ACCOUNTING ESSENTIALS

Accounting- communicating about(financial)(business)

- Provide quantitative information for the owner, creditor, regulation, tax employees
- Art of reporting
- Language of business
- Information used to make decisions
Bullae- way of recording (bill of lading) legal documents
Amatino manucci- invented double entry record
Luca Pacioli (1494)- public a book of double entry record
- Father of modern accountancy
You need three essential things
- Sufficient cash
- Bookkeeper (records the assets)
- Accounting system
Types of business
1. Services-they hire skilled types people (artist, attorney, accounting services)
2. Trader- buy and selling product (retailer and wholesaler)
3. Manufacture- design and assemble products to have a finished product
4. Raw materials- farming
5. Infrastructure- transportation
6. Financial- deposit (banks, loans)
7. Insurance
Forms of business
Sole proprietorship- single owner
Partnership- two or more to contribute money
Corporation- owned by stakeholders
- Operated by law
Concepts
1. Entity concept0 business is different from any other business
2. Periodicity- subdivided to equal time (separate period)
3. Stable monetary unit- (Philippine peso) (dollar)(yen)where the owner operates
Basic principles to generate information
1. Objectivity principle- based on the reliable data and reliable sources.
2. Historical cost- how much is the cost
3. Revenue recognition- record when you deliver your goods
4. Adequate disclosure-all the information that you should defend or can affect
 5. Materiality – depends on site and nature
6. Consistency- consistent you can change is justifiable
Branches of accounting
1. Auditing- most significant service.
External audit- third party- outside to inside
Internal audit- employees and all the people on the company
2. Bookkeeping- records the transactions
3. Cost bookkeeping, cost accounting
- Process of cost data
4. Financial accounting- focus on business transactions more specifically on things (more on
financial aspect)
5. Management accounting- incorporates non-financial
6. Financial management0 setting financial human resources objectives
7. Taxation- computation of taxes of business and also employee
8. Government accounting- abide the law
Four competencies to be an accountant
1. Knowledge- (general knowledge) (organizational business knowledge)
2. Information technology systems
3. Accounting knowledge
4. Skills
Intellectual skills
- Logical thinking, critical thinking
- Analysis, strategies
- Interpersonal skills- works with a group
- Communication skills- active listening skills
- Values- professional ethics or moral value
1. Integrity
2. Objectivity
3. Independence
SCOPE OF PRACTICE
Public accountancy- you serve the public
- Auditing or transaction of practice
- Propose income tax return
Commerce and industry- private sector
- Involve to decision making
Education or academe- teacher
- In educational institutions
Government- people in the government

QUALITATIVE CHARACHTERISTICS
Fundamental qualitative characteristics
- Relevance
1. Predictive: role/ value
2. Confirmative: role/ value
 - Faithful representation
1. Completeness
2. Neutrality
3. Freedom from error
Relevance- relevant information that affects the decision making of the user
Predictive role/value- predictions
Confirmatory role/ values- confirmatory

Faithful representation
- Economic phenomenon in numbers and words
Completeness
- includes all information
Neutrality
- free from bias
freedom from error
- there’s no errors

Enhancing qualitative
1. comparability
- compare with some information
2. verifiability
- Faithful representation: agreement
3. Timeliness
- Information is available by the time they decide to use it
4. Understandability
- Be clear and concise

Going concern- you assume that the operation is still on going and no closure

Elements in financial statement

- Assets = liabilities and equity (capital)
- Assets
-liability
-equity
What to write in financial statement

1. Profitable future economic benefit

2. Cost or value measured with liability

How do we measure

- Historical cost
- Current cost
- Realization value
- Present value- discounted value

Accounting cycle steps in analyzing transaction

1. Identify transactions from source documents
2. Indicate accounts – assets, liabilities, equity, income, expense- affected by transaction
 3. Ascertain whether each account is increased or decreased by the transaction
4. Determine whether to debit or credit the account

Corporation- legally separated from owners