ACCOUNTING

AND ITS
ENVIRONMENT

Chapter 1&2
 Developmen
t of
Accounting

Accountancy
Introductio in the
n to OBJECTIVES… Philippines
accounting

Forms of
Sizes of business Business
Organizations
Activities
Performed by
Business
Organizations
 Development of
Accounting

PRIMITIVE ACCOUNTING

MIDDLE AGES

INDUSTRIAL REVOLUTION

INFORMATION AGE
PRIMITIVE ACCOUNTING
8500BC
Bullae
 Clay Tablets

• 1st dynasty of Babylonia (2286-2242 BC)

• Code of Hammurabi – sealed memorandum
(agreed price)
• Recorded by Scribe (modern day accountant)
 MIDDLE AGES
• 11th-13th centuries Northern italy’s literacy
• Use of Arabic numerals
• Use of credit (banking system)

• 11th-14th centuries Inca empire – South

America
• Use of quipu (accounting records)
 MIDDLE AGES
• 13th – 15th AD development of account
keeping in Florence, Venice, Genoa Italy
• 1211AD Floretine banker records
• Single entry
• 1340 AD double entry record in Genoa
MIDDLE AGES

Fra Luca
INDUSTRIAL REVOLUTION
INFORMATION AGE
Accountancy in the
Philippines
 Don Vicente Fabella

• First Filipino CPA

• Founder of Jose Rizal University(1919)
Dr. Nicanor Reyes
 Jaime Hernandez

First Filipino
Auditor
General of the
Commission
on Audit
Manuel Villar Jose W.
Diokno
Andres Soriano

Alberto Romulo Washington SyCip

 Scope of Practice of
Accountancy

Practice of Public Accountancy

Practice of Commerce and Industry

Practice in Education / Academe

Practice in Government
 Forms of Business
Organizations

Sole proprietorship

Partnership

Corporation
 Activities
Service Concern Performed by
Business
Organization
s
Merchandising

Manufacturing
 Sizes of business

Micro
Small

Medium

Large
 I have four
definitions.
Stop and I
Hey, how do you will tell you.
define accounting?
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
decisions.
Accounting is the process
of identifying, measuring,
and communicating
economic information to
permit informed
judgments and decisions
by users of the
information.
 Accounting is 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 a financial
character and interpreting
the results thereof.
bout an
conomic entity
Bookkeeping
Is an accounting
support function that
involves the
systematic recording
of business
transaction in financial
terms
 Objectivity

Relevanc
e
Feasibilit
y
Criteria for General Acceptance
of an Accounting principle
 ASSUMPTIONS PRINCIPLES CONSTRAINTS
1. Economic entity 1. Measurement 1. Cost
2. Going concern 2. Revenue recognition 2. Materiality
3. Monetary unit 3. Expense recognition Third
level
4. Periodicity 4. Full disclosure
5. Accrual

QUALITATIVE
CHARACTERISTICS ELEMENTS
1. Fundamental 1. Assets
qualities 2. Liabilities Second level
2. Enhancing 3. Equity
qualities 4. Income
5. Expenses

OBJECTIVE
Framework Provide information about the reporting
entity that is useful

for Financial to present and potential

equity investors,
lenders, and other
First level

Reporting creditors in their

capacity as capital
Providers.
 First level

OBJECTIVE
Provide information about the reporting
entity that is useful
Government agencies
to present and potential
Investors equity investors,
lenders, and other
creditors in their
capacity as capital
Providers.

Employee
s users
Customer
s Lenders

Public Suppliers
Second Level: Fundamental Concepts

Hierarchy of Accounting
Second Level: Basic Elements

Assets
Liabilit
y
Equity
Income or
Revenues

Expenses
 Third Level: Recognition, Measurement, and
Disclosure Concepts
These concepts explain how companies should recognize,
measure, and report financial elements and events.

Recognition, Measurement, and Disclosure Concepts

ASSUMPTIONS PRINCIPLES CONSTRAINTS

Assumptions

•Stable
•Monetary Going
•Unit
concern
•Periodicity

•Entity
Accrual
Basis
 BASIC
PRINCIPLES
Consistenc
yRevenue
recognition
Expense
recognition
Adequate
disclosure
Materiality
Objectivity
Historical cost
 Constrain
ts
COS MATERIALI
T TY
Thank
You