Accounting

Lakukan tugas rumah & ujian kamu dengan baik sekarang menggunakan Quizwiz!

Advantages of Cooperatives

a. The prices of products offered to consumers are lower due to direct purchases of cooperative members from producers or manufacturers. b. Cooperatives are managed by the members themselves; thus saving on management costs which leads to lower prices of products inuring to the benefit of the consumers.

Financial Accounting

broadest branch and focused on the needs of external users

Dr. Gunter Dreyer

unearthed the clay tablets considered to be among the oldest written tax accounting records of the German Institute of Archaelogy in Egypt

Venetians merchants

use double entry system in the late 15th century to calculate their earnings and profits.

Cash book

was maintained by households for their expenses

Old stone labels

were complete with marks representing accounts of oil and linens where believed to be paid to the king as taxes

Tomb of King Scorpion I in Egypt

where Dr. Gunter Dreyer discovered old stone labels believed to date back to 3,000 BC or around 5,000 years ago

Basic Features of Accounting

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

History of Accounting

-Ancient Accounting in Egypt, Mesopotamia, Greece and Rome -history of accounting dates back to ancient times

Examples of Financial Reports

-Balance sheet -Income statement -Statement of cash flows

Potential Investors/Creditors

-Before making an investment or extending credit, potential investors or creditors may not only be interested in the company's financial position and results of operations, but also in the company's financial history.

20th Century

-Economic depression, SEC (Securities and Exchange Commision) was formed -Periodic reports vouched by CPAs were filed by all publicly-traded companies who had to register with SEC before selling their securities to the public -AICPA was tasked to set the accounting and auditing standards for these reprots until the establishment of the Financial Accounting Standards

Luca Pacioli book contains:

-Explanation of balance sheet -method of using memorandums -journals and ledgers -use of accounts such as assets, liabilities, owner's equity, revenue/expenses, year-end closing entries, use of trial balance

Who are the external users?

-Financial institutions/creditors -government -Potential investors

Who are the internal users?

-Investors/owners/stockholders -Management -Employees

Luca Pacioli

-Italy -known as Friar Lucas dal Borgo, a mathematician, friend and contemporary of Leonardo da Vinci -Father of Accounting -Wrote "Summa de Arithmetica, Geometria, Proportioni et Proportionalita" (Everything About Arithmetic, Geometry and Proportion) -one section of the book contained 36 short chapters that describe bookkeeping -accounting cycle was include in his book

Cost Accounting

-Sometimes considered as a subset of management accounting -Refers to the recording, presentation, and analysis of manufacturing costs.

Cooperatives

-Under the Section 3 of R.A. 6938, a cooperative is a duly registered association of persons, with a common bond of interest, who have voluntarily joined together to achieve a lawful common social or economic end, making equitable contributions to the capital required and accepting a fair share of the risks and benefits of the undertaking in accordance with universally accepted cooperative principles. -In short, a cooperative is an association of small producers and consumers who come together voluntarily to form a business which they own, manage and patronize.

Accounting is both an ART and a DISCIPLINE

-art of recording, classifying, summarizing and finalizing financial data. -"art" refers something is performed -systematic method consisting of definite techniques and its proper application requires skill and experties -an art and also a discipline

Financial Institutions/Creditors

-before extending credit, financial institutions use financial information to determine the capacity of the business organization to pay its obligations and their interests at the appropriate time.

Information Age

-brought a significant change in the workload of accountants -manual, tedious, time consuming task were replaced by faster and more accurate computer methods -transactions were done online with internet -various software applications in accounting have been developed to expedite procedures and accommodate the numerous needs and demands of diffetent business

Sarbanes-Oxley Act (2002)

-established to protect investors from corporate misinformation. -imposed tougher restrictions on accountants conducting consultancy services.

Romans

-introduced the use of an annual budget which coordinated estimated revenues and taxes paid by the citizen in relation to the nation's expenditures

Pipe Roll or the Great Roll of Exchequer

-is the most ancient surviving accounting record in the English language. -contains the early accounting of rents, fines, and taxes due to the king of England, from 1130 to 1830.

Accounting

-is the systematic process of measuring and reporting relevant financial information about the activities of an economic organization or unit. -underlying purpose is to provide financial information -capable of being expressed in monetary terms

Latter part of 19th century

-large amounts of British capital were invested in the U.S. -Scottish or British chartered accountans were sent to the U.S. to audit British investments.

Greeks

-made significant contributions to the development of accounting -introduced money in the form of coins -adopted the Phoenician writing system and invented a Greek alphabet which they used to facilitate record-keeping -same in Rome where accounting helped establish their finance and legal system.

Accounting is a PROCESS

-method of performing any specific job step by step according to the objectives or targets. -performs specific task of collecting, processing and communicating financial information

Management

-organizational managers use financial information tp set goals for their companies. -managers evaluate their progress towards these goals and use financial data as a guide for future management actions.

Scribe

-performed extensive duties in writing and recording in the Mesopotamian civilization are the equivalent of present-day documents -assured that the agreements were in compliance with the detailed code requirements for commercial transactions.

Internal Users

-primary users who are inside the reporting entity and are directly involved in managing the company's daily operations -decision makers who make the strategic and operational decisions of the company

Accounting is an INFORMATION SYSTEM

-recognized and characterized as a storehouse of information -service function -collects processes and communicates financial information

The Philippine Institute of Certifiied Public Accountant

-service activity -provide quantitative information -primarily financial in nature -useful in making economic decisions

External Users

-the secondary users of financial information who are parties outside the company -they may not be directly involved in the company's operations their decisions may significantly affect the business entity.

Investors

-these parties provide the financial resources to keep the business going. -they decide whether to invest or not depending on the estimated amount of income on the investment. -upon investment, they would want to know the financial position or results of operation of their business investment.

Step 2: Journalizing Transaction

1. Analyze the transaction 2. Determine the type of the account transaction 3.Apply the rules of debit and credit

Step 1: Analyzing Transaction

1. Classify the transaction 2. Identify the major accounts and account titles 3. Determine the ammount

2 Types of Auditing

1. External Auditing 2. Internal Auditing

Users of Financial Information

1. Internal Users 2. External Users

Types of Business Organizations

1. Sole/Single Proprietorship 2. Partnership 3. Corporation 4. Cooperatives

1887: British of the first national U.S. accounting society

American Association of Public Accountants provided a formal certificatiom process of accountants

21st Century

Accounting in the Modern Times

Accounting Equation

Assets= Liabilities + Owner's Equity

Journals and Ledgers

Diary of events

Transactions

Economic event of an organization

20th Century

Evolution of Modern Accounting Standards

Managerial accounting involves:

Financial analysis, budgeting and forecasting, cost analysis, evaluation of business decisions, and similar areas.

The Basic Function of Accounting in Business

Generation of relevant and timely financial information for interested parties

Where do taxes go?

Roads, hospitals, for education and others

14th Century

The Birth of Double Entry Bookkeeping

19th Century

The Dawn of Modern Accounting in Europe and America

Disadvantages of Corporation

a. A corporation entails many requirements and is more costly than a partnership. b. The government exercises control over corporations and imposes high taxes. c. Shareholders have little or no participation in the management of the corporation. d. Distribution of the net income depends upon the decleration dividends by the board of directors. e. In large corporations, there is formal or impersonal relationship between employees and management due to the big number of employees. Hence, chances of creating a personal and friendly atmosphere in the corporate setting are minimal.

Disadvantages of Sole/Single Proprietorship

a. Resources are limited as the capital is provided only by the owner. b. The liability of the owner is unlimited as he or she is accountable to all creditors of the business. c. Infusion of knowledge in the management of the business is limited to one person only, which is the owner.

Disadvantages of Partnership

a. The partners are liable for the actions of each partner as a result of mutual agency b. A general partner has unlimited liability if the other partners are limited partners or are insolvent. c. Disagreement between or among partners can lead to the withdrawal of one or more partners. d. The death, retirement, withdrawal, or incapacity of a partner results in the dissolution of the partnership. e. Admission of new partner depends upon the approval of the other partners.

Advantages of Corporation

a. The stockholders only have limited liability, as their liability extends only up to the amount of their capital investment. b. A corporation has continuous existence as its life is indefinite. c. There is more infusion of funds from the stockholders or investors. d. Shares of stocks can be transferred without the consent of the other shareholders. e. Management of the corporation is vested upon its board of directors.

Advantages of Sole/Single Proprietorship

a. There are minimal costs and requirements in the formation. b. The owner can withdraw the assets and profits of the business anytime at his or her own discretion. c. Decision making is solely in the hands of the owner. d. The duration of the life of the business solely depends on its owner.

Advantages of Partnership

a. There are minimal costs and requirements in the formation. b. There are more funds contributed from the investment of the partners. c. There is infusion of more knowledge, experience, and skills from 2 or more partners

Disadvantages of Cooperatives

a. There is limited capital due to underprivileged members. b. The cooperative is strictly for members only and shares cannot be transferred to non-members. c. Lack of efficient management as it is manage only by its members.

Employees

although the employees are not directly involved in the decision making of the company, they are nontheless interested in the financial information of the company to determine if they have a future in the company.

Italians

are broadly recognized to be the father of accounting for their marked contribution to the improvement of trade and commerce

Liabilities

are present obligations of an entity arising from post transactions or events

Revenues

are the earnings arising from the main line of operations

The American Institute of Certified Public Accountants

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 chapter

Clay tablets

considered to be among the oldest written tax accounting records

Domesday Book

contained all the real estate surveyed by William the Conquerer and the taxes due to then

Cotrugli

credit by Pacioli for the original idea of double entry bookkeeping although his manuscript was never printed

Internal Auditing

deals with determining the operational efficiency of the company regarding the protection of company's assets, accuracy and reliability of the accounting data, adherence to certain management policies.

Sumerians

developed abacus

Expenses

the costs being incurred by the business in generating revenues

William the Conqueror

took possesion of all properties in the name of the king upon his invasion

Management Accounting

ephasizes the preparation and analysis of accounting information within the organization

Government

financial information is important for tax purposes and in checking of compliance with Securities and Exchange Commission (SEC) requirements.

Accounting Research

focuses on the search of new knowledge on the effects of economic events on the process of summarizing, analyzing, verifying, and reporting standardized financial information, and on the effects reported information on economic events.

Abacus

functioned as calculator in the ancient times

Scotland-Queen Victoria

granted a royal charter to the Institute of Accountans in Glasgow on July 6,1854, thereby creating the profession of chartered accountant (CA). Thus, accounting became a formal profession

Enron Scandal

greatest corporate fraud case recorded in American history

Mesopotamia

had clay tokens and clay tablets to record their loans, herd crops and system of trade.

Tax Accounting

helps clients to follows rules set by tax authorities. It includes tax planning and preparation of tax returns.

Identifying

involves selecting economic events that are relevant to a parcticular business transaction

Partnership

is a business organization owned and managed by 2 or more people who agree to contribute money, property, or industry to a common fund for the purpose of earning a profit.

Corporation

is a form of business organization managed by an elected board of directors. The investors are called stockholders and the unit of ownership is called share of stock

Financial Accounting

is primarily concerned with processing historical data.

Accounting

is the process of identifying, recording, and communicating economic events of an organization to interested users

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 receipt, spending, transfer, usability and disposition of assets and liabilities.

Accounting Education

it deals with developing future accountants by creating relevant accounting curriculum. Accounting professionals can become faculty members of educational institutions.

Recording

it involves keeping a chronological diary of events that are measured in pesos

Information Age

known as: -Computer Age -Digital Age -New Media Age

Papyrus

not only allowed recording of commercial, transactions but also the transcription of religious text, music, literature, and more

Communicating

occurs through the preparation and distribution of financial and other accounting reports

Accounting is a service activity

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

Accounting deals with FINANCIAL INFORMATION and TRANSACTIONS

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

External Auditing

refers to the examination of financial statements by an independent CPA with the purpose of expressing an opinion as to fairness and compliance with the generally accepted accounting principles.

England-Industrial Revolution

replaced hand tools with machine or power tools (known as factory system) transformed accounting into an actual profession


Set pelajaran terkait

Chapter 23: Statement of Cash Flows

View Set

Unit 4: World History Renaissance and Reformation Q/A

View Set

Social Studies 4-8 Texas Certification - PACT

View Set

Mosby's Review: Chapter 4: Image Production (digital image acquisition)

View Set

Community Exam 2 (6, 7, 12, 14, 18)

View Set

Intro to Media: Chapter 11 & 12 Advertising and Public Relations

View Set

MS - Bulgaria/Romania/Serbia/Moldova/Macedonia/Malta

View Set