ACCOUNTIING NOTES 1

INTRODUCTION TO ACCOUNTING

Accounting – “language of business”

A service activity which function is to provide quantitative information, primarily in financial nature.
Useful in making economic decisions.

Functions of Accounting
Analyze whether personal or business transaction. If personal, disregard. If business, look for source
documents.
Source documents legality and time relevance.
Record either manually or electronically in chronological order.
Financial Reports are prepared, analyzed and interpreted.

PHASES

Analyzing - identifying business transactions

Recording - journalizing transactions in the general journal
Classifying - posting of accounts from general journal to general ledger
Summarizing - preparation and presentation of financial statements
Interpreting - determining factors affecting period’s profitability, liquidity, solvency and others that are
useful in making economic decisions

BRANCHES OF ACCOUNTING
Financial Accounting – preparation of general-purpose financial statements.
Governed by Philippine Financial Reporting Standards Council (PFRS).
Financial information to internal and external users.

External Users – individuals or organizations that not involved in day-to-day activities of the
organization.

- Business Contacts
- Lenders
- Customers
- Investors
- Analysts/Advisers
- Independent Auditors
- Government and their agencies
- Public

Managerial Accounting – provides accounting information to internal users.

Not governed by the Philippine Accounting Standards (PAS) set financial accounting.
Needs accounting information for planning, organizing, directing, and controlling business operations.
Internal Users – those who make decisions directly affecting the internal operations of the business.

- Managers
- Employee
- Officers
- Internal Auditors

Cost Accounting – focused on gathering cost information that is useful in determining prices.
Helps in making decision as to reduction or increase of selling prices.
Key players: selling price, cost and profit

TAXATION

- Preparation of tax returns

- Provides tax advice:
Tax avoidance: legal way of reducing or eliminating tax dues (tax minimization).
Tax evasion: illegal way of reducing or eliminating tax dues (tax dodging).

PUBLIC ACCOUNTING – an accountant may practice as an individual practitioner

- Auditing, Taxation, Management Consultancy

PRIVATE ACCOUNTING – an accountant working in commerce and industry

- Financial Accountant, Cost Accountant, Internal Auditor

GOVERNMENT ACCOUNTING – an accountant employed in government agencies

- BIR, COA, DFA

EDUCATION – an accountant teaching the future professionals

- CPA, Holder of Master’s Degree, Must be an accredited accounting teacher

ORGANIZATIONS

- Philippine Institute of Certified Public Accountants (PICPA)

Is a professional association of certified public accountants.
- ACPAE
- ACPACI
- GACPA
- ACPAPP
- Professional Regulation Commission(PRC)
 Government agency who is tasked to promulgate rules and regulations regarding practice of a
profession
- Board of Accountancy (BOA)
In charge or regulating the accounting profession by setting up rules of conduct and standards
for the practice of accountancy.

Types

- Service
Ex. MERALCO, PAL, Globe Philippines
- Merchandising
Ex. SM Supermarket, Grocery Stores, etc
- Manufacturing
Ex. Coca Cola, San Miguel Corp, Universal Robina, etc

Forms

- Sole Proprietorship
Owned and operated by the owner
Easy to organize
Low in capital
- Partnership
Two or more persons bind themselves together to contribute money, property and industry into
a common goal of dividing the profits among themselves (ART 1767)
- Corporation
A legal entity, that is separate and distinct from its owners
Board of Directors: 5-15
- Cooperatives
Owned by a group of individuals and is operated for their mutual benefits