Basic Bookkeeping NCIII

Accounting for service business

Definition of Accounting:

Financial Reporting Standards Council

“A service activity

American Institute of Certified Public Accountants (AICPA)

-“The art of recording, classifying and summarizing in a significant manner and in terms of

money, transactions and event which are in part at least of financial character and interpreting the

results thereof”

Nature of Accounting:

- A service activity

- A process, an art and a discipline

- The language of business

 Profitability – ability to generate revenue

 Liquidity – convert the assets into cash

 Solvency – duty to pay to your obligations

 Stability - your business is stable even there is crisis

 Capital Structure – thru balance sheet or financial position, business is composed of

capital and loan

  Financial Flexibility – flexible to survive in different seasons

Bookkeeping & Accounting

Bookkeeping – deals primarily with the systematic method of recording and classifying financial

transactions.

Objective of Accounting:

 To ascertain the result of the business operations

 To ascertain the financial position of the business

 To assist financial users in predicting the enterprise’s financial capacity

Field of Accounting

 Financial Accounting – reports about financial statements

 Management Accounting – to make decision internally

 Cost Accounting – cost of product, merchandise, selling price

 Tax Accounting – BIR

 Government Accounting –

Sector of Accounting Practice

 Public Practice

 Commerce and Industry

 Education and Academe

 Government
Users of Accounting Information

 Internal users – those who are directly involved in the business (Owners, management,

employees)

 External Users – not directly involved in the business (potential investors, creditors,

customers, taxing authorities, government regulation agencies, non-profit org.)