DEFINITION OF ACCOUNTING
statements.
 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 a financial character, and
interpreting the results thereof.
 Is the process of identifying, measuring,
communicating economic information to permit
informed judgements and decisions by users of
the information.
 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- in
making reasoned choices among alternative
courses of action.
ELEMENTS OF ACCOUNTING
 IDENTIFYING – The accountant analyzes each
transaction whether it is an accountable event
or non-accountable event.
 RECORDING – The accountant recognizes
 COMMUNICATING – The accountant
summarizes the information processed in the
accounting system in order to produce
meaningful reports.
TYPES OF ACCOUNTING INFORMATION
 QUANTITATIVE – Information expressed in
numbers, quantities, or units.
 QUALITATIVE – Information expressed in words
or descriptive form. Normally found in the notes
to financial statements.
 .
NATURE IN ACCOUNTING
 AS A SCIENCE – Accounting is a body of
knowledge which has been systematically
gathered, classified and organized.
 AS AN ART – Accounting requires the use of
creative skills and judgement.
 AS AN INFORMATION SYSTEM – A system is
one that consists of an input (accountable
events), a process (process of recording,
classifying and summarizing) and output
(financial statements)
 LANGUAGE OF BUSINESS – It is the means by
which financial information are communicated
to the interested users in the form of financial
BOOKKEEPING VS. ACCOUNTING
BOOKKEEPING – The process of recording the
accounts of transactions of an entity. It ends
with the preparation of Trial Balance.
ACCOUNTING – It covers the whole process of
identifying, recording and communicating
information to interested users.
ACCOUNTING AS A MANAGERIAL TOOL
 PLANNING – Involves the process of mapping
out or arranging in detail how a business goal is
to be achieved.
- ACCOUNTING – Provides information
on the current and past level of the
business sales. Use in forecasting sales.
 ORGANIZING – After a plan is formulated,
manager needs to organize his personnel and
resources according to plan. Organizing thus
involves assigning responsibilities and granting
authority.
- ACCOUNTING – Provides information
on the current productive and existing
facilities and equipment. Provides
information on cost spent in the past in
relation to the sales generated.
Provides information on the amount of
available cash and the business ability
to generate financing.
 STAFFING – Involves the process of selecting,
training and developing employees.
- ACCOUNTING – Provides information
on the number of current employees
compared to the current level of
productivity. Provides information on
the amount of cash needed to employ
additional personnel.
 DIRECTING – After a plan is formulated and
resources are organized and are available, a
manager needs to lead his personnel to ensure
that each is performing his responsibilities
towards the organization’s common goal and to
the best of his ability.
- ACCOUNTING – Provides information
about the records of personnel training
and development costs. Provides
information on the daily sales.
  CONTROLLING – Involves the process of
continuously monitoring results against goals
and take corrective actions necessary to ensure
that the plan remains on track.
- ACCOUNTING – Provides variance
analysis on differences between actual
sales and expected sales.
BRANCHES OF ACCOUNTING
 FINANCIAL ACCOUNTING – Focuses on general
purpose financial statements. Services provided
include general record-keeping, preparation of
general-purpose financial statements.
 MANAGEMENT ACCOUNTING – Involves in the
accumulation for use by internal users. Service
includes preparation of specifically tailored
management reports.
 GOVERNMENT ACCOUNTING – Refers to the
accounting for the government and its
instrumentalities focusing attention on the
custody of public funds, the purpose or
purposes to which those funds are committed.
And the responsibility and accountability of the
individuals entrusted with those funds. Service
includes general record-keeping and
preparation of financial reports for the
government and its agencies.
 AUDITING – Involves in the inspection f entity’s
financial statements or business processes to
ascertain their correspondence with an
established criterion. Service rendered includes
expression of an opinion (auditor’s report) on
the financial statements.
 TAX ACCOUNTING – Branch of accounting that
is involve in the preparation of tax returns and
rendering of tax advice. Services include
preparation of tax returns and providing tax
advice.
 COST ACCOUNTING – Branch of accounting that
is involve in the systematic recording and
analysis of the cost of materials, labor and
overhead incident to the production of goods or
rendering of services. Service includes analyses
of costs of products and services.
 ACCOUNTING EDUCATION – Refers to teaching
accounting and accounting-related subjects in
an organized learning environment. It is a
process of facilitating the acquisition of
knowledge and skills regarding one or more of
the other branches of accounting. Service
includes teaching accounting subjects.
 ACCOUNTING RESEARCH – Pertains to the
careful analyses of economic events and other
variables to understand their impact on
decisions. Accounting research includes a broad
range of topics which may be related to one or
more of the other branches of accounting, the
economy….
 FORENSIC ACCOUNTING – Involve in the use of
accounting skills to investigate fraud or
embezzlement and to analyze financial
information for use in legal proceedings.
Services include examine data to determine
where missing money has gone and how to
recover it. They may also present reports of
their financial finding as evidence during
hearings, where they often testify as expert
witness.
TYPES OF ACCOUNTING INFORMATION
 GENERAL PURPOSE ACCOUNTING
INFORMATION – information designed to meet
the common needs of most statement users. It
is provided by financial accounting.
 USERS OF ACCOUNTING INFORMATION –
INTERNAL USERS – those who are directly
involve in managing the business. Ex: Business
owners, board of directors, Managerial
personnel.
EXTERNAL USERS – those who are not directly
involved in managing the business. Ex:
Investors, Lenders, Government agencies, non-
managerial employees, Customers, Public
INTERNAL USERS – Board of
Directors/Owners/Managers – to determine the
activities of the enterprise for planning, organizing,
leading, and controlling.
EXTERNAL USERS
EMPLOYEES – To determine…
GOVERNMENT AGENCIES – To determine the capacity
to pay taxes and its tax compliance. Bases for
monitoring and regulating the activities of the
enterprise.
CUSTOMERS –
PUBLIC –
ACCOUNTING CONCPETS AND PRINCIPLES

These are set of logical ideas and procedures that guide

the accountants in recording and communicating
economic information.

1. SEPERATE ENTITY CONCEPT – Under the

Business Entity Concept, the business is viewed
as an entity separate from its owners, creditors,
or other businesses.
2.