Professional Documents
Culture Documents
BSOA 1- C
I.
II. American Institute of Certified Public Accountants (AICPA)- defined Accounting as the art of
recording, classifying, summarizing in a significant manner in terms of money, transaction and events,
which are in part at least of a financial character and interpreting the results thereof.
a. Recording. This function deals with the writing on the books or records of the business transaction or
events. This is referred to as Bookkeeping. This is defined as the systematic and chronological recording
of business transactions. It is systematic because it follows prescribed rules and principles of accounting.
It is chronological because the recording is in the order of occurrence of dates of business transactions.
b. Classifying. Similar items are grouped or sorted under the same account names. In the preparation of
accounting reports, items may be arranged according to their liquidity or permanent nature or whether
items are operating or non-operating.
c. Summarizing. The accountant groups summarize the details of the data in the accounting records
preparatory to the submission of reports to the management which is usually done on a yearly, semi-
annually, quarterly, and monthly basis. An owner requires the accountant information regarding the
status of the business.
d. Interpreting. In this function, the accountant usually prepares Financial Statements which include the
Balance Sheet (now called Statement of Financial Position), Income Statement (now called Statement of
Comprehensive Income or Statement of Profit and Loss), Statement of Changes in Equity, Statement of
Cash Flow and Notes to Financial Statement.
These will be analyzed and interpreted for management's decision making. These analytical reports will
be encountered in managerial and management advisory services subjects.
Clearly from the definition stated by the American Accounting Association, there are three
important activities in the accounting process, namely:
c. Communicating. This accounting process is the preparation and the distribution of accounting reports
to potential users of accounting information.
2. Who are the parties interested in the accounting data of the business?
-Several distinct categories of interested people are informed of the information. Business executives,
owners, creditors, governmental agencies, financial analysts, and even workers are among them.
A. Ownership
B. Partnership. - This is a business organization with two or more owners called the partners who
agree on the capital contributions, management of the firm, distribution of profits and losses, and other
matters pertaining to the operation of the firm.
C. Corporation. - This is an organization of not less than five persons. It is created and organized under
the operation of law, whose capital is divided into shares of stock. It has legal personality separate and
distinct from the owner (stockholders) thereof.
b. Nature of business
A. Service Concern. This type of business deals with rendering of services to the customers such as
tailoring shops, beauty salon, vulcanizing shop, firms of CPAs, lawyers, doctors and others.
B. Trading or Merchandising. This type of business deals with the buying of goods and selling the same
goods in the same form from profit. Examples are department stores, grocery stores, and sari-sari
stores, etc.
C. Manufacturing Concern. This type of business involves purchasing of raw materials and converting
these raw materials into finished products. Examples are textile manufacturing, candy manufacturing,
shoe and plastic factories, drug laboratories, food processing companies, etc.
4. What are the three activities in accounting according to AAA?
6. What is bookkeeping?
- Bookkeeping is the process of recording your company's financial transactions into organized accounts
on a daily basis. It can also refer to the different recording techniques businesses can use. Bookkeeping is
an essential part of your accounting process for a few reasons.
7. What is transaction?
- In business, there are four main types of financial transactions, and they include sales, purchases,
receipts, and payments. All financial transactions that occur have an effect on at least two accounts,
depending on the type of transaction. One account will increase in value, while the second account
decreases.
Public accounting - refers to a business that provides accounting services to other firms. Public
accountants provide accounting expertise, auditing, and tax services to their clients.
Auditing - is a part of the accounting world. It is an examination of accounting and financial records that
is undertaken independently. This is done to determine if the company or the business undertaking has
confirmed its operations to the laws and the generally accepted accounting principles.
Management advisory services- Management advisory services are consulting services performed by a
specialist organization for its clients. These services are intended to provide advice regarding the
operations and finances of clients. The services may address any of the following areas: Asset valuation.
Tax services- Tax services offer bookkeeping, tax, payroll, auditing, and financial planning services.
They provide expertise and address your accounting and tax preparations needs.
Private accounting- is commonly called industry accounting. Private accountants are considered internal
accountants. They work for a single company and help deal with the financial information of that
company. They prepare and analyze reports for an internal manager.
Government Accounting - Government accounting is the process of recording, analyzing, classifying,
summarizing communicating and interpreting financial information about government in aggregate and in
detail reflecting transactions and other economic events involving the receipt, spending, transfer, usability
and disposition of assets
Research and Education- Accounting education can be considered as experience, as practice in learning
to learn, and as part of education for business. Accounting techniques are important as parts of a data-
processing apparatus, providing deeply significant data regarding enterprise prior experience.
• Sales invoice
• Purchase Invoice
• Official Receipts
• Cash Vouchers
• Journal Vouchers
D 2. The responsibility to review the work of the accountants and issue opinions as to the fairness of
the financial statement’s rests with
a. the external auditor
b: the board of directors
c. the internal auditors
d. the management
D 3. Primary responsibility for the preparation of financial statements in accordance with generally
accepted accounting principles rests with
a. the internal auditors
b. the management
c. the external auditors
d. the board of directors
D 4. The assumed continuation of a business entity in the absence of evidence to the contrary is an
example of the accounting concept of
a. accrual
c. comparability
b. consistency
d. going concern
C 5. Which of the following criteria must be met before an event should be recorded for accounting
purposes?
a. The event must be an arm's-length transaction.
b. The event must be repeatable in a future period.
c. The event must be measurable in financial terms.
d. The event must be disclosed in the reported footnotes.
IV. Exercises
A. Fill in the blanks for value received and value parted with. The following are
transactions of AMA Co. for the year end 2013.
B. Fill in the blanks for value received and value parted with.
The following are transactions of Bagwis Co. for January, 2013.
Transactions Value received Value parted with
1. Purchased from Mosquera Office supplies Cash
bookstore office supplies for
cash
2. Billed Mike Co. for legal Account receivable Service
service rendered
3. Paid legal books ordered Books Cash
and received from Migs
4. Paid Sam Trading as Cash Account receivable
partial payment of accounts
5. Received in cash Cash Services
professional fees from
Maileen Co.
6. Paid telephone bill for the Services Cash
month
7. Paid salaries and wages for Services Cash
C. State the value received and value parted with in the following transactions of Samantha
Company.
6. Paid P5,000 for legal books ordered and received from Bernasol Bookstore
VALUE RECEIVED - BOOKS
VALUE PARTED -CASH
11. Received 5,000 from Nero Co. for legal service rendered
VALUE RECEIVED - CASH
VALUE PARTED -SERVICE
13. Elirene Mosquera Co. billed Samantha Co. for service rendered amounting to P9,000.
Paid half of the accounts due and the balance are still on credit.
VALUE RECEIVED - CASH AND ACCOUNTS RECEIVABLE
VALUE PARTED -SERVICE