ABM 102 FUNDAMENTALS OF ACCOUNTANCY, BUSINESS AND MANAGEMENT

LEARNING MODULES

MODULE 1 (Week 1)
Introduction to Accountancy, Business and Management (ABM)

I. Overview:

This module covers the introduction of basic accounting, business and

management. This orients the students on the basic things one needs to know about
accounting as the language of business. Likewise, the significance of business
management is emphasized articulating the importance of accounting. Basically this
covers the following scope: definitions of accounting, business and management
concepts, the accounting elements, sources of accounting standards, and the
accounting process and equation.

II. Module Objectives:

After successful Completion of this module, you should be able to:

 state the meaning and importance of accounting, business and management;

 enumerate the accounting elements; and
 describe the activities in the accounting process.

III. Course Material:

Watch:

Brief History of Accounting on https://www.youtube.com/watch?

v=hWK6ilRTGig

Read:

Business:
– an organization or enterprising entity engaged in commercial, industrial or
professional activities.
- the organized efforts and activities of individuals to produce and sell goods
and/or services for profit.
- the production, distribution and sale of goods and services for profit
Management:
- the process of planning, organizing, leading and controlling the efforts of
organization members and of using all other organizational resources to
achieve stated organizational goals (James A. F. Stoner).
 - A set of activities (including planning and decision making, organizing, leading
and controlling) directed at an organization’s resources (human, financial,
physical, and information), with the aim of achieving organizational goals in
an efficient and effective manner. (Griffin, 2013)
Accounting:

Accounting is like a diary for a business undertaking. It records all the

accountable business transactions. Although modern technology innovations have
changed the way financial records are kept, the antecedents of present-day accounting
systems date back over 700 years ago. Fra Luca Pacioli, a Renaissance monk and
traditionally known as the “Father of Accounting” authored the first published work in
Venice on accounting entitled Suma de Arithmetica, Geometria, Proportioni et
Proportionalita in 1494.  His text described a system that already had been in use for
about 200 years. 

According to Accounting Standards Council of the Philippines, accounting is a

service activity. Its function is to provide quantitative information, primarily financial in
nature, about economic entities, which are intended to be useful in making economic
decisions.

The basic purpose of accounting is to provide quantitative financial information

about economic activities intended to be useful in making economic decisions.
Accountancy is the practice of accounting profession

Sources of Accounting Standards

1. International Accounting Standards Board (IASB) – was formed in 1973 as
International Accounting Standards Council to develop worldwide accounting
standard. It was founded by representatives of professional bodies in
Australia, Canada, France, Germany, Japan, Mexico, the Netherlands, the
United Kingdom, Ireland and the United States.
2. Financial Reporting Standards Council (FRSC) – accounting standard setting
body in the Philippines. It has a chairman and representatives from the
following:
a. Board of Accountancy
b. Securities and Exchange Commission
c. Bangko Sentral ng Pilipinas
d. Bureau of Internal Revenue
e. A major organization composed of preparers and users of financial
statements
f. Commission on Audit (COA)
g. Accredited national professional organization of CPAs
According to the American Institute of Certified Public Accountants, Accounting
is an art of recording, classifying, 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. Based on this definition, we can trace the four phases
of accounting which can also be construed as the accounting process: recording,
classifying, summarizing and interpreting.

Review:

Chapter 1 of the Following Textbooks and reference materials:

1.Fundamentals of Accountancy, Business and Management by Timbang, F. and

Villegas, A.
2.Business Organization, Operations and Management Morales, J. and Saidali, M.

IV. Assessment

1. Research assignment:

Discuss the activities in the accounting process

2. Quiz:

I. True or False (2 pts each)

1. The book of original entry is called general journal.

2. The basic accounting equation is : Assets = Liabilities – Capital
3. Fra Luca Pacioli, a Renaissance monk and traditionally known as the “Father of
Accounting”.
4. Assets are the economic obligations of an entity.
5. Business is the process of planning, organizing, leading and controlling the
efforts of organization members and of using all other organizational resources to
achieve stated organizational goal.
6. Statement of Financial Position is otherwise known as the income statement.
7. Business is the organized efforts and activities of individuals to produce and sell
goods and/or services for profit.
8. The basic purpose of accounting is to provide quantitative financial information
about economic activities intended to be useful in making economic decisions.
9. Bookkeeping is the systematic and chronological recording of the accountable business
transactions.
10. Financial Reporting Standards Council (FRSC) is the accounting standard
setting body in the Philippines.

II. Essay

1. Why is accounting considered the language of business? (5 pts)

 2. Distinguish accounting from bookkeeping. (5 pts.)

MODULE 2 (Week 2)
The Financial Statements

I. Overview:

The scope of this module covers discussion on the basic financial statements.
The purposes and importance in the preparation of financial statements are stated to
stimulate learning. Basically this covers the following scope: definition of financial
statements and the four basic financial statements and their parts.

II. Module Objectives:

After successful completion of this module, you should be able to:

 enumerate the basic financial statements;

 internalize the contents of the basic financial statements
 state the purpose and importance behind the preparation of the financial statements

III. Course Material:

Watch:

YouTube: The Key to Understanding Financial Statements on

https://www.youtube.com/watch?v=_F6a0ddbjtI

Read:

Financial statements are the end products (output) of the

accounting process. There are 4 basic financial statements, as follows:
a. Income Statement – shows the results of operations of the business
(financial performance). Income and expenses are found in this
statement.

b. Balance Sheet – otherwise called Statement of Financial Position

tells the status of the business as of a given date. It shows the
balances of assets, liabilities and capital of the enterprise.

c. Statement of Changes in Equity – shows the increases and decreases

in the capital structure of the business. Net income and additional
investment increase equity while net loss and owner’s cash
withdrawal for personal purpose decrease the equity or capital.
 d. Statement of Cash Flows – shows the increases and decreases of the
cash position of the business. These cash changes may be due to the
entity’s operating, financing and investing activities of the business.

Review:

Topics on Financial Statements on the following references:

1.Fundamentals of Accountancy, Business and Management by Timbang, F. and

Villegas,
2. Fundamentals of Accounting Revised Edition 2019-2020 by Rafael M. Lopez, Jr.

IV. Assessment

1. Research assignment:

State the importance in the preparation of the following financial statements:

1. Income statement
2. Balance sheet/Statement of Financial Position
3. Statement of Changes in Owner’s Equity
4. Statement of Cash FLows
 MODULE 3 (Week 3)
The Theory of Debit and Credit and Transactions Analysis

I. Overview:

This module covers the theory of debit and credit. This explains the normal
side or increase side of the accounts, as well as their decrease sides. Sample
transactions and analysis of these transactions are being presented.

II. Module Objectives:

After successful completion of this module, you should be able to:

 Illustrate the accounting equation and the bookkeeping cycle;

 Distinguish between the single-entry and double-entry bookkeeping systems;
 Identify the normal balances of accounts as debit and credit
 Analyze business transactions;

III. Course Material:

Watch:
Colin Dodds - Debit Credit Theory (Accounting Rap Song) on
https://www.youtube.com/watch?v=j71Kmxv7smk

Read:

The Theory of Debit and Credit

and Analysis of Transactions

THE ACCOUNTING EQUATION

ASSETS = LIABILITIES + OWNER’S EQUITY
Example:
Ana invested her P15,000 cash for her business. She also borrowed money from
Philippine National Bank for P10,000. The Accounting equation for Ana’s business is as
follows:
Assets = Liabilities + Owner’s equity
P25,000 = P10,000 + P15,000
Bookkeeping is a systematic and chronological recording of business transactions
THE BOOKKEEPING CYCLE
• Journalizing/recording
 • Posting to the Ledgers

• Preparation of Trial Balance

• Computation of:

- Cost of Sales (Merchandising Business) or

- Cost of Goods Sold (Manufacturing / processing business)
• Preparation of Income Statement

• Preparation of Balance Sheet

• Preparation of Post-Closing Trial Balance

Bookkeeping Systems

1. Single – entry method

Uses special journals to record the transactions of the business. (Example: sales
book, cash receipts book, cash disbursement book)

2. Double – entry method

 Every transaction affects at least 2 accounts (Debit and Credit). This is done to
keep both sides of the accounting equation equal.

Debit - the value received (the left side of an account)

Credit – the value parted with (the right side of an account)

NORMAL BALANCES OF AN ACCOUNT

Account Increase Side Decrease Side

(Normal Balance)
ASSETS DEBIT CREDIT
LIABILITIES CREDIT DEBIT
CAPITAL CREDIT DEBIT
INCOME CREDIT DEBIT
EXPENSES DEBIT CREDIT

Examples of Asset accounts: Cash, Accounts receivable, inventories or merchandise,

prepaid expenses, land, building, machinery, equipment, furniture and fixtures, office supplies,
etc.
Examples of Liability accounts: Accounts Payable (when buying products on credit), Bank
Loan Payable (borrowing money from the bank), Accrued Expenses (expense incurred but not
yet paid)
 Example of a Capital account : A. Perez, Capital, partners capital, capital stock
Examples of Income accounts : Sales, Rent income, Professional fees income, service
income, etc.
Examples of Expense accounts : Salaries and wages, cost of goods sold, rent expense, light
and power, repairs and maintenance, taxes and licenses, insurance expense, etc.

Sample Business Transaction:

Transaction 1: September 3, 2020 - Received cash for Sales of merchandise in the amount of
P2,500.
In this transaction, the value received by the business enterprise is cash in the amount
of P2,500 while the value parted with or given in exchange is the merchandise or the product
sold or in short sales.
ANALYSIS:
In analyzing, follow these steps:
1. Which accounts are affected? (is it asset, liability, capital, income or
expense?)
2. Is it an increase or decrease of the accounts?
3. Identify which side to be placed (debit or credit)

So, for transaction 1, THE THREE-STEP analysis will be:

1. The accounts affected are:
a. Cash (asset) - 2,500
b. Merchandise sold (income) – P2,500
2. Is it an increase or decrease of the accounts?
Cash (asset) - INCREASE in asset
Merchandise sold (income) - INCREASE in income
3. Go back to the Normal Balances Table. Finally, we can have this analysis:

Cash (asset) - INCREASE in asset - DEBIT

Merchandise sold (income) - INCREASE in income – CREDIT

Since Cash is an asset and the transaction is an increase in Asset Cash,

then we place Cash on the DEBIT side.
The transaction increases income also because of sales, so we place Sales
on the CREDIT side.

We record the transaction in the General Journal this way:

2020 DEBIT CREDIT

Sept 3 Cash 2,500.00
Sales 2,500.00
Sold merchandise for cash.
,
Review:

1.

2. The Theory of Debit and Credit in Accounting (Classic Reprint)

https://www.amazon.com › Theory-Credit-Accounting-...

2. The Theory of Debit and Credit on the book:

Fundamentals of Accounting Revised Edition 2019-2020 by Rafael M. Lopez, Jr.

IV. Assessment:

1. Knowledge Check:

Write the account classification and normal balances for the following accounts:
Account Classification Normal balance
1. Furniture and fixtures asset debit
2. Salaries and wages
3. Prepaid insurance
4. Interest income
5. Accounts payable
6. Accounts receivable
7. R. Perez, capital
8. Utilities expense
9. Loans payable
10. Sales