Fundamentals Of Accountancy, Business, And Management 1 PDF

FUNDAMENTALS OF ACCOUNTANCY, BUSINESS, AND MANAGEMENT 1 LESSON 1: INTRODUCTION TO ACCOUNTING Lesson 1.1 The Nature of Accounting and Lesson 1.2. History of Accounting Content Standards. The learners demonstrate an understanding of the definition, nature, function and history of accounting. Specific...

FUNDAMENTALS OF ACCOUNTANCY, BUSINESS, AND MANAGEMENT 1 LESSON 1: INTRODUCTION TO ACCOUNTING Lesson 1.1 The Nature of Accounting and Lesson 1.2. History of Accounting Content Standards. The learners demonstrate an understanding of the definition, nature, function and history of accounting. Specific Learning Objectives. At the end of this lesson, the learners will be able to define accounting and describe its nature; explain the functions of accounting in business; give examples of business transactions and decisions requiring the need for accounting; and narrate the history of accounting A. INTRODUCTION: QUESTIONS to PONDER: Do your parents ask how you spend your allowance every day? When deciding between buying a bottle of soft drinks or fruit juice, what is the basis of your decision? Do you compare the prices of both and then decide? When going home, do you sometimes choose to walk from school rather than riding a jeepney because you want to save? B. LESSON PROPER: LESSON 1.1 WHAT IS ACCOUNTING? Accounting is the process of identifying, recording, and communicating economic events of an organization to interested users. (Weygandt, J. et.al) IDENTIFYING – this involves selecting economic events that are relevant to a particular business transaction. The economic events of an organization are referred to as transactions. Examples of economic events or transactions - In a bakery business: sales of bread and other bakery products. purchases of flour that will be used for baking purchases of trucks needed to deliver the products RECORDING – this involves keeping a chronological diary of events that are measured in pesos. The diary referred to in the definition are the journals and ledgers. 1 COMMUNICATING – occurs through the preparation and distribution of financial and other accounting reports. OTHER DEFINITIONS OF ACCOUNTING Systematic process of measuring and reporting of relevant and timely financial information about the activities of an economic organization or unit. The art of recording, classifying, 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 result thereof. (AICPA) A service activity to provide quantitative information, primarily financial in nature, about economic entities useful in making decisions. (PICPA) Nature of Accounting Accounting is a systematic process. – It is a series of actions that produce something or that leads to a particular result. Accounting is an art – a skill acquired by experience, study, or observation. Accounting is a service activity. – something that is done or work for a particular purpose Accounting deals with financial information and transactions – Accounting records the financial transactions and date after classifying the same and finalizes their result for a definite period for conveying them to their users. Accounting is an information system – Accounting is recognized and characterized as a storehouse of information. As a service function, it collects processes and communicates financial information of any entity. This discipline of knowledge has been evolved out to meet the need of financial information required by different interested groups. https://accountingtheory.weebly.com/nature-and-scope-of- accounting.html Four Aspects of Accounting 1. Recording - writing down of business transactions chronologically in the books of accounts as they transpire 2. Classifying – sorting similar and related business transactions into the three categories of assets, liabilities, and owner‟s equity 3. Summarizing – preparing the financial statements from the transactions recorded in the books of account that are designed to meet the information needs of its users 4. Interpreting – representing the qualitative and quantitative financial information about the business transactions in a language comprehensible to the users of financial statements. *** Accounting – the language of business: Users are able to determine the financial standing of the company as well as its stability and growth. Basic Function of Accounting in Business: Generation of relevant and timely information for interested parties. Focus Group Discussion: Mr. Johnny is a retired government employee who is good at baking. One day he decides to put up a bakery shop in your barangay. He renovates a portion of his house to serve as the area for the production of bread. He purchases baking equipment and raw materials to produce five different types of bread. Mr. Johnny also hires Joseph to help him with the baking and, at the same time, to be in-charge of sales. Mr. Johnny pays Joseph on a weekly basis. Every day, Mr. Johnny‟s wife deposits the daily cash sales in their bank account at XY Savings Bank. Question: With the help of accounting, what possible decisions or questions of Mr. Johnny can accounting provide an answer to? Let’s watch! Now that we understand the definition, nature, and function of accounting, let us now watch the video. Please click the link below. Watch https://www.youtube.com/watch?v=hwJby9ztwvE MOTIVATION (10 POINTS) After watching the video, answer the following: 1. What are the processes involved in accounting? ____________________________________________________________________________________________ __________________________________________________________________________________________ 2. What is the basic function of accounting? 2  ____________________________________________________________________________________________ __________________________________________________________________________________________ 3. Who do you think are the users of financial reports? ___________________________________________________________________________________________ ___________________________________________________________________________________________ LESSON 1.2 BRIEF HISTORY OF ACCOUNTING Egypt, Mesopotamia, Greek and Rome Tools and Instruments used in ancient times: Abacus – functioned as a calculator in the ancient times was developed by the Sumerians in 5,000 BCE Papyrus – developed by ancient Egyptians in 4,000 BCE. Not only allowed recording of commercial transactions but also the transcriptions of religious text, music, literature and more. Clay tablets – considered to be among the oldest written tax accounting records unearthed by Egyptian archaeologist Dr. Gunter Dreyer of the German Institute of Archaeology. Old stone labels – found in the tomb of King Scorpion 1 in Egypt representing accounts of oil and linens which were believed to be paid to the king as taxes. 3 Mesopotamian Scribes – performed extensive duties in writing and recording in the Mesopotamian civilization are the equivalent of present-day accountants. Greeks – introduced money in the form of coins in 600 BCE and invented a Greek alphabet which they used to facilitate record-keeping Romans – introduced the used of annual budget which coordinated estimated revenues and taxes paid by the citizen in relation to the nation‟s expenditures. Cash books were maintained by household for their expenses. Domesday Book – contained all the real estate surveyed by William the Conqueror of England who took possession of all properties in the name of the king upon his invasion. Pipe Roll or the Great Roll of the Exchequer – the most ancient surviving accounting record in the English language containing the yearly accounting of rents, fines, and taxes due to the King of England, from 1130 to 1830. 14th Century – the Birth of Double-Entry Bookkeeping Luca Pacioli – otherwise known as the Friar Luca dal Borgo and considered to be the “Father of Accounting” wrote the “De Computis et Scripturis (of Reckonings and Writings) which is composed of 36 short chapters that describe bookkeeping that also included what is similar to the modern day accounting cycle. Bernedetto Cotrugli – He is the writer of Della Mercatura et del Mercante Perfetto (Trading and the Perfect Trader) where the original idea of the double-entry bookkeeping was introduced. 4  19th Century – The Dawn of Modern Accounting in Europe and America Industrial Revolution (England) – replaced hand tools with machine or power tools, otherwise known as the factory system, transformed accounting into an actual profession requiring expertise of accountants to gain corporate control of their flourishing businesses. Queen Victoria (Scotland) – granted royal charter to the Institute of Accounts in Glasgow on July 6, 1854, thereby creating the profession of chartered accountant (CA), thus accounting became a formal profession. 1887 – the birth of the first national US accounting society the American Association of Public Accountants, the predecessor of the present American Institute of Certified Public Accountants. (AICPA). 20th Century – The Evolution of Modern Accounting Standards 5 American Institute of Certified Public Accountants. (AICPA) – was tasked to set the accounting and auditing standards for the periodic reports vouched by certified public accountants until the establishment of the Financial Accounting Standards Board (FASB) in 1973 GAAP – generally accepted accounting principles established by the two significant authorities in the United States: Financial Accounting Standards Board (FASB) and the Governmental Accounting Standards Board (GSAB) The Information Age Also known as the Computer Age, Digital Age, or New Media Age where manual, tedious and time consuming tasks were replaced by faster and more accurate computer methods. 21st Century – Accounting in the Modern Times International Accounting Standards Board (IASB) – established in January 2001 Enron Scandal – The greatest corporate fraud case recorded in American history, caused Arthur Andersen, one of the top audit firms in the US to close business. Sarbanes-Oxley Act – was passed by the US Congress in 2002 to protect investors from corporate misinformation that imposed tougher restrictions on accountants conducting consultancy services. The accounting profession in the 20th century developed around state requirements for financial statement audits. Beyond the industry's self-regulation, the government also sets accounting standards, through laws and agencies such as the Securities and Exchange Commission (SEC). As economies worldwide continued to globalize, accounting regulatory bodies required accounting practitioners to observe International Accounting Standards. This is to assure transparency and reliability, and to obtain greater confidence on accounting information used by global investors. Lesson 1.3. The Business Environment Content Standards. The learners demonstrate an understanding of the varied branches and areas of accounting, and the external and internal users of financial information, various forms of business organizations, and the types of business according to activities. Performance Standards. The learners shall be able to make a list of business within the community on the types of accounting services they require. solve exercises in the identification of the branches of accounting described through the types of services rendered. Solve exercises and problems on the identification of users of information, types of decisions to be made, and types of information needed by the users. Cite users of financial information and identify whether they are external or internal users. Differentiate the forms of business organizations in terms of nature of ownership Make a list of existing business entities in their community and identify the form of business organization Differentiate the types of business according to activities and make a list of businesses in their community according to their activities. Learning Competencies. The learners shall be able to Differentiate the branches of accounting. Explain the kinds/types of services rendered in each of these branches. define external users and internal and gives examples identify the type of decisions made and describe information needed by each group of users differentiate the forms of business organizations. identify the advantages and disadvantages of each form compare and contrast the types of business according to activities identify the advantages and business requirements of each type Specific Learning Objectives. The learners will be able to identify the forms of business organizations by nature of ownership. give examples of businesses in their respective communities and identify the form identify the advantages and disadvantages of the four forms of business organization describe and give examples of the three types of business activities The Different Branches of Accounting 6 Financial Accounting Financial accounting is the broadest branch and is focused on the needs of external users. Financial accounting is primarily concerned with the recognition, measurement and communication of economic activities. This information is communicated in a complete set of financial statements. It is assumed under this branch that the users have one common information need. Financial accounting conforms with accounting standards developed by standard-setting bodies. In the Philippines, there is a Council created to set these standards. Examples of these financial reports include: balance sheet (statement of financial condition) income statement (the profit and loss statement, or P&L) statement of cash flows Financial accounting is primarily concerned with processing historical data. Although financial accounting generally meets the needs of external users, internal users of accounting information also use these information for their decision- making needs. Management (or Managerial) Accounting Management accounting emphasizes the preparation and analysis of accounting information within the organization. The objective of managerial accounting is to provide timely and relevant information for those internal users of accounting information, such as the managers and employees in their decision-making needs. Oftentimes, these are sensitive information and is not distributed to those outside the business - for example, prices, plans to open up branches, customer list, etc. Managerial accounting involves financial analysis, budgeting and forecasting, cost analysis, evaluation of business decisions, and similar areas. Government Accounting Government accounting is the process of recording, analyzing, classifying, summarizing, communicating and interpreting financial information about the government in aggregate and in detail reflecting transactions and other economic events involving the receipt, spending, transfer, usability and disposition of assets and liabilities. This branch of accounting deals with how the funds of the government are recorded and reported. Auditing There are two types of auditing: external and internal auditing. External auditing refers to the examination of financial statements by an independent CPA (Certified Public Accountant) with the purpose of expressing an opinion as to fairness of presentation and compliance with the generally accepted accounting principles (GAAP). The audit does not cover 100% of the accounting records but the CPA reviews a selected sample of these records and issues an audit report. Internal auditing deals with determining the operational efficiency of the company regarding the protection of the company‟s assets, accuracy and reliability of the accounting data, and adherence to certain management policies. It focuses on evaluating the adequacy of a company's internal control structure by testing segregation of duties, policies and procedures, degrees of authorization, and other controls implemented by management. Tax Accounting Tax accounting helps clients follow rules set by tax authorities. It includes tax planning and preparation of tax returns. It also involves determination of income tax and other taxes, tax advisory services such as ways to minimize taxes legally, evaluation of the consequences of tax decisions, and other tax-related matters. Cost Accounting Sometimes considered as a subset of management accounting, cost accounting refers to the recording, presentation, and analysis of manufacturing costs. Cost accounting is very useful in manufacturing businesses since they have the most 7  complicated costing process. Cost accountants also analyze actual and standard costs to help managers determine future courses of action regarding the company's operations. Cost accounting will also help the owner set the selling price of his products. For example, if the cost accounting records shows that the total cost to produce one can of sardines is PHP50, then the owner can set the selling price at PHP60. Accounting Education This branch of accounting deals with developing future accountants by creating relevant accounting curriculum. Accounting professionals can become faculty members of educational institutions. Accounting educators contribute to the development of the profession through their effective teaching, publications of their research and influencing students to pursue careers in accounting. Accounting teachers share their knowledge on accounting so that students are informed of the importance of accounting and its use in our daily lives. Accounting Research Accounting research focuses on the search for new knowledge on the effects of economic events on the process of summarizing, analyzing, verifying, and reporting standardized financial information, and on the effects of reported information on economic events. Researchers typically choose a subject area and a methodology on which to focus their efforts. The subject matter of accounting research may include information systems, auditing and assurance, corporate governance, financials, managerial, and tax. Accounting research plays an essential part in creating new knowledge. Academic accounting research "addresses all aspects of the accounting profession" using a scientific method. Practicing accountants also conduct accounting research that focuses on solving problems for a client or group of clients. The Accounting research helps standard-setting bodies around the world to develop new standards that will address recent issues or trend in global business. C. PRACTICE 1. Identify the term that best suits each statement: (10 POINTS) 8  C. PRACTICE 2 (10 POINTS) Identify what branch of accounting renders this service: ___________________________1. Preparation of general-purpose financial statements ___________________________2. Evaluation of the performance of a sales department ___________________________3. Develop standards to address a new business set up ___________________________4. Review tax compliance of the business ___________________________5. Evaluate whether a branch of the business complies with the collection and deposit policy of the company ___________________________6. Review whether the financial statements are presented fairly and in compliance with accounting standards ___________________________7. Report on the spending of government funds ___________________________8. Report on the total cost of materials and labor used in the production ___________________________9. Conducting lectures on accounting topics USERS OF ACCOUNTING INFORMATION AND THEIR INFORMATION NEEDS INTERNAL USERS Internal users of accounting information are those individuals inside a company who plan, organize, and run the business. These users are directly involved in managing and operating the business. These include marketing managers, production supervisors, finance directors, company officers and owners. Accounting information is presented to internal users usually in the form of management accounts, budgets, forecasts and financial statements. This information will support whatever decision of the internal users. EXTERNAL USERS External users are individuals and organizations outside a company who want financial information about the company. These users are not directly involved in managing and operating the business. Most common types of external users: Potential Investors use accounting information to make decisions to buy shares of a company. Creditors (such as suppliers and bankers) use accounting information to evaluate the risks of granting credit or lending money. 9  Government regulatory agencies such as Securities and Exchange Commission (SEC), Bureau of Internal Revenue (BIR), Department of Labor and Employment (DOLE), Social Security System (SSS), and Local Government Units (LGUs). Questions asked by internal users: Is cash sufficient to pay bills? What is the cost of manufacturing each unit of product Can we afford to give employee pay raises this year? Which product line is the most profitable? Will the company be able to pay its debts as they come due? Internal Users Information Need Decisions Supported analyze the organization's performance and position and take income/earnings for the period, sales, appropriate measures to improve the Management available cash, production cost company results. sufficiency of cash to pay dividends to stockholders; pricing decisions job security, consider staying in the profit for the period, salaries paid to Employees employ of the company or look for employees other employment opportunities considerations regarding additional profit or income for the period, investment, expanding the business, Owners resources or assets of the business, borrowing funds to support any liabilities of the business expansion plans. External Users Information Need Decisions Supported Terms of credit are set by creditors Creditors include suppliers as well as credit worthiness of an organization. according to the assessment of their lenders of finance such as banks. customers' financial health. credibility of the tax returns filed on Collection improvement and filing of Tax Authorities (BIR) behalf of a company cases on tax fraud make sure they can earn a reasonable analyzing the feasibility of investing Investors return on their investment in a company for assessing the financial position of to maintain a stable source of supply Customers its suppliers in the long term. ensuring that a company's disclosure to protect the interests of the of accounting information is in stakeholders who rely on such Regulatory Authorities (SEC, DOLE) accordance with the rules and information in forming their regulations set decisions. TYPES OF BUSINESS ORGANIZATIONS Do you know that….? Do you know that with your daily allowance you can own a company? Your daily allowance can be used to buy shares of stock of a corporation and that you will become the owner of such a company? “Suppose you want to open your own sari-sari store that will need PHP10,000 to start and you SOLE/SINGLE used your PHP10,000 savings to start the said business. You are the sole owner of the said PROPRIETORSHIP sari-sari store. This type of business is called sole/single proprietorship.” “What if the needed amount to start your dream sari-sari store is PHP50,000 and you only have PHP25,000 cash savings. You ask Juan, your friend if he is willing to invest his PARTNERSHIP PHP25,000 and become part owner of the sari-sari store. Assuming he agrees, what form of business organization was created?” 10  “Assuming your dream is to open a grocery store and not just a sari-sari store but you will need PHP1,000,000 to start the said business. You have only PHP25,000, your friend Juan has CORPORATION PHP25,000, and your mother is willing to invest her PHP50,000, but still these are not enough to start your dream grocery store. Where will you get the money to raise the PHP1 million? You may consider setting up a corporation?” “Assuming all the mothers in your barangay decided to open a sari-sari store where all the members can buy in cash or in credit. Some mothers were also taught how to sew dresses and bags as part of the project of the group. These bags are then sold to a certain company. Aside from that, the organization provides seminars to the members on various topics involving COOPERATIVE mothers and their roles. At the end of the year, the profits are distributed among the members based on their capital contribution. The amount of their purchases in the sari-sari store during the year is also computed and they receive something out of the profit/surplus based on their purchases. This form of business organization is called a cooperative. 1. Sole/single proprietorship. A form of business is owned by one person; the simplest, and the most common form of business organization. It is not separate from the owner. The business and the owner are inseparable. Advantages of sole/single proprietorship. The owner keeps all the profits. The owner makes all the decisions. It is easy to form and operate. Disadvantages of sole/single proprietorship. The life of the business is limited to the life of the owner. Once the owner dies, the business will cease to operate under the name of the proprietor. The amount of capital is limited only by the wealth of the proprietor. Infusion of knowledge in the management of the business is limited to one person only, which is the owner. *The Department of Trade and Industry is the government agency that regulates the trade names of sole/single proprietorship businesses. **Misconception: Once a person dies the business is continued by his relatives. ***Upon death of the old owner, the business legally ceases. The one taking over is considered as the new owner. 2. Partnerships. A form of business owned by two or more persons. The details of the arrangement between the partners are outlined in a written document called articles of partnership. Profits are divided among partners based on their agreed sharing. The owner is called a partner. Advantages of a partnership Higher capital because two or more persons will contribute to the common fund. It is easy to operate like a sole/single proprietorship Disadvantages of a partnership The profits are divided among the partners. A partner can be held liable for the acts of the other partners. In a lawsuit, the personal properties of the partners can be held beyond their contributions and may be used to answer for any liability of the partnership. 3. Corporations A corporation is a business organized as a separate legal entity (artificial person) under the corporation law with ownership divided into transferable shares of stocks Emphasize that it is the law (Corporation Code of the Philippines) that creates a corporation. The corporation begins its existence from the date the Articles of Incorporation is approved by the Securities and Exchange Commission (SEC). The SEC (Securities and Exchange Commission) is the government agency primarily tasked to regulate private corporations in the Philippines. The owners are called stockholders or shareholders. The word „Corporation/Incorporation/Corp./Inc.‟ appears in the name of the entity. The voting rights of a shareholder is generally based on the percentage of ownership. The management of the business is delegated by the shareholders to the Board of Directors The ownership is divided into shares and the value of one share may be denominated at a smaller amount, for example at PHP10 per share. The proof of ownership is evidenced by a stock certificate. Advantages of a corporation Can easily raise additional funds by selling shares of stocks to the public. Shareholders are not personally liable for the debts of the corporation. The extent of their liability is limited to their equity (ownership) in the corporation. Disadvantages of a corporation It is relatively complicated to set up. Subject to several legal restrictions as listed in the Corporation Code of the Philippines 4. Cooperatives 11  A cooperative is a duly registered association of persons with a common bond of interest, voluntarily joining together to achieve their social, economic and cultural needs. The owners are called members who contribute equitably to the capital of the cooperative. The members are expected to patronize their products and services. The word „cooperative‟ appears in the name of the entity. This form of business organization is regulated by the Cooperative Development Authority (CDA). The teacher may introduce the role of CDA as a government agency regulating the cooperatives. Advantages of a cooperative Enjoys certain tax exemption privilege Promotes the concept of sharing resources Disadvantages of a Cooperative Limited distribution of surplus Requires continuous education programs for members. The members have active and direct participation in the business of the cooperative. D. ENRICHMENT 1: What kind of information do users need that can be answered by accounting? What are the decisions supported by this information? Fill up the table by choosing the answers from the choices given below. (10 POINTS) External Users Information Need Decisions Supported POTENTIAL INVESTORS BANKS SUPPLIERS BIR DOLE salaries and other benefits paid to employees taxes paid by the business Income or profit of the business liabilities or amount owed by the business to its suppliers resources or assets of the business Is the owner paying the correct taxes? Is it profitable for me to invest in this business? Do I extend credit to this company? For how long? Does this company have sufficient resources to pay its loan? Stock certificate D. ENRICHMENT 2: (10 POINTS) A. List down at least three businesses in your locality or in the country 1.____________________________ 2. _____________________________ 3. ____________________________ B. For every business you listed above, identify the business activities, products or services offered by each business. 1.______________________________2. _____________________________ 3. ____________________________ C. Identify the owners of every businesses listed. 1.______________________________2. _____________________________ 3. ____________________________ E. EVALUATION (15 points) 1. Enumerate all the forms of business organizations by nature of ownership. ___________________ ___________________ 12  ___________________ ___________________ 2. Differentiate a corporation from a partnership. ___________________________________________________________________________________________ ___________________________________________________________________________________________ ___________________________________________________________________________________________ ___________________________________________________________________________________________ ___________________________________________________________________________________________ 3. Differentiate a corporation from cooperative. ___________________________________________________________________________________________ ___________________________________________________________________________________________ ___________________________________________________________________________________________ ___________________________________________________________________________________________ ___________________________________________________________________________________________ 4. Give two examples of corporations in the Philippines. _____________________________________________ _____________________________________________ 5. Give two examples of cooperatives in the Philippines. ____________________________________________ ____________________________________________ LEGAL REQUIREMENTS IN THE FORMATION OF A BUSINESS The sole proprietorship is the easiest business to register. It is registered with the Department of Trade and Industry (DTI) under the Bureau of Trade Regulation and Consumer Protection. For a single proprietorship, the business is registered with Securities and Exchange Commission (SEC) upon submission of the following documents: a. Proposed Articles of Partnership b. Name Verification Slip c. Bank Certificate of Deposit d. Alien Certificate of Registration, Special Investors Resident Visa, or proof of other types of visa (in case of foreigners) e. Proof of Inward Remittance (in case of non-resident aliens) For a corporation, the following are the incorporation documents required to be filed with the Securities and Exchange Commission (SEC): a. Articles of Incorporation b. By-Laws c. Treasurer‟s Affidavit which should state compliance with the authorized subscribed and paid-up capital stock requirements. d. Bank Certificate which should state that the paid-up capital portion of the authorized capital stocks has been deposited to the issuing bank. What should be stated upon registration of a corporation? a. The name of the corporation which must not be identical, or deceptively or confusingly similar to any existing corporation b. The purpose of the corporation c. Principal office of the corporation d. The term or life of the corporation which should not exceed fifty (50) years. This corporate lifetime may, however, be extended for another fifty years but the extension must not be effected earlier than five (5) years before the expiration of its term. For a cooperative, the business is registered with the Cooperative Development Authority (CDA) upon submission of the following documents. a. Economic Survey b. Notarized Articles of Cooperation and By-Laws c. Bonds Accountable officer or officers d. Notarized sworn statement of the treasurer certifying that the required subscription and payment of the authorized share capital and paid-up capital have been fulfilled. 13 3 TYPES OF BUSINESS ACTIVITIES/OPERATIONS *Because of the nature of their business operations, the presentation of their statement of comprehensive income and the content of the statement of financial position may differ from each other. by providing services by selling goods C. PRACTICE (10 POINTS) How do the following businesses earn profits? (Write S if by providing services, and G if by selling goods) ______ 1. Bruno‟s Barber Shop ______ 6. Susan‟s Roses Flower Shop ______ 2. Clean Ko Place Mo Cleaning Services ______ 7. Wash Your Problem Laundry Shop ______ 3. Tutorial Services ______ 8. Bread Pit Bakery ______ 4. Cynthia‟s Food Vendor ______ 9. Cut and Face Parlor ______ 5. Fish Be With You Fish Shop ______ 10. Manila Hotel Three types of business organizations: 1. Service Business This type of business offers professional skills, advice and consultations. Examples: barber shops and beauty parlors, repair shops, banks, accounting and law firms 2. Merchandising Business This type of business buys at wholesale and later sells the products at retail. They make a profit by selling the merchandise or products at prices that are higher than their purchase costs. This type of business is also known as "buy and sell". Examples are: book stores, sari-sari stores, hardware stores 3. Manufacturing Business This type of business buys raw materials and uses them in making a new product, therefore combining raw materials, labor and expenses into a product for sale later on. Examples are: shoe manufacturing businesses, car manufacturing plants Additional information: There are businesses that may be classified under more than one type of business. A bakery, for example, combines raw materials in making loaves of bread (manufacturing), sells hot pan de sal (merchandising), and caters customers‟ orders in small coffee table servings of ensaymada and hot coffee (service). D. ENRICHMENT (10 POINTS) Identify if it is a service, merchandising, manufacturing business or hybrid: __________________1. Provides services to customers __________________2. Sells goods to customers __________________3. Raw materials are available __________________4. Goods to be sold are purchased from a supplier __________________5. Goods to be sold are produced by the company itself __________________6. Supplies are used, no goods to be sold __________________7. Bakery __________________8. Barber shop __________________9. Cellphone store __________________10. Abenson appliances E. EVALUATION (20 POINTS) Determine the form of business organization formed in each case. Then determine the type of activities or operations performed by the business. 1. Jack Ty and Jill Alunan were classmates since elementary. They went to college together and recently passed the board exam for certified public accountants. They decided to form T. Alunan Auditing Services. Form of business _______________________ Type of activities or operation _______________________ 2. Bill Lee, a marketing student, is looking for a business to help him fund his studies. He decides to rent a stall near the university and hire a sales lady to help him sell the school supplies he buys from Divisoria. Mark up is usually 25% of the cost. Form of business _______________________ Type of activities or operation _______________________ 14 3. Juan Cruz and Pedro Co are both engaged in the production of soaps and shampoos. They decided to join their businesses together in order to expand their market. Form of business _______________________ Type of activities or operation _______________________ 4. Alibaba, Seus, and three more friends, who are mechanical engineers, decide to open a plant where they can produce machines to be sold to big factories in order to cut labor cost. Because the cost of starting the business is substantial, they decide to invite incorporators to generate more funds. Form of business _______________________ Type of activities or operation _______________________ Prepared by: MRS. ROSE JEANNIE G. NABONG 15