Accounting Overview

John V. Balanquit

johnthecpa.wikispaces.com

Objectives

Student will be able to discuss:• The history of accounting• Accounting systems• The forms of business organization• The nature of business operations

Objectives

Student will be able to :• Define accounting• Summarize the accounting process• Explain the needs of each user of financial

information• Define and identify FS elements

History of Accounting

Primitive Accounting• Bullae• Code of Hammurabi– Scribe

History of Accounting

Middle Ages• Fra Luca Pacioli– Father of Accounting

History of Accounting

Information Age (Modern)• Globalization– The world is becoming a small community due

to the advancement of technology

Accounting Systems

Manual Accounting System• A system that uses pen and paper only or

any substitute to pen and paper

Accounting Systems

Mechanical Accounting System• A system that uses simple computing

machines in addition to pen and paper

Accounting Systems

Electro-mechanical Accounting System• A system that uses advanced computing

machines in addition to pen and paper

Accounting Systems

Electronic Data Processing (EDP) System• A system that uses networks of computers

and the internet in processing information• Still uses pen and paper

Forms of Business Organization

• Sole proprietorship• Partnership• Corporation– Cooperative

Nature of Business Operation

• Service• Merchandising• Manufacturing• Agri-business• Hybrid

Let’s have a one minute break so that we can absorb the concepts of the previous topic.

Definition of Accounting

It is a service function which involves the processes of identifying, recording, summarizing and interpreting financial information relevant in decision-making.

Definition of Accounting

• It is a science because it follows a process and it involves critical thinking

• It is an art because it involves judgment and creative thinking

• It is the language of the business

Accounting Process

1. Identifying

Accounting Process

2. RecordingJournalizingClassifying (Posting)

Accounting Process

3. SummarizingTrial BalanceWorksheetFinancial Statement

Accounting Process

4. InterpretingRatio AnalysisTrend AnalysisBenchmarkingHorizontal and Vertical Analysis

Users of Financial Information

• Owners/ Investors• Suppliers/ Trade Creditors• Lenders/ Other Creditors• Employees

Users of Financial Information

• Customers• Government• Public

Elements of Financial Statements

• Assets• Liabilities• Equity

Elements of Financial Statements

• Income– Revenue– Gain

• Expense– Expense– Loss

End of Lecture

Thank You!

Quick Check

1. What purpose does the bullae serve during the primitive times?

Quick Check

2. What specific rule does the code of Hammurabi say regarding business transactions?

Quick Check

3. What is the contribution of Fra Luca Pacioli to accounting?

Quick Check

4. Provide the types of businesses according to ownership.

Quick Check

5. Provide the types of businesses according to nature of operations.

Quick Check

6. Provide the various accounting systems

Quick Check

7. Provide the processes of accounting.

Quick Check

8. Define the needs of the different users of financial information.

Quick Check

9. Enumerate the elements of financial statements.

Assignment1 Whole Yellow Paper 15 Points• Provide the technical definition of the

financial statement elements based on the Conceptual Framework for Financial Reporting.

• Indicate your reference

Seat WorkAnswer the following questions by groups of 3.

1. Provide two instances where an EDP system is not appropriate in a business.

2. Why is it important for businesses to maintain pen and paper (Printed) reports?