INTRODUCTION TO ACCOUNTING
DISCUSSION:
DEFINITION & NATURE
Accounting is a process of identifying, recording and communicating economic information that is useful in
making economic decisions.
Essential Elements:
1. Identifying – The accountant analyzes each business transaction and identifies whether the
transaction is an accountable event or not. Only accountable events are recorded in the book of
accounts. Accountable events or economic events are those that affect the assets, liabilities, equity,
income and expenses.
2. Recording- The accountant records the economic events he has identified. This process is called
journalizing.
3. Communicating – At the end of each accounting period, the accountant summarizes the information
processed in the accounting system in order to produce meaningful reports. (Financial Statements)
TYPES OF INFORMATION
1. Quantitative Information – expressed in numbers and quantities.
2. Qualitative Information – expressed in words or descriptive form.
3. Financial Information – expressed in money. Can be viewed as quantitative information because
monetary amounts are expressed in numbers.
FUNCTIONS OF ACCOUNTING
1. To provide external users with information that is useful in making among others, investment and
credit decisions.
2. To provide internal users with information that is useful in managing the business.
USERS OF ACCOUNTING
Internal INFORMATION
1. – those Users who are directly involved in managing the business. (Owners) 2. – those
who are Internal not directly involved in managing the business.
i. Users Existing & Potential Investors
ii. Lenders
iii. Government Agencies iv. Employees
v. Customers
vi. Public
TYPES OF ACCOUNTING INFORMATION
1. General Purpose – information designed to meet the common needs of most statement users.
2. Special Purpose - information designed to meet the specific needs of most statement users.
COMMON BRANCHES OF ACCOUNTING
1. Financial Accounting – focuses on general purpose financial statements.
a) Financial Statements – are the structured representation of an entity’s financial position and
results of its operations.
– include b) Financial the financial statements and other information.
2. Reports – f o c u s e s
Management needs of internal users.
3. Accounting Government Accounting – refers to the accounting for the government and
its instrumentalities. Also known as Fund Accounting.
4. Auditing – involves the inspection of an entity’s financial statements or
business processes to ascertain their correspondence with an established
criterion.
5. Tax Accounting – is the preparation of tax returns and rendering of tax
advice.
6. Cost Accounting – is the systematic recording and analysis of the costs of
materials, labor and overheads.
7. Accounting Education – refers to teaching accounting and accounting
related subjects in an organized learning environment.
8. Accounting Research – pertains to the careful analysis of economic events
and other variables to understand their impact on decisions.
FORMS OF BUSINESS ORGANIZATIONS
1. Sole or Single– is a business that is owned by an individual.
2. Proprietorship a b u s i n e s s t
Partnershi – is divide among themselves the profit therefrom.
3. p C o r
owned by more than one individual and is created by operation of law
rather than contract.
4. Cooperative – is an association of individuals who joined to contribute
capital and cooperate in order to achieve certain goals.
TYPES OF BUSINESS ACCORDING TO
Service Business o ACTIVITIES 1. ffers
– services as its main product.
2. – or Merchandising trading business is one that buys and sells goods without changing their
Business physical form.
3. Manufacturing Business – is one that buys raw materials and processes them into final products.
Reference:
Millan, Z. (2018). Financial Accounting & Reporting (Fundamentals). Bandolin Enterprises, Baguio City,
Philippines.
----------------------------------------------------------------------------------------------------------------------
