INTRODUCTION

TO ACCOUNTING

Jasmin Villapando
OUTLINE OF THE TOPICS
01 DEFINITION OF ACCOUNTING 05 FORMS OF BUSINESS
ORGANIZATIONS

02 RELEVANCE OF ACCOUNTING 06 TYPES OF FINANCIAL

STATEMENTS
03 USERS OF ACCOUNTING
07 THE ACCOUNTING
INFORMATION EQUATION

04 THREE MAIN TYPES OF BUSINESS

 ACCOUNTING
Language of Business: Quantifies Business
Communications

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, in
making reasoned choices among
alternative courses of action. (AICPA)
 BUSINESS
accumulates financial data through its various activities

ACCOUNTING
processes the financial data and prepares financial reports

USERS
Read the reports and make decisions
RELEVANCE OF
ACCOUNTING
Accounting is the backbone of
any company because every
business needs reliable data to
make informed decisions.
● No business could operate very long without knowing how much it
was earning and how much it was spending. Accounting provides the
business with this information and more.
● Its like the scorecard of the business, which make the accountants the
scorekeepers.
● Without accounting a business couldn’t function optimally. It wouldn’t
know where it stands financially whether its making a profit or not
and it wouldn’t know its financial situation.
USERS OF ACCOUNTING
INFORMATION
Users of Financial Statements are
called stakeholders.
 USERS OF ACCOUNTING INFORMATION

OWNER INVESTORS CUSTOMERS

“Will the business be
“Is the business “Is the business
able to continously
profitable?” profitable?” supply goods?”

MANAGERS LENDERS/SUPPLIERS GOVERNMENT

“Is the business “Will the business be able “Is the business
operating profitably?” to pay its debt/account?” paying the right taxes”
 USERS OF ACCOUNTING INFORMATION

OWNER INVESTORS CUSTOMERS

MANAGERS CREDITORS/SUPPLIERS GOVERNMENT

INTERNAL USERS EXTERNAL USERS

 THREE MAIN TYPES OF BUSINESS
TYPE ACTIVITY STRUCTURE EXAMPLE

Barber Shops
Service Selling people’s time Hiring skilled staff and selling their time Airlines
Internet Shops

Buying a range of raw materials and

manufactured goods and consolidating Shoe Store
Merchandising Buying and Selling products them, making them available for sale in Book Store
locations near to their customers or Drug Store
online for delivery

Designing products, Taking raw materials and using Food Processors

Manufacturing aggregating components, and equipment and staff to convert them into Garment Factories
assembling finished products finished goods Vehicle Assembly
Nestle - MANUFACTURING
JAC Liner - SERVICE
Procter and Gamble - MANUFACTURING
Meralco - SERVICE
H & M - MERCHANDISING
Jollibee - SERVICE
SNR - MERCHANDISING
Hotel - SERVICE
Mercury Drug – MERCHANDISNG
Samsung - MANUFACTURING
 FORMS OF BUSINESS ORGANIZATIONS

SOLE PROPRIETORSHIP PARTNERSHIP CORPORATION

single owner called the
proprietor who generally is
also the manager, receives
all profits absorbs all losses
and is solely responsible for
all debts of the business
operated by two or more
persons who bind
themselves to contribute
money, property, or industry
to a common fund, with the
intention of dividing the
profits among themselves
Business owned by its
stockholders, it is an
artificial being created by
operation of law, having
the rights of succession
and the powers
TYPES OF FINANCIAL STATEMENTS
Statement of Financial
1
Position (Balance Sheet)

2 Income Statement

Statement of Owner’s
3
Equity

Statement of Cash
4
Flows
Statement of Financial Position
shows how the wealth of the
business stands by enumerating
the assets, liabilities, and net
worth of the business.
FINANCIAL
STATEMENTS
Statement of Owner’s Equity
shows why the net worth
changed by listing the
activities that caused it to
increase or decrease.
Income Statement
shows how wealth is produced
by listing the revenues earned
and expenses incurred
by the business
Statement of Cash Flows
shows what happened to the
cash by enumerating the
activities of cash received and
cash used by the business.
 THE ACCOUNTING EQUATION

present
obligation of
the enterprise OWNER’S
ASSETS EQUITY

resources residual
controlled by interest in
the enterprise the assets
LIABILITIES
THANKS!