Lesson 1: INTRODUCTION TO ACCOUNTING
Definition
Accounting is famously known as the "language of business".
The American Institute of Certified Public Accountants (AICPA) defines
accounting as:
“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”.
Scope of practice
Public Accounting. Accountants in public practice are working in accounting
firms or individually to provide audit and attestation, tax planning and
preparation, and advisory services to their clients.
Private Accounting. Also known as practice in commerce and industry, an
accountant serves only one company.
Government Accounting. These agencies need accounting information to help
them plan, budget, forecast, and allocate government funds.
Academe. Accountants can pursue a career as a faculty member in a school, an
author of an accounting book, a researcher, a trainer, or a reviewer.
Types and Forms of Businesses
A. Major types
Service businesses - offer intangible products to customers using their skills
and expertise.
Merchandising businesses - buy goods and sell the same at higher prices.
Manufacturing businesses - purchase goods and use them to make new
products that are to be sold.
B. Basic forms of organization or business ownership
Sole proprietorship - is owned by only one person, known as sole proprietor,
who bears an unlimited liability.
Partnership - is owned by two or more persons called partners.
Corporation - is owned by stockholders who enjoy limited liability. They are
nonetheless not involved in the actual operations of the company. The board
of directors runs the company for the stockholders.
Basic Accounting Principles
Going Concern Assumption. The going concern principle, also known
as continuing concern concept or continuity assumption, means that a business
entity will continue to operate indefinitely, or at least for another twelve
months.
Accrual Basis of Accounting. The accrual method of accounting means that
"revenue or income is recognized when earned regardless of when received
and expenses are recognized when incurred regardless of when paid".
Definition
Accounting is famously known as the "language of business".
The American Institute of Certified Public Accountants (AICPA) defines
accounting as:
“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”.
Scope of practice
Public Accounting. Accountants in public practice are working in accounting
firms or individually to provide audit and attestation, tax planning and
preparation, and advisory services to their clients.
Private Accounting. Also known as practice in commerce and industry, an
accountant serves only one company.
Government Accounting. These agencies need accounting information to help
them plan, budget, forecast, and allocate government funds.
Academe. Accountants can pursue a career as a faculty member in a school, an
author of an accounting book, a researcher, a trainer, or a reviewer.
Types and Forms of Businesses
A. Major types
Service businesses - offer intangible products to customers using their skills
and expertise.
Merchandising businesses - buy goods and sell the same at higher prices.
Manufacturing businesses - purchase goods and use them to make new
products that are to be sold.
B. Basic forms of organization or business ownership
Sole proprietorship - is owned by only one person, known as sole proprietor,
who bears an unlimited liability.
Partnership - is owned by two or more persons called partners.
Corporation - is owned by stockholders who enjoy limited liability. They are
nonetheless not involved in the actual operations of the company. The board
of directors runs the company for the stockholders.
Basic Accounting Principles
Going Concern Assumption. The going concern principle, also known
as continuing concern concept or continuity assumption, means that a business
entity will continue to operate indefinitely, or at least for another twelve
months.
Accrual Basis of Accounting. The accrual method of accounting means that
"revenue or income is recognized when earned regardless of when received
and expenses are recognized when incurred regardless of when paid".
