Accounting-the process of identifying, measuring, and communicating economic information to permit

informed judgments and decisions to the users of the information.

Identifying, Measuring, Classifying (3 important activities in accounting process)

Identifying-it is the process of analyzing the events and transactions to determine whether or they
will not be recognized.

Recognition- it is the process of including effects of an accountable events to the statement of

financial position or statement in comprehensive income through a journal entry.

Only accountable events are recognized because they are the only one that affects the assets,
liabilities, equity, income, or expenses in entity.

Accountable events also called “economic activities” which is the subject matter of accounting.

Non accountable events are note recognized like Sociological and Psychological but disclosed only in the
notes, if they have accounting relevance will be recorded through a memorandum entry.

TYPES OF EVENTS AND TRANSACTIONS

1.External events- are events that involve an entity and another external party.

a. Exchange (reciprocal transfer)- event where there is a reciprocal giving and receiving of economic

resources or discharging economic obligations between entity and external party.

Examples: sale, purchase, payment of liabilities, receipt of note receivable in exchange of account
receivable

b. Non reciprocal transfer- is a “one way” transaction

Example: donations, gifts, or charitable contributions, payment of taxes.

c. External event other than transfer- an event that involves changes in the economic resources or
obligations of an entity