Cons

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he is interested to know whether the business should be maintained, increased, decreases or disposed of completely. He is interested to know whether he is getting a fair return of his investments

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Owner

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it serve as a measure for making future financial decisions and a measure of its effectiveness

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Management

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an investor is interested in the financial statement to determine whether to acquire ownership in the firm.

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Prospective investors

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is interested in a financial statement to determine if the business meet its obligation.

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Creditors

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they are interested in information to enable them to asses the ability of the firm to provide renumeration and other benefits

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Employees

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they need accounting information to regulate the firm’s activities and determine the basis for taxation policies

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Government

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defined as the art of recording, classifying, 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 result thereof.

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Accounting (The Committee on Terminology, American Institute of Accountants)

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Four phases in Accounting

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Recoding

Classifying

Summarizing

Interpreting

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This is technically called bookkeeping where business transaction are recorded systematically and chronologically in the proper accounting books.

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Recording

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Two kinds of Bookkeeping

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Single Entry Bookkeeping

Double Entry Bookkeeping

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does not show the two fold effects of business transactions. It shows only the debit or credit of each transaction

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Single Entry Bookkeeping

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reflects the two fold effects of business transaction. it has a debit and credit

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Double Entry Bookkeeping

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in this phase, items are sorted and grouped. Similar items are classified under the same name

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Classifying

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Classification of items in accounting

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Asset Accounts

Liability Accounts

Capital Accounts

Revenue Accounts

Expenses Accounts

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After each accounting period, data recorder are summarized through financial statements. These reports are submitted to the management at the end of each accounting period or as the need arises petty

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Summarizing

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Usually, due to the technicality of accounting reports, the accountant's interpretation on the financial statement is needed

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Intepreting

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it's a professional service rendered by a certified public accountant and his employees to the public for a fee

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Public Accounting

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This is the principal service that a public accountant offers

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Auditing

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This includes the design, installation, and improvement of the firm's general accounting system and other system deemed necessary for controlling and distributing manufacturing costs

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Management advisory services

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Fields of accounting

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Public Accounting

Private Accounting

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Private Accounting

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General Accounting

Cost Accounting

Budgeting

Internal Auditing

Government Accounting

Accounting Education

International Accounting

Social Accounting

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This includes recording transactions and preparing financial reports for the use of the management, owners, creditors, governmental units, and other interested parties

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General Accounting

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This has to do with the controlling, determining and controlling cost particularly those cost in producing a product or a service

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Cost Accounting

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This provides management a plan for future operations and after this plan has been applied.

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Budgeting

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some business forms actually maintain a staff of blank who check the recorded prepared and maintained in each department or branch

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Internal Auditing

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this deals with the rendering of services to the customers such as tailoring shops, beauty shops, firms of CPAs, lawyers, doctors, and others

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SERVICE CONCERN

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this type of business deals with the buying of goods and selling the same goods in the same form for profit.

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TRADING OR MERCHANDISING

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this involves purchase of raw materials and converting these raw materials into finished products

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MANUFACTURING CONCERN

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Nature of business

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Service Concern

Trading or merchandising

Manufacturing concern

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The data record in accounting book

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Transaction

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These activities involve one enterprise and another enterprise

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external transaction

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it maybe activities within the enterprise

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internal transaction

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are economic resources owned by the business. They include properties and other things of value the ownership title of which is in the name of the business

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assets

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are those assets which can be reasonably converted into cash within a short period of time

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Current Assets

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This includes currency of cash items on hand, peso or foreign currency deposits in banks which are unrestricted and immediately available for use in the current operations of the business

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Cash or cash on Hand and In Banks

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represents amounts collectible from customers arising from sales of merchandise, claims for money lent or the performance of services. Such is presented as note receivable

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Receivables

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constitute items of tangible personal property

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Inventories

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held for sale in the ordinary course of business

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Merchandise inventory / finished goods

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in the process of production for such sale

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Goods in process

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to be currently consumed in the production of goods or services to be available for sale

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Raw materials

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are those which are already paid before they are used or consumed

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Prepaid Expenses

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are those assets that are not classified as current. They include along other property, plant and equipment

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Non current assets

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Are debt or obligations of the business to a party other than its owner

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Liabilities

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Two types of liabilities

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Short term liabilities

long term liabilities

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Those which are due for payment within a short period of time or within one year from the balance sheet date. These obligation require a current asset for payment.

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Current or Short Term Liabilities

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are indebtedness arising from purchase of goods and services in the ordinary course of business

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Account payable

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are short term indebtedness supported by written promises to pay

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Notes payable

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are expenses already incurred but are not yet paid as of the balance sheet date.

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Accrued expenses

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arises when payments for undelivered goods or services not yet rendered are received. This item is included among current liabilities because it requires current asset for its liquidation, say the delivery of merchandise

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Unearned income

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Those which mature beyond one year from the balance sheet date

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Fixed or Long term liabilities

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represents the owner's equity or investment in the business

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Capital