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Fundamentals of Accountancy, Business and Management 1, WELCOME TO THE WORLD OF ACCOUNTING!
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Introduction to Accounting: Definition & Nature of Accounting, Objectives: , At the end of the lesson, the students should be able to:, 1. Define accounting., 2. Describe the nature of accounting., 3. Show appreciation on the importance of , understanding the nature of accounting and , its uses.
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Share and learn!, 1. Do your parents ask how you spend your , allowance everyday?, , 2. When deciding between buying a bottle of soft , drinks or fruit juice or milktea, what is the basis , of your decision? Do you compare the prices of , both and then decide?, , 3. When going home, do you sometimes choose to , walk from school rather than riding a jeepney , because you want to save?
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Is accounting important to you?
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What’s In, Mahinhin sold 2 pairs of shoes to Maganda for ₱350.00 each. She bought it from the supplier for ₱250.00 each. , , a. How much is Mahinhin’s total sales?, , b. How much is the total cost for the two pairs of shoes?, , c. How much is Mahinhin’s total profit?
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COST - The value incurred in purchasing raw materials or production of a product., , SALES – Company’s revenue earned from the sales of products of services., , PROFIT – Company’s total earnings
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Let’s check, 1. TOTAL SALES = ₱350.00 each x 2 pairs of shoes, = ₱700.00, , 2. TOTAL COST = ₱250.00 each x 2 pairs of shoes, = ₱500.00, , 3. TOTAL PROFIT = TOTAL SALES – TOTAL COST, = ₱700.00 - ₱500.00, = ₱200.00
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Where do I came from? The word “accounting” comes from both French and Latin words, “compter” and “computare”, meaning to count or score.
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Accounting Defined, American Institute of Certified Public Accountants (AICPA), “Accounting is 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.”, , American Accounting Association (AAA), “Accounting is the process of identifying, measuring and communicating economic information to permit informed judgment and decision by users of the information.”, , Financial Reporting Standards Council (FRSC), “Accounting is a service activity. Its function is to provide quantitative information, primarily financial in nature, about economic entities, that is intended to be useful in making economic decision.”
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Three important activities mentioned in the definitions:, 1. IDENTIFYING – involves selecting economic events that are relevant to a particular business , transaction. These events are also referred to as transactions., Economic Events – events which can be measured in terms of money and are recorded in the , financial events., 2. RECORDING/BOOKKEEPING – involves keeping a chronological diary of events that are , measured in pesos and cents. The diary referred to in the , definition are the JOURNALS and LEDGERS., a. Journals – Book of Original Entry, b. Ledgers – Book of Final Entry, >Classifying – group accounts under same category or account, namely ASSET, LIABILITIES, , CAPITAL, INCOME and EXPENSES., 3. COMMUNICATING – occurs through the preparation and distribution of financial and other , accounting reports it also includes the analysis and interpretation of data for , the users.
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Natures/Features of Accounting, Accounting is a service activity. Accounting aids decision makers by providing them financial reports that will guide them in coming up with sound decisions., Accounting is a process. A process refers to the method of performing any specific job step by step according to the objectives or targets. Accounting is identified as a process, as it performs the specific task of collecting, processing and communicating financial information., Accounting is both an art and a discipline. Accounting is the art of recording, classifying, summarizing and finalizing financial data. The word “art” refers to the way something is performed. Accounting is a systematic method consisting of definite techniques and its proper application requires skill and expertise. , Accounting deals with financial information and transactions. Accounting records financial transactions and data, classifies these and finalizes their results given for a specified period of time, as needed by their users. It does not deal with non-monetary or non-financial aspects of such information., Accounting is a means and not an end. Accounting is a tool to achieve specific objectives. It is not the objective itself., Accounting is an information system. Accounting is recognized and characterized as a storehouse of information.
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Self-check: Definition of Accounting Nature of Accounting, -Is accounting important to you?, , -Do you agree on the statement, “Accounting is the language of business? Why or why not?
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Mr. Juan is a retired government employee who is good at baking. One day he decides to put up a bakery shop in your Barangay. He renovates a portion of his house to serve as the area for the production of bread. He purchases baking equipment and raw materials to produce five different types of bread. Mr. Juan also hires Jose to help with the baking and, at the same time, to be in-charge of sales. Mr. Juan pays Jose on a weekly basis. Everyday, Mr. Juan’s wife deposits the daily cash sales in their bank account at XY Savings Bank. With the help of accounting, what possible decisions or questions of Mr. Juan can accounting provide an answer to?
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1. Is my business earning? (profitability), 2. How much daily or monthly sales do I need in order to , recover my fixed cost? (break-even), 3. Do I need to hire additional workers to help me with my , production?, 4. Can I afford to set up a new store in another place? , Where do I get the funds?, 5. Can I afford to pay a bank loan? (liquidity)
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Assessment: Refer to Module 1, page 10. You have 7 minutes to answer the test and 3 minutes for the checking., A. Identify what organization gave the following definitions of accounting., 1. “Accounting is 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.” , 2. “Accounting is a service activity. Its function is to provide quantitative information, primarily , financial in nature, about economic entities, that is intended to be useful in making economic , decision.” , 3. “Accounting is the process of identifying, measuring and communicating economic information to , permit informed judgment and decision by users of the information.”, B. Identify the nature of accounting described by the following statements., 4. Accounting helps users of financial report in making decisions., 5. Accounting follows certain standards and professional ethics., 6. It does not deal with non-monetary or non-financial information., 7. Accounting is recognized and characterized as a storehouse of information., 8. Accounting is a tool to achieve specific objectives., 9. In doing accounting, you must follow definite steps., 10. Accounting has a specific technique and it requires skills and expertise.
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Checking of answers:, Answers: , 1. AICPA, 2. FRSC, 3. AAA, 4. Accounting is a Service activity, 5. Accounting is both an art and a discipline., 6. Accounting deals with financial information and transaction., 7. Accounting is an information system., 8. Accounting is a means and not an end., 9. Accounting is a process., 10. Accounting is both an art and a discipline.
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Assignment: Write your answers in your AS for SUMMATIVE TEST and PERFORMANCE TASK., PERFORMANCE TASK NO. 1 , , Cite at least 5 specific examples in your daily activities in which accounting is used in making business decisions.
