ACC 104: Fundamentals of Accounting

and Financial Statement Analysis

Student Activity Sheet #1

Navarrete, Kendrick C’zar M.

Name: ____________________________________________________ Class #:_____________ Section:
____________ Schedule: ____________________________
SJC- 1BSBA-MM-A 1:00PM – 4:00PM Date: _______________
NOV 30, 2023

Lesson Title: Orientation & Introduction to Fundamentals of Materials:

Accounting Activity Sheet #1
Lesson Objectives:
At the end of this module, I should be able to: References:
1. Familiarize with the FLM, class rules, policies and grading Basic Financial Accounting and
system Reporting, WIN Ballada
2. Define accounting and describe its nature and function Financial Accounting and
3. Identify the users of accounting information and explain basic Reporting, Zeus Vernon Millan
principles of accounting

Productivity Tips:
Before this day ends, review the important concepts and terms that you’ve learned and share it with your
friends and classmates.

A. LESSON PREVIEW/REVIEW Introduction

Good day our future entrepreneur! Please smile as we start your new journey this semester. ☺
Our learning framework remains to be Active Learning. In response to the needs of this new normal,
we will be adopting a Flexible Learning Approach. It is a combination of face-to-face classes and homebased
learning. Also, please read our course syllabus to give you an overview of the subject. Welcome to ACC104
and have a great day ahead!

Activity 1: What I Know Chart, Part 1

Do you know anything about accounting? Try answering the questions below by writing your ideas
under the first column What I Know. It’s okay if you write key words or phrases that you think related to the
questions.

What I Know Questions: What I Learned (Activity 4)

Accounting makes it possible to 1. What is accounting? Is a process of identifying, measuring, and

record, analyze, report, and communicating economic information to
communicate. permit informed judgments and decisions by
the users of information.

Accounting is important because
it teaches us how to spend
wisely
There are 5 basic principle of
accounting are the going principle,
the principle of accrual, the principle
of matching and more
Internal users, external
users and the government.
2. Why accounting is important?
3. What are the principles of
accounting?
4.Who are the users of
accounting information?
It is a service activity. Ex legal services of
lawyers, health care services of out medical
frontliners, and of course the accounting,
Audit and tax
There are 8 basic accounting principles
objectivity principle, history cost, revenue
recognition principle, expense recognition
principle, adequate disclosure, and more.
Primary users and other users.

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 ACC 104: Fundamentals of Accounting
and Financial Statement Analysis
Student Activity Sheet #1

B. MAIN LESSON Activity 2: Content Notes

Learning new things or concepts should begin with a definition. Understanding something you don’t know
its meaning is hard, but if you define it well you will appreciate its nature, function and purpose. Let’s start
now with the definition of accounting! Smile as you read! ☺

✓ 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.

✓ is a process of identifying, measuring and communicating

economic information to permit informed judgments and
decisions by the users of information.

✓ is the art of recording, classifying and summarizing in a

significant manner, transactions and events which are in part at
least of a financial character and interpreting the result thereof.

Essential Elements of the Definition

Nature of Accounting
✓ Accounting is a service activity. Services are intangible product (i.e. they cannot be seen or
touched as opposed to goods) performed to clients or customers. Examples: Legal Services of
Lawyers, Health Care Services of our Medical Frontliners, and of course the Accounting, Audit,
Tax, and Management Consultancy Services of Accountants which provides quantitative
financial information (information expressed in numbers, quantities or units particularly in
money)

✓ Accounting is a process. It involves systematic methods to perform tasks to achieve objectives.

1. Identifying – the process of recognition or non-recognition of business transactions as
accountable events for recording purposes. Note: the event is said to be accountable
when it affects the assets, liabilities, equity, income and expenses of a business.
2. Measuring – the process of assigning peso value or amount to the identified accountable
event.
3. Communicating – the process of preparation and distribution of financial reports. The
information from different transactions and events identified, processed, measured in
accounting information system to produce meaningful reports commonly known as
financial statements.

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 ACC 104: Fundamentals of Accounting
and Financial Statement Analysis
Student Activity Sheet #1

✓ Accounting is a practical art. It consists of definite techniques and its proper application requires
the use of creative skills, functions, expertise and judgment.
1. Recording – the preparation of journal entry in the process called journalizing
2. Classifying – the grouping of accounts with similar nature and characteristics
3. Summarizing – the preparation of financial reports
4. Interpreting – the analytical function

✓ Accounting is a social science. It is a body of knowledge which has been systematically

gathered, classified and organized.

Functions and Purpose of Accounting in Business

✓ Accounting is the language of business because it quantifies and facilitates the communication
between the economic entity (business) and the users. These users or decisionmakers need
information. The more important their decision is, the greater is their need for reliable information.
Then, the role of accounting becomes important. The accounting functions to provide relevant
information to users serves as the useful basis or guide in making economic sound decisions.
Accounting helps the users of to understand the clear picture of the business in financial terms.

Users of Financial Information

Classification of User Needs for Financial Information

1. Primary Users - are the fund providers of
the business
a. Investors - are those who provide
money, investment, capital or other
resources for a business
b. Lender and Other Creditors – could be
a person, bank or other enterprise that has
lent money or extended credit to another
party/ies
2. Other Users – are users of financial
information other than primary users
6. Employee – someone who is paid to
work for others
b. Customer – an individual or enterprise that
purchases the products of the business
c. Government and their Agencies (BIR,
SEC)
d. Public – relating to people in general
As primary users, they are interested in financial
information…
• to determine the risk inherent in and return provided
by their investment
• to decide whether they should buy, hold or sell their
stocks
• to determine whether their loans including interest
thereon will be paid when due
• to determine whether or not to extend a loan to a
business
Even they are classified as other users; they are
interested in financial information…
• to assess the stability and profitability of the employer
company
• to assess the ability of the entity to provide salaries,
retirement benefits and other employment
opportunities
to assess continuance of an entity, especially when
they have a long term involvement with, or are
dependent on, the company
to determine the income earned by the entity for the
computation of tax payable
to assist the public about the trend and the range of
activities of the entity

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 ACC 104: Fundamentals of Accounting
and Financial Statement Analysis
Student Activity Sheet #1

Basic Accounting Concepts

1. Entity concept – each entity should be evaluated separately; it separates owners from the
business.
2. Periodicity concept – divides the life of an entity into equal time periods, like month, quarter or
years; allows users to obtain timely data for a specific period to serve as a basis of decision
making
3. Stable monetary unit concept – treats peso amounts as though each peso has the same
purchasing power as any other peso at any time; effects of inflation are ignored

Basic Accounting Principles

1. Objectivity principle – accounting records and statements are based on reliable data and
supported by verifiable documentation
2. Historical cost – acquired assets should be recorded at their actual cost and not at what
management thinks they are worth as at reporting date.
3. Revenue recognition principle – revenue is to be recognized in the accounting period when
goods are delivered or services are rendered or performed.
4. Expense recognition principle – expenses should be recognized in the accounting period in
which goods & services are used to produce revenue and not when entity pays for those goods
& services.
5. Adequate disclosure – requires that all relevant information that would affect the user’s
understanding and assessment of the accounting entity be disclosed in the financial statements.
6. Materiality – dictates that financial reporting should only be concerned with information that is
significant to affect evaluations and decisions.
7. Consistency – dictates that firms should use the same accounting method from period to period
to achieve comparability over time within a single enterprise.
8. Matching Principle – the costs of doing business are recorded in the same period as the revenue
they help to generate.

Suggested Reading:
To appreciate the history and origin of accounting, here is the link for additional text reading:
https://www.thestreet.com/investing/history-of-accounting-timeline-14944095

Activity 3: Skill-building Activities

Let’s practice! After completing each exercise, you may refer to the Key to Corrections for feedback. Try
to complete each exercise before looking at the feedback.

Exercise 1: Fill in the blanks. Supply the missing word or phrase to complete the definition of accounting.

Accounting is a 1__service__ activity. Its function is to provide 2__quantitative__information primarily

financial in nature about economic 3__entities__that is intended to be useful in making 4. Economic
decisions.

Accounting is a 5__Process__ of 6__Identifying__, 7__Measuring__ and 8__Communication_ economic

information to permit informed judgments and decisions by the 9-10 _User of information_.

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 ACC 104: Fundamentals of Accounting
and Financial Statement Analysis
Student Activity Sheet #1

Exercise 2: Try this exercise and see how well do you understand the concepts about accounting. In
the spaces provided, write T if the statement below is true otherwise F if it is false.

T 1. Primary Users are the fund providers of the business.

T 2. Accounting is both an art and a science.
F 3. Customers are interested in financial information which enables them to assess the stability
and profitability of the company.
F 4. Revenue recognition principle states revenue is to be recognized in the accounting period
when services are paid for cash
T 5. Expense recognition principle dictates that expenses should be recognized in the accounting
period in which they are incurred.
T 6. In entity concept, the business and the owner are treated as separate and distinct entity.
F 7. Summarizing function of accounting is the grouping of accounts with similar nature and
characteristics
T 8. Other users are users of financial information other than primary users
F 9. All events in business are accountable events.
T 10. Accounting is a social science because it is a body of knowledge which has been
systematically gathered, classified and organized.

Activity 4: What I Know Chart, part 2

It’s time to answer the questions in the What I Know chart in Activity 1. Log in your answers based on
what you now know in the third column of the chart.

Activity 5: Check for Understanding

SHORT QUIZ: Identification

Identify the words or phrase being described in the statement below:

Accounting 1. It is an information system that measures, processes and communicates financial

information about an identifiable economic entity.
Entity concept 2. These are business organizations or units that have an identity separate from
those of its owners.
Measuring 3. It is the process of assigning peso value to the accountable events.
Communicating 4. It is the process of preparation and distribution of accounting information to the
intended users.
Objectivity 5. It is the principle stating that accounting records and statements should be based
principle on reliable data and supported by verifiable documentation
Financial statement 6. It is the product or output of accounting process.
Goods and 7. These are the tangible products which can be sold to the customers of the
services business
Quantitative financial 8. Information expressed in money.
information
Consistency 9. This principle which dictates that firms should use the same accounting method
from period to period to achieve comparability over time within a single enterprise.
Periodicity 10. This allows users to obtain timely data for a specific period to serve as a basis of
concept decision making.

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 ACC 104: Fundamentals of Accounting
and Financial Statement Analysis
Student Activity Sheet #1

C. LESSON WRAP-UP Activity 6: Thinking about Learning

Congratulations for finishing this module! Shade the number of the module that you finished answer the
questions below.

You are done with the session! Let's track your progress.
Period 1 Period 2 Period 3

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26

1. What could you have done better to improve your learning today?
Understanding more about the lesson and researching more about the topic in the internet or a
book.

2. What surprised you about the lesson today?

The lesson I am surprised is about the classification of user.

3. Some question/s I want to ask my teacher about this module is/are:

None at the moment.

FAQs
1. Why not all events occurred in business is accountable?
Answer: Accounting deals primarily with financial information. Therefore, only those transactions that
affects the financial structure of the business particularly its assets, liabilities, equity, income and
expenses will be accounted and recorded. In additional, sociological and psychological matters are
outside the scope of accounting.

2. Does consistency principle mean that a business cannot change its accounting policies?
Answer: No, accounting policies can be changed if it is permitted by a standard or the change would
result in more relevant and reliable information. However, any change in accounting policy must be
disclosed.
KEY TO CORRECTIONS Answers to Skill-Building Exercises
Exercise 1: 8. communicating 5. T
1. service 9-10 users of information 6. T
2. quantitative 7. F
3. entities Exercise 2: 8. T
4. economic decisions 1. T 9. F
5. process 2. T 10. T
6. identifying 3. F
7. measuring 4. F

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