ACCTG-111-WEEK-2 (1).docx

**Week 2** **Accounting** -it is the language of business -it is also defined as the systematic art of recording, classifying and summarizing in a significant manner and in terms of money, transaction and events which are in part at least of a financial character and interpreting the results ther...

**Week 2** **Accounting** -it is the language of business -it is also defined as the systematic art of recording, classifying and summarizing in a significant manner and in terms of money, transaction and events which are in part at least of a financial character and interpreting the results thereof. -it is actually information system that measures business activities, process information into reports and communicates the results to decision makers. **Four Aspects of accounting:** 1. **Recording-** is engaged putting into records all the business transactions. It can be recorded either manually or electronically. It is usually done in chronological manner according to date of occurrence. It is also known as *Bookkeeping*. 2. **Classifying-** is sorting and grouping of all similar and interrelated transactions. 3. **Summarizing-** is the preparation of financial statements intended for the users of financial information. 4. **Interpreting**- is engaged in analyzing the financial statements and the changes to its financial performance from prior years to other similar business. **Types of Business Organization** 1. **Sole proprietorship-** owned and managed by only one person. -this is an entity owned by an individual or single person. The owner is called proprietor. 2. **Partnership-** is an entity owned and shared by 2 or more persons. The owners are called partners. --owned and managed by two or more people who agree to contribute money, property or Industry to a common fund for the purpose of earning a profit. 3. **Corporation-** is an entity whose operation is created according to the law. The capital is shared and divided in form of stocks. The owners are called shareholders or stockholders. -managed by an elected board of directors. **Types of Business Operations** 1. **Service**- a business operation engaged in rendering of services. *Example: dental clinic, barber shop, laundry services, schools, hospitals.* 2. **Trading/Merchandising**- a business operation engaged in buying and selling goods. *Example**:** supermarket, sari-sari store, grocery store* 3. **Manufacturing**- business operation engaged in the production of items to be sold. -it buys raw materials, turns them into a new product, and sells the products to earn a profit. *Example: food processing, shoe factory,* **GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP)** - Broad, general statements or "rules" and "procedures" that serve as guides in the accounting practice. - Standards, assumptions, and concepts with general accessibility - Measurement techniques and standards used in the presentation and preparation of financial statements. **FUNDAMENTALS CONCEPT** 1. **Entity Concept**- the business enterprise is separate and distinct from its owners. 2. **Periodicity**- the concept behind providing financial accounting information about the economic activities if an enterprise for specified time periods - One year is usually considered as one accounting period **Types of Accounting Periods** A. **Calendar Year**- starts on January 1 and ends on December 31 B. **Fiscal Year**- starts on any month and ends twelve months after - **Natural Business Year**- any twelve-month period that ends when business activities are their lowest point. 3. **Going Concern**- assumes that the enterprise will continue to operate indefinitely