(1) Accounting 1101 Chapter 1

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A process of Identifying, Measuring and Communicating economic information to permit informed judgement and decision by the users of information.

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ACCOUNTING (defined by AAA)

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is an art of recording, classifying, and summarizing in a significant manner and in terms of money, transactions, events and interpreting the results thereof.

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ACCOUNTING defined by AICPA

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is primarily concerned with the recognition and measurement of economic obligation

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ACCOUNTING

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Known as the Cooperative Code of the Philippines of 2008

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RA NO. 9520

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New type of organization that emerged in US, UK, Vietnam and other countries

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LIMITED LIABILITY COMPANY

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A hybrid of partnership and corporation.

The company is taxed like partnership, has liability like a corporation but investors have voted in proportion to their ownership

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LIMITED LIABILITY COMPANY

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BUSINESS FIRMS

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• Service Concern

• Merchandising

• Manufacturing

• Agriculture

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Business firms that renders services to clients

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SERVICE CONCERN

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Derive their income from the sale of merchandise.

Concerned with buying and selling goods in the same form

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MERCHANDISING

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Purchase raw materials convert them into finished products and sell these finished products at a profit

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MANUFACTURING

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Concerned with planting of crops or raising animals and selling of their products either in raw or finished form at a profit

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AGRICULTURE

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Represents the rules, procedures, practice and standards followed in the preparation of financial statements

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GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP)

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This is conventional in the sense that these principles have be developed on the basis of experience, reason and practical necessity

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GENERALLY ACCEPTED ACCOUNTING PRINCIPLES- GAAP

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Organizations who have contributed to the development of accounting standards in the Philippines

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• FRSC

• IASB - International Acc Standards Board

• PICPA

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Its main function is to establish and improve accounting standards that will be generally accepted in the Philippines

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FINANCIAL REPORTING STANDARDS COUNCIL (FRSC)

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• It was created by PRC

• Composed of 15 members with a term of 3 years and is renewable for another term

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FINANCIAL REPORTING STANDARDS COUNCIL (FRSC)

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FRSC issues its standards in a series of pronouncements called

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PHILIPPINE FINANCIAL REPORTING STANDARDS (PFRS) and PHILIPPINE ACCOUNTING STANDARDS (PAS)

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Replaced the IASC - International Accounting Standards Committee

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INTERNATIONAL FINANCIAL REPORTING STANDARDS

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International Accounting Standards Board published its standards in a series of pronouncements called

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INTERNATIONAL FINANCIAL REPORTING STANDARDS

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Is a national organization of CPAs in the Philippines

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P I C P A

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An organization often involved in the improvement of Philippine Accounting Standards

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P I C P A

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Organizations under PICPA

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• ACPAPP

• GACPA

• ACPACI

• NACPAE

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An organization of CPAs who perform auditing, taxation or management advisory services

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ACPAPP

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CPAs who are employed by the government

Maybe working in BIR, COA, DF, BT, SEC or any local and national government units

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GACPA

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CPAs employed in Private Firms holding positions like chief accountant, accounting manager, internal auditor, finance manager and comptroller

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ACPACI

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CPAs who are employed in learning institutions and review centers as accounting professors or reviewers

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NACPAE

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These are the economic resources

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ASSET

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These are the economic obligations

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LIABITIES

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T/F

Accounting does not measure sociological and psychological matters

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TRUE

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It is considered the Language of the Business

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ACCOUNTING

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Established rules of accounting and of great importance to financial accountants

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GENERALLY ACCEPTED ACCOUNTING PRINCIPLE (GAAP)

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Amounts used in measuring financial transactions

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HISTORICAL COST AND CURRENT VALUE

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Most common measure of financial transactions

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HISTORICAL COST

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Involves the recognition and non recognition of business activities to be accounted for

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IDENTIFYING

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involves analysis of transactions before they can be recorded in the book of accounts

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IDENTIFYING

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Is considered as the analytical component of accounting

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IDENTIFYING

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Involves the assigning of monetary amounts to the accountable economic transaction and events

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MEASURING

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Is the technical component of accounting

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MEASURING

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Involves the preparation and distribution of accounting information. This is the Formal component of accounting

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COMMUNICATIING

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Without this the accounting process would be futile

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COMMUNICATING

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It is through this process that accounting is considered as the language of the business

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COMMUNICATING

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Popularly known as journalizing, involves the routine and mechanical process of committing to writing business transactions and events on the book of accounts in a chronological sequence in accordance with the established accounting rules and procedures

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RECORDING

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Involves the sorting or grouping of similar items into their respective kinds. This is done through the process of posting the information from the journal to the ledger

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CLASSIFYING

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Involves the sorting or grouping of similar items into their respective kinds. This is done through the process of posting the information from the journal to the ledger

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CLASSIFYING

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Involves the determination of balances of each account in the ledger and the preparation of financial statements such as IS, SCI, SFP, SCE, SCF.

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SUMMARIZING

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The analytical phase of accounting, involves giving meanings to the amount, ratios, trends and other information derived from the financial statements

The information maybe used to predict future outcome or confirm previous expectation

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INTERPRETING

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It is a service activity, its function is to provide quantitative information primarily financial in nature

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ACCOUNTING defines by Philippines ASC

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He is named as the father of Accounting

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LUCA PACIOLI

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T/F

Luca Pacioli did not invent the double entry bokkeeping but merely described it in his book

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TRUE

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USERS OF FINANCIAL INFORMATION

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• PRIMARY USERS

- Existing and Potential Investors

- Lenders and Other Creditors

• OTHERS USERS

- Employess

- Customers

- Government and their Agencies

- Public

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Business Organizations

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• SOLE PROPRIETORSHIP

• PARTNERSHIP

• CORPORATION

• COOPERATIVE

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Primary motive of business organizations

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PROFIT

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T/F

People go into business in order to earn income.

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TRUE

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Simplest form of Business Organization

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SOLE PROPRIETORSHIP

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Known as the Revised Corporation Code of the Philippines

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RA NO. 11232

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T/F

Corporation has greater source of capital compared to the sole proprietorship and partnership

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TRUE

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Sole Government agency mandated to register all types of cooperatives

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COOPERATIVE DEVELOPMENT AUTHORITY