Module 1 - 2

Introduction:

Good day! This module you will learn that an accounting

information system (AIS) is a structure that a business uses to collect, store,
manage, process, retrieve, and report its financial data so it can be used by
accountants, consultants, business analysts, managers, chief financial officers
(CFOs), auditors, regulators, and tax agencies..

I am formally welcoming you, as your subject teacher, to our course

Fundamentals of Accountancy, Business, and Management 1. In the process, this
course will help you ICONS and Lady ICONS to gain a better knowledge of
accounting world.

OBJECTIVES:
o define accounting & describe the nature of accounting;
o narrate the history & origin of accounting;
o explain the functions of accounting in business;
o identify the purpose of financial statement; and,
o identify the users of FS & their use of the FS.
 MOTIVATION:
Is accounting important to you? State your answer in four to five
sentences.
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LESSON:

Accounting is the art of analyzing financial transactions and

economic events, recording them, classifying them into accounts, summarizing
them, reporting, and interpreting the results. The diagram of the accounting
process is as follows:

Analyzing
1

Interpreting 6 2 Recording

Reporting 5 3 Classifying

4
Summarizing
 1. Analyzing – is the first phase of the accounting process. The accountant
must look at the transactions entered into, economic events that have
taken place, and determine their effects on the business.

2. Recording – involves writing the effects of the transactions and events that
have been analyzed. The recording may be done manually, or it may be
encoded with the use of computers or data-processing machines.

3. Classifying – is the sorting or grouping of similar transactions and events into

specific account titles. This process is almost like putting similar information
in boxes.

4. Summarizing – is the process that involves grouping the various accounts

referred to in the classifying process. This is where the accounts are
grouped into assets, liabilities, owner’s equity, revenue, and cost and
expenses.

5. Reporting – involves the preparation of financial summaries called financial

statements.

6. Interpreting – is the last step in the accounting process. It is the step that
directs attention to the significance of various matters and relationships.

BUSINESS ENTITY CONCEPT

There is a need to clearly identify the entity or business entity, for which the
accounting is to be done. The entity may be:

1. Sole proprietorship
2. Partnership
3. Corporation

PURPOSE OF FINANCIAL STATEMENTS

Financial statements consist of (a) a balance sheet, (b) an income

statement, and (c) a cash flow statement. These three financial statements are
presented with the accounting policies, explanatory notes, and supplementary
schedules and information that should be read together with the statements.
USERS OF FINANCIAL STATEMENTS
Financial statements are prepared by entities whether for profit or non-
profit. These entities may be the sole proprietorships, partnerships, or corporations.
Financial statements are also prepared for some individuals. Common among
these financial statements for individuals are statements of assets and liabilities
required from government officials. Management is the one primarily responsible
for the preparation and presentation of financial statement.

The users of financial statements are:

1. Investors
2. Employees
3. Lenders
4. Suppliers
5. Customers
6. Government Agencies
7. Public
8. Management

RECAPITULATE:
In this module you learned that accounting is a systematic process of
measuring and reporting relevant financial information about the activities
of an economic organization or unit. Its underlying purpose is to provide
financial information and it is capable of being expressed in monetary
terms.
 ACTIVITY 1:
Direction: Answer the following items. Choose the correct answer from
the choice below.

a. Analyzing
b. Recording
c. Classifying
d. Summarizing
e. Reporting
f. Interpreting

_______ 1. The process of grouping similar transactions and events together

_______ 2. The process of explaining the relationships of the different items in the
financial statements.
_______ 3. The process of determining the effects on the different accounts of the
documented transactions and economic events
_______ 4. The process of writing in the journal the effects, whether increases or
decreases, of the analyzed transactions and events
_______ 5. The process of identifying the relationships of various items in the financial
statements and pointing out their effects and importance to decisions to be
made by their users
_______ 6. The process of preparing balance sheets, income statements, and statements
of cash flows
 ACTIVITY 2:

Directions: Fill in the blanks with the correct answer. Choose the word
from the word bank below.

Calendar year Fiscal year

Liabilities Statement of income
Balance Sheet Supporting paper
Accounting period Assets
Bookkeeper Transactions

1. The financial statement that reports assets, liabilities, and owner’s equity is
called _____________________.
2. The financial statement that reports the net income or net loss for a period
of time is called __________________.
3. Things owned are called ___________________.
4. Things owed are referred to as _________________.
5. An exchange of value is referred to as ____________________.
6. A period of time, at the end of which financial statements are prepared
_________________.
7. A document that supports an activity to be recorded in the accounting
books ____________________.
8. An accounting period that ends of December 31 __________________.
9. An accounting period that ends on a date other that December 31
__________________.
10. The person who records transactions is a _______________. He/she is
supervised by an accountant.
 EVALUATION:

Student’s Evaluation/Feedback

Not Worse than About Better than Outstanding

Acceptable Average Average Average lkjlljlkjljljllllll
1 2 3 4 5

This lesson topic was helpful.

The lesson held my attention.

The lesson was easy to understand.

What I liked about this lesson:

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What I did not like about this lesson:
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Additional comments:
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Teacher’s Notes/ Feed forward

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 REFERENCE:

Florendo, J.G (2016). Fundamentals of accountancy, business, and

management 1. Rex book store.

Frias, S. A. (2016). Fundamentals of accountancy, business, and

management 1. Phoenix publishing house

Ong, F.L. (2016). Fundamentals of accountancy, business, and

management 1. C & E publishing, inc.