
• Fewer regulations compared to a corporation
• Unlimited liability of all partners.
• Managerial difficulties.
• Limited life or easy dissolution.
• Organization inolves registration with SEC, Barangay Office, Mayor's Permit, BR, and SSS.
• A Corporation is considered an artificial enitity.
• Power of succession enables it to enjoy a continuous existence.
• large-scale business made possible with many investors
• Limitations mean shareholders may weaken its credit.
• Limited Liability.

Types of Corporations

• stock includes Non-Stock, Public, Private, Domestic, Foreign, and family.
• Organization of a corporation involves registering with SEC, Barangay Office, Mayor's Office, and BIR.
• The entity is viewed as continuing to operate indefinitely.
• The sole proprietorship Is a business owned by only one person.
• The entity is separate from the owners.
• "Dividends" are withdrawals for a non-corporation with a normal debit balance.

Accountants

• Accountants can be found in teaching, auditing.
• Accountants can be found in government, and management consultating firms.
• "dividends" can be found in equity.
• Accrual Accounting effects tranctions.
• Costs should be recorded in the same period.
• revenue is the amount earned regardless of when received.
• Each transaction should have impartial evidence.
• Conservatism alternative is the least favorable impact.
• There should be full dispolsure, therefore it must be transparent.
• If there is a conflict between substance and form, economic substance prevails.
• Resources should be controlled in cash.

Assets

• Undeposited currency is petty cash.
• Fixed assets include the office.
• Fixed assets include property.
• Franchises include trademarks.

Liabilities

• Liabilities are obligations.
• Accounts measure assets.
• There should be working capital.
• Working capital measures companiy efficiency.
• Each should have equitable equity.
• Equity claims assets.

Chart of Accounts

• accounts should be debit.
• Revenue is credit.