CHAPTER 1_Introduction To Accounting.pptx

Unit 1: Introduction to Accounting Learning Objectives Define accounting and explain its purpose. Describe the nature and scope of accounting. Identify the different types of accounting and their functions. Explain the importance of accounting in business decision-making....

Unit 1: Introduction to Accounting Learning Objectives Define accounting and explain its purpose. Describe the nature and scope of accounting. Identify the different types of accounting and their functions. Explain the importance of accounting in business decision-making. Identify the users of accounting information Recognize the history of accounting  Classifying economic entities Decision-making recording ACCOUNTING Quantitative information Reasoned choices interpreting summarizing What is Accounting? #SGVforABetterPhilippine s Accounting Accounting is a services activity. Its function is to provide quantitative information, primarily financial in nature, about economic entities that is intended to be useful in making economic decision, making reasoned choices among alternative course of action. Accounting Standards Council (ASC) Accounting Service activity About quantitative Accounting information & Financial in nature “ Useful in making economic decisions Accounting is a service activity The function is to provide quantitative information, primarily financial in nature. About economic entities Intended to be useful in making economic decisions Making reasoned choices among alternative course of action. Accounting 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 financial character, and interpreting the results thereof. American Institute of Certified Public Accountants (AICPA) Accounting Recording (journal) Technically, transactions must be analyzed first before they are being recorded. In some references, you'll see that the 1st step is ANALYZING while some would start at JOURNALIZING with the presumption that transactions have already been analyzed. Classifying (ledger) Entries from the journal are transferred to the ledger account per account. Accounting Summarizing (trial balance) Accounts from the ledger are presented in an organized fashion together with their corresponding amounts. Interpreting the results (financial statements) This deals with the using of Financial Statement Accounting Process Accounting Process 1. Analyze Business Transactions 2. Journalize transactions 3. Post to Ledger Account 4. Prepare Trial Balance (Unadjusted) 5. Adjusting Entries 6. Prepare Adjusted Trial Balance 7. Prepare Financial Statements 8. Make Closing Entries 9. Post Closing Trial Balance 10. Reversing Entries Nature of Accounting #SGVforABetterPhilippine s Nature of Accounting Art Financial Process Information System Function of Accounting #SGVforABetterPhilippine s Function of Accounting Maintenance of systematic records Financial results of an entity can be communicated Meeting legal requirements Protecting assets of a business Assistance to management Branch of Accounting #SGVforABetterPhilippine s  Branches of Accounting Financial Accounting Management Accounting Cost Accounting Government Accounting Auditing Tax Accounting Accounting Education Accounting Research Accounting vs Bookkeeping #SGVforABetterPhilippine s Accounting vs Bookkeeping Difference Analysis and interpretation of financial Accounting information, conduct of audit and preparation of financial statements Routine recording of economic Bookkeeping activities. It is mechanical in process Users of Accounting Information #SGVforABetterPhilippine s Accounting Information USERS INTERNAL EXTERNAL  Owners  Investor  Managers  Creditor  Government  Employees  Customers  General Public Users of Accounting Information INTERNAL  Owners- May provide capital to the business and they assess if needs funding  Managers- They need financial information because they plan and organized firm Users of Accounting Information EXTERNAL  Investors – The information they need is related to deciding whether they should buy, sell or hold their shareholdings or ownership in a business  Creditor- They are the people from whom the company borrows funds for business use. It is in their interest to know if the company is in good shape and can pay back the loans  Government- Certain information are required by the government from the businesses for activity regulation, taxation policies, etc. Users of Accounting Information EXTERNAL  Employees- These people seek employment opportunities, benefits and security. They want to assess the company’s profitability and stability  Suppliers- Suppliers provide business with the items required to run the actual business. They include suppliers of raw material or other services that help business produce goods or provide services to its customers.  Tax Authorities- These bodies use business information to determine whether the amount of declared tax in tax return is correct Users of Accounting Information EXTERNAL  Customers- Over time, people (customers) may become highly involved or dependent upon an enterprise. With this, this group of users would like to know about the company’s continuance.  General Public- The general public normally would look into the business trends and recent progress of an enterprise including the coverage of its activities History of Accounting #SGVforABetterPhilippine s History of Accounting Accounting can be traced to the ancient civilizations. History of Accounting Accounting records dating back more than 7,000 years have been found in Mesopotamia. Other early accounting records were also found in the ruins of ancient Babylonia, Assyria, and Sumeria. History of Accounting The Roman Empire had access to detailed financial information as seen in the “The Deeds of the Devine Augustus. History of Accounting Records of cash, commodities, and transactions were kept by the military personnel of the roman army. History of Accounting The merchants during the Goryeo Dynasty of the Korea kept track of their businesses and trades through record-keeping methodologies. History of Accounting Records of cash, commodities, and transactions were kept by the military personnel of the roman army. Father of Accounting Luca Bartolomeo de Pacioli Summa de arithmetica, geometria, proportioni et proportionalita (Publish in 1494) Details of calculation and recording describes the accounting methods, then in use among northern-Italian merchants, including double-entry bookkeeping , trial balances, balance sheets and various other tools still employed by professional accountants THANK YOU! #SGVforABetterPhilippine s