INTRODUCTION TO

ACCOUNTING

Prepared by:
Abella, Rafael
Agustin, Britney
Alfanta, Gia Marie
Saliot, James Wennard
WHY DO WE STUDY ACCOUNTING?
 Accounting plays a vital role in running a business because it helps
you track income and expenditures, ensure statutory compliance, and
provide investors, management, and government with quantitative
financial information which can be used in making business decisions.

 Its role is to track a company’s finances in their numerous forms, from

credits, debits, and profitability to payroll and tax filing. It is a field
driven by analytics and analytical interpretations, and the information
derived from such functions provides a business with a record of its
financial health and stability.
WHAT KNOWLEDGE IS NEEDED IN
THE STUDY OF ACCOUNTING?
 Innovation
 Understanding

 Communication

 Commercial Awareness

 Enthusiasm

 Initiative

 Credibility/Integrity

 Resilience
IMPORTANCE IN KEEPING OF
BUSINESS RECORDS
 It Helps in Evaluating the Performance of Business
 It Ensures Statutory Compliance

 It Helps to Create Budget and Future Projections

 Tells about the success of your past campaigns and improvement in

present campaign.
 Act as resource for new strategies.

 Helps in monitoring company growth rate and profit.

 And most of all it is the most resourceful adviser when ever your
business is in serious trouble.
BUSINESS AND ACCOUNTING
 "business" also refers to the organized efforts and activities of
individuals to produce and sell goods and services for profit
 Accounting is the process of recording financial transactions
pertaining to a business. The accounting process includes
summarizing, analyzing and reporting these transactions to
oversight agencies, regulators and tax collection entities.
WHAT IS ACCOUNTANT?
 These are among the many tasks that accountants perform for their
clients:
 Organizing and maintaining financial records
 Evaluating financial operations and making recommendations to
management about best financial practices
 Examining account books and accounting systems to make sure they are
efficient and conform to accepted standards and accounting procedures
 Examining financial statements to make sure they are accurate and meet
legal requirements
 Suggesting ways to increase revenue, reduce costs, and improve profits
HOW CAN ACCOUNTANTS BE OF HELPED
TO BUSINESS AND GOVERNMENT?
 It Helps in Evaluating the Performance
 It Ensures Statutory Compliance

 It Helps to Create Budget

and Future Projections
 It Helps in Filing Financial
Statements
 Payroll Duties

 Audits
WHAT ARE THE CAREER OPPORTUNITIES
OF AN ACCOUNTANT?
Financial Services:
Business Valuation Specialiist
Certified Financial Planner
Financial Analyst
Tax Consultant

Public Accounting Jobs:

Cost Estimator
Enrolled Agent
Forensic Accountant
Real Estate Appraiser
Tax Accountant
Tax Attorney
Tax Preparer

Government and Non Profit accounting jobs:

Fund Accountancy
Private Accounting Jobs:

Accounting Clerk
Accounts Payable/Receiveble Clerk
Accounting Information System Specialist
Actuarial Accountant/Insurance Accountant
Bookkeeping
Budget Analyst
Capital Accountant
Financial Controller
Cost Accountant
Environmental Accountant
Payroll Accountant
TYPES OF ACCOUNTING INFORMATION
 Accounting Information of Financial Performance and
Financial Position
This is the main type and common accounting information. Every
user need the information of net profit or net loss of company. At
the end of year, what is amount of net profit or net loss of
company. If net profit's value is very high, every user will take
benefit from this data. Employees can demand more salary.
Shareholders may demand more dividend. Investors can invest
their money in the company because it is the good chance that
they will receive more return on their investment.
 Accounting Information of Total Cost and Per Unit Cost

Second type of accounting information is of value of total cost

and per unit cost. If you have to sell your product in the market,
you need to know what is your total cost and per unit cost. All
cost accounting records will be helpful for providing such
accounting information.

Accounting Information for Planning and Control of

Business
There are lots of accounting information which are need for
planning and control over the business.
 Accounting Information for Tax Management
This is the important type of accounting information. In this type,
we collected information which are only need for tax
management.

Accounting Information for Social Responsibility

Through social accounting, we collect the accounting information
for social responsibility. In big corporate, a social account is made
which provide the information of benefits to society and cost of
natural resources which are taken by corporate. Future benefits
like product safety, financial support to manpower, customer
satisfaction and pollution control can be given on these
accounting information.
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP).

Generally accepted accounting principles, or GAAP, are a set of

rules that encompass the details, complexities, and legalities of
business and corporate accounting. The Financial Accounting
Standards Board (FASB) uses GAAP as the foundation for its
comprehensive set of approved accounting methods and
practices.
BASIC ACCOUNTING ASSUMPTIONS
 Accrual assumption
 Conservatism assumption

 Consistency assumption

 Economic entity assumption

 Going concern assumption

 Reliability assumption

 Time period assumption

WHAT ARE FINANCIAL STATEMENT?
 Financial statements (or financial reports) are formal records of
the financial activities and position of a business, person, or
other entity.
 Relevant financial information is presented in a structured
manner and in a form which is easy to understand. They
typically include four basic financial statements accompanied
by a management discussion and analysis.
 ACCOUNTING DOES "WONDER“

Accounting is like any language, accounting has its own set of

terminology. Those in key financial positions within a business
must learn accounting language and, specifically, learn the
meaning behind unique terms to properly and effectively use
them on a daily basis.
 WHAT COMPRISES THE BALANCE SHEET?

A balance sheet is a snapshot of a business's financial condition

at a specific moment in time, usually at the close of an
accounting period. A balance sheet comprises assets, liabilities,
and owners' or stockholders' equity. Assets and liabilities are
divided into short- and long-term obligations including cash
accounts such as checking, money market, or government
securities. At any given time, assets must equal liabilities plus
owners' equity. An asset is anything the business owns that has
monetary value. Liabilities are the claims of creditors against the
assets of the business
 BASIC ACCOUNTING EQUATION

Accounting equation describes that the total

value of assets of a business is always equal to its
liabilities plus owner’s equity. This equation is the
foundation of modern double entry system of
accounting being used by small proprietors to large
multinational corporations. Other names used for
accounting equation are balance sheet equation
and fundamental or basic accounting equation
Using the concept of accounting equation, compute missing figures
from the following:
 Assets = $50,000, Liabilities = $20,000, Owner’s equity = ?
 Assets = ?, Liabilities = $10,000, Owner’s equity = $15,000
 Assets = $60,000, Liabilities = ?, Owner’s equity = $40,000
 Assets = ?, Liabilities + Owner’s equity = $150,000
 Solution
 Owner’s equity = Assets – Liabilities
= $50,000 – $20,000
= $30,000
 Assets = Liabilities + Owner’s equity
= $10,000 + $15,000
= $$25,000
 Liabilities = Assets – Owner’s equity
= $60,000 – $40,000
= $20,000
 The basic accounting equation is: Assets = Liabilities + Owner’s
equity. If liabilities plus owner’s equity is equal to $150,000, the
assets must also be equal to $150,000.
 EXPANDED ACCOUNTING EQUATION

 The expanded accounting equation is derived from the

common accounting equation and illustrates in greater detail
the different components of stockholder equity in a company.
 By decomposing equity into component parts, analysts can get
a better idea of how profits are being used—as dividends,
reinvested into the company, or retained as cash.
 In the expanded accounting equation, the "capital" portion is
broken down into several components: contributions,
withdrawals, income, and expenses.
 USES OF FINANCIAL STATEMENTS

Credit decisions –Lenders use the entire set of information in the

financials to determine whether they should extend credit to a business,
or restrict the amount of credit already extended.
Investment decisions – Investors use the information to decide
whether to invest, and the price per share at which they want to invest.
Taxation decisions - Government entities may tax a business based
on its assets or income and can derive this information from the
financials.
Union bargaining decisions - A union can base its bargaining
positions on the perceived ability of a business to pay; this information
can be gleaned from the financial statements.
 QUALITIES THAT FINANCIAL
STATEMENTS SHOULD POSSESS

Depict True Financial Position

Effective Presentation
Relevance
Attractive
Easiness
Comparability
Analytical Representation
Presented in Brief
Promptness
 ELEMENTS OF FINANCIAL STATEMENTS
 Assets - are the resources control by the entity as the result of
past events and from which the future economic benefits are
expected to flow the entity
 Liabilities - are the present obligations arising from the past
events, the settlement of which is expected to result in an
outflow from entity resources embodying economic benefit.
 Equities - the residual interest in the assets of the entity after
deducting all its liabilities.
 Revenues - is increase in the economic benefits during the
accounting period in the form of inflows or enhancements of
assets or decrease of liabilities that result in increases in
equity, other than those relating to contributions from equity
participants.
 WHY IS ACCOUNTING CONSIDERED AS
LANGUAGE OF BUSINESS

it is the language that managers use to communicate the firm's

financial and economic information to external parties such as
shareholders and creditors. Nobody working in business can
afford financial illiteracy. Whether you run your own business,
work as a manager or are just starting your career, you want to
understand financial information and be able to interact with
accountants, controllers, and financial managers.
 WHEN DO ACCOUNTANTS PREPARE THE
FINANCIAL STATEMENTS?

A financial statement can be prepared for a company for any

length of time and at any point in time. Some companies prepare
financial statements monthly to keep a tight handle on the
financial position of the firm. Other companies have longer
accounting cycles. Financial statements must be prepared at the
end of the company's tax year.
 FORMS OF BUSINESS ORGANIZATION AND
THEIR CAPITAL STRUCTURE
 Sole proprietorship

The vast majority of small businesses start out as sole

proprietorships. These businesses usually are owned by one
person, aka the individual who has day-to-day responsibility for
running the business.
 Partnerships

In a partnership, two or more people share ownership of a

single business. Like proprietorships, the law does not distinguish
between the business and its owners.
 Corporations

A corporation is considered by law to be a unique entity, separate

from those who own it.
legal entity owned by shareholders.
 NATURE OF BUSINESS
Production
Making product or providing service
Manufacturing- produce goods
Service Firms-provide assisstance o satisfy specialized
Marketing
Deals with how goods or services are exvhanged betwrrn prodicers
and consumers
Finance
Deals with all the money matters related to running a business