FABM 1

Accounting is a service activity

- Accounting provides assistance to decision makers by providing them financial reports that will guide them in coming up with sound decisions.

International Financial Reporting Standards

IFRS

Management Accounting

It is concerned with the preparation of reports for internal users only

Financial Accounting Management Accounting Cost Accounting External Auditing Internal Auditing

MAJOR FIELDS OF ACCOUNTING

The Industrial Revolution (1760 - 1830)

Mass production and the great importance of fixed assets were given attention during this period.

Management Accounting

Reports are based on what the management requires and do not need to be audited by an external auditor

Securities and Exchange Commission

SEC

Accounting is a service activity Accounting is a process Accounting is both an art and a discipline Accounting deals with financial information and transactions Accounting is an information system

THE 5 NATURE OF ACCOUNTING:

Recording Classifying Summarizing Interpreting

THE FOUR BASIC FUNCTIONS OF ACCOUNTING

19th Century

The Beginning of Modern Accounting in Europe and America - In this period, rapid changes in accounting practice and reports were made

Summa de Arithmetica

What did Luca Pacioli wrote?

Accounting is the process of IDENTIFYING, RECORDING, and COMMUNICATING economic events of an organization to interested users.

What is Accounting?

Accounting is the process of planning, recording, analyzing and interpreting financial information to users for making decisions.

What is Accounting?

Accounting is both an art and a discipline

a systematic method consisting of definite techniques and its proper application requires skill and expertise

Journal

considered as the book of original entry; all business transactions are recorded in the journal for the first time

Financial Accounting

field in accounting that accumulates financial information and prepares the financial statements

Ledger

is called the book of final entry; it is in the ______ where the transactions recorded in the journal are classified

merger

it is when one company take over all the operations of another business entity resulting in the dissolution of another business

Chronological recording

means that the order of writing of transactions and events is based on when the events happened; the transaction that happens first shall be recorded first.

The Cradle of Civilization (Around 3600 B.C.)

record keeping was already common from Mesopotamia, China and India to Central and South America

Interpreting

refers to the process of analyzing and evaluating the information presented in the face of the financial statements and the accompanying notes.

Classifying

refers to the process of sorting or grouping similar business transactions and events into their respective kinds or classes

Recording

refers to the routine and mechanical process of writing down business transactions. Only business transactions and events that are quantifiable or measurable are recorded in the books of accounts in chronological manner

Summa de Arithmetica

the first book published that contained a detailed chapter on double-entry bookkeeping

Summarizing

the phase in the accounting process which involves preparation of the financial statements.

Posting

the process of transferring the same information from the journal to the ledger.

Summarizing

this process starts from the preparation of the worksheet

Generally Accepted Principles

GAAP

Accounting is a process

A process refers to the method of performing any specific job step by step according to the objectives or targets.

Accounting is an information system

Accounting is recognized and characterized as a storehouse of information

Accounting is both an art and a discipline

Accounting is the art of recording, classifying, summarizing and finalizing financial data. The word "art" refers to the way something is performed

Accounting deals with financial information and transactions

Accounting records financial transactions and data, classifies these and finalizes their results given for a specified period of time, as needed by their users

- has a wider scope and involves not only the recording aspect but also the preparation and interpretation of financial statements. - it connotes applications of proper accounting procedures and principles from the recording stage up to the preparation of financial statements. - Accounting is undertaken by an accountant; he reviews the work of the bookkeeper although in some instances, his work involves some level of bookkeeping. - an Accountant should have a higher-degree of knowledge and analytical skills. - in big businesses, accountants are usually Certified Public Accountants

Difference of Accounting to Bookkeeping

- refers to the recording aspect of the accounting process or cycle. - it is the chronological recording of business transactions and events in the books of accounts. - it is usually performed by a bookkeeper. - he is responsible for keeping the financial records of the business.

Difference of Bookkeeping to Accounting

14th Century

Double-Entry Bookkeeping - The most important event in accounting history is generally considered to be the dissemination of double entry bookkeeping

The Present

The Development of Modern Accounting Standards and Commerce - The accounting profession in the 20th century developed around state requirements for financial statement audits

Luca Pacioli

The Father of Accounting

a. Statement of financial position b. Statement of comprehensive income c. Statement of changes in equity d. Statement of cash flows e. Notes to the financial statements

The complete set of financial statements

clay-tablet

The oldest evidence of The Cradle of Civilization

French Revolution (1700s)

The thorough study of accounting and development of accounting theory began during this period

Cost Accounting

This area in accounting analyzes, records and reports costs of the product and the cost of doing the business

External Auditing

This field involves reviewing and examining financial statements to make sure that they were prepared in accordance with GAAP and IFRS

Internal Auditing

This field makes sure that the company adheres to the policies and procedures set by the management specifically in the treatment, management and recording of financial transactions including other properties of the business

Financial Accounting

This field serves both internal and external users