ACCOUNTING ESSENTIAL
Accounting is a service activity that is to provide quantitative information that is useful in Accounting Cycle- length of time lapsed from disbursement of cash until it reverted back to
making economic decisions. (ASC)ACCOUNTING STANDARD COUNCIL cash.
Accounting is an information system that measures, process and communicates financial Identifying Journalizing Posting Trial Balance Adjusting
information. (FASB)FINANCIAL ACCOUNTING STANDARDS BOARD
Entries Adjusted Trial Balance Financial Statements Closing
Accounting is a process of identifying, measuring, communicating informations. (AAA)AMERICAN
ACCOUNTING ASSOCIATION
Entries Post Closing Trial Balance Reversing
General Purpose Financial Reports- Product of Accounting.
2 BROAD CATEGORIES OF ACCOUNTING: BUSINESS ACTIVITIES TO MEASURE:
1. Managerial Accounting- Internal Users Informations. 1. Financing Activities- External sources of funding.
2. Financial Accounting- External Users Informations. 2. Investing Activities- Purchase and Sale of resources.
OTHER BRANCHES OF ACCOUNTING: 3. Operating Activities- Primary operations of the company.
1. Auditing 4. Financial Management ACCOUNTING CONCEPTS AND PRINCIPLES:
2. Bookkeeping 5. Government Accounting 1. Separate entity concept or Economic Entity Assumption- Business is a separate
3. Cost Accounting 6. Taxation person, distinct to owner, only economic events will be recorded.
Manager- Agent or steward of the owner. 2. Historical Cost Concept- Assets are initially recorded at their acquisition cost.
Stewardship/Agency Theory- Conflict between the owner and the manager can be inevitable. 3. Going Concern Assumption- Business is assumed to continue to exist for indefinite
USERS OF ACCOUNTING INFORMATIONS: time.
1. Internal Users 4. Matching- Costs are initially recognized as assets and charged as expenses only
2. External Users when related revenue is recognized.
Clay Tokens is the form that used during 8500 BC in Mesopotamia. 5. Accrual Basis of Accounting- economic events are recorded in the period in which
Scribe the predecessor of modern accountant. they occur.
Quipu- Knotted cords of different lengths and colors to keep accounting records. 6. Time Period or Periodicity- The life of the business is divided into series of
Amatino Manucci was the inventor of double-entry bookkeeping . reporting periods.
Fra Luca Pacioli- Father of Double Entry Bookkeeping, Summa De Arithmetica, Geometria, Calendar Year- January 1 to December 31
Proportioni, et Proportionalita Fiscal Year- 12 months but any month
Act No. 3105- Acounting Profession on March 17, 1923. Interim Period- shorter than 12 months
PICPA- Philippine Institute of Certified Public Accountants 7. Stable Monetary Unit- Any unit must translate all its financial information to
BASIC PROFESSIONAL VALUES AND ETHICS common monetary unit that used by the parent company.
1. Integrity- Straightforward and Honest. 8. Materiality Concept- Determines whether the omission or misstatement of
2. Objectivity- No Bias, conflict interest or undue influence. information in a financial report would impact a reasonable user's decision-
3. Professional Competence and Due Care- maintain professional knowledge and act making.
diligently. 9. Full Disclosure Principle- Companies should disclose all information that is relevant
4. Confidentiality- respect confidential information.
to their financial statements.
5. Professional Behavior- comply laws and regulation to avoid discredit of the
Conceptual Framework- serves as a general frame of reference in developing or applying the
profession.
standards
FORMS OF BUSINESS ORGANIZATIONS
QUALITATIVE CHARACTERISTICS:
1. Sole Propreitorship
1. Fundamental Characteristic- Characteristics that make information useful to users.
2. Partnersip
a. Relevance- Can affect the decisions of users.
3. Corporation
b. Faithful Representation- Factual and represents actual effects of
4. Cooperatives
events.
BUSINESS ORGANIZATION BASED ON ACTIVITIES
c. Substance Over Form- Present what is true in the form even it is
1. Service Business
nice or not.
2. Merchandising Business
d. Completeness- Includes all necessary informations.
3. Manufacturing Business
e. Neutrality- Presented without Bias and no manipulation.
4. Agriculture Business
f. Prudence- Caution of making judgements.
5. Hybrid Companies
ACCOUNTING ESSENTIAL
g. Free from error- No omission and errors, not materially misstated.
2. Enhancing Qualitative Characteristics- Characteristics that supports the
fundamental characteristics.
a. Comparability- identify similarities and diffrences.
b. Consistency- use of the same methods for the same items.
c. Uniformity- the practice of requiring organizations to record accounting
information and prepare financial statements in accordance with a relevant
accounting framework.
d. Verefiability- different users reach a general agreement.
e. Timeliness- Information is timely if it is available to users in the time to be
able to influence their decisions.
f. Understandability- understandable if it is presented in a clear and concise
manner.
g. Cost-Benefit or Cost Costraint- Determines whether an action's benefits are
worth its associated costs.
h. Measurement Uncertainty- relevant information may have such a high level
of measurement uncertainty rather than less relevant information.
