MODULE 1 Lenders (e.g., banks) and Creditors (e.g.,
ACCOUNTING is a process of identifying, suppliers)
recording and communicating economic
HISTORY OF ACCOUNTING
information that is useful in making economic
In 1494, the first systematic record keeping
decisions.
dealing with the “double entry recording
ESSENTIAL ELEMENTS OF THE DEFINITION OF system” was formulated by Fra Luca Pacioli, a
ACCOUNTING Franciscan monk and mathematician.
1. IDENTIFYING - This is because only -Fra Luca Pacioli is considered as the father of
“accountable events” are recorded in the books modern accounting.
of accounts.
COMMON BRANCHES OF ACCOUNTING
2. RECORDING - This process is called
1. FINANCIAL ACCOUNTING – General record-
“journalizing.” After journalizing, the
keeping, i.e.,maintenance of Journals and
accountant then classifies the effects of the
Ledgers.
event on the “accounts.” This process is called
- preparation of general purpose financial
“posting.”
statements (FS)
3. COMMUNICATING - Accounting information
- Records provide information that is also used
is communicated to interested users through
in the other branches of accounting
accounting reports, the most common form of
- business prepare FS at least annually for the
which is the financial statements.
use of lenders, investors, or government
NATURE OF ACCOUNTING regulatory bodies.
Accounting is a process with the basic purpose 2. MANAGEMENT ACCOUNTING – Preparation
of providing information about economic of specifically tailored management reports.
activities intended to be useful in making - Required by management to aid them in
economic decisions. performing their management functions.
3. GOVERNMENT ACCOUNTING – General
TYPES OF INFORMATION PROVIDED BY
record-keeping and preparation of financial
ACCOUNTING
reports for the government and its agencies.
1. QUANTITATIVE INFORMATION
- Required by the government and its agencies.
2. QUALITATIVE INFORMATION
4. AUDITING – Expression of an opinion on the
3. FINANCIAL INFORMATION
correspondence between management
FUNCTIONS OF ACCOUNTING IN BUSINESS assertions and establishes criteria.
1. To provide external users with information - Businesses with gross quarterly revenues of
that is useful in making investment and credit 150,00 pesos are required to have their financial
decisions statements audited by an independent Certified
2. To provide internal users with information Public Accountant (CPA)
that is useful in managing the business. 5. TAX ACCOUNTING – Preparation of tax
returns.
USERS OF ACCOUNTING INFORMATION -Providing tax advice.
1. INTERNAL USERS – those who are directly - All businesses are required to file tax returns.
involved in managing the business. EX: - Some taxpayers may require the professional
Business owners who are directly involved in advice of a tax practitioner regarding the
managing the business. management of taxes.
2. EXTERNAL USERS - those who are not
directly involved in managing the business. Ex:
ACCOUNTING is a process of identifying, suppliers)
recording and communicating economic
HISTORY OF ACCOUNTING
information that is useful in making economic
In 1494, the first systematic record keeping
decisions.
dealing with the “double entry recording
ESSENTIAL ELEMENTS OF THE DEFINITION OF system” was formulated by Fra Luca Pacioli, a
ACCOUNTING Franciscan monk and mathematician.
1. IDENTIFYING - This is because only -Fra Luca Pacioli is considered as the father of
“accountable events” are recorded in the books modern accounting.
of accounts.
COMMON BRANCHES OF ACCOUNTING
2. RECORDING - This process is called
1. FINANCIAL ACCOUNTING – General record-
“journalizing.” After journalizing, the
keeping, i.e.,maintenance of Journals and
accountant then classifies the effects of the
Ledgers.
event on the “accounts.” This process is called
- preparation of general purpose financial
“posting.”
statements (FS)
3. COMMUNICATING - Accounting information
- Records provide information that is also used
is communicated to interested users through
in the other branches of accounting
accounting reports, the most common form of
- business prepare FS at least annually for the
which is the financial statements.
use of lenders, investors, or government
NATURE OF ACCOUNTING regulatory bodies.
Accounting is a process with the basic purpose 2. MANAGEMENT ACCOUNTING – Preparation
of providing information about economic of specifically tailored management reports.
activities intended to be useful in making - Required by management to aid them in
economic decisions. performing their management functions.
3. GOVERNMENT ACCOUNTING – General
TYPES OF INFORMATION PROVIDED BY
record-keeping and preparation of financial
ACCOUNTING
reports for the government and its agencies.
1. QUANTITATIVE INFORMATION
- Required by the government and its agencies.
2. QUALITATIVE INFORMATION
4. AUDITING – Expression of an opinion on the
3. FINANCIAL INFORMATION
correspondence between management
FUNCTIONS OF ACCOUNTING IN BUSINESS assertions and establishes criteria.
1. To provide external users with information - Businesses with gross quarterly revenues of
that is useful in making investment and credit 150,00 pesos are required to have their financial
decisions statements audited by an independent Certified
2. To provide internal users with information Public Accountant (CPA)
that is useful in managing the business. 5. TAX ACCOUNTING – Preparation of tax
returns.
USERS OF ACCOUNTING INFORMATION -Providing tax advice.
1. INTERNAL USERS – those who are directly - All businesses are required to file tax returns.
involved in managing the business. EX: - Some taxpayers may require the professional
Business owners who are directly involved in advice of a tax practitioner regarding the
managing the business. management of taxes.
2. EXTERNAL USERS - those who are not
directly involved in managing the business. Ex:
