I.

INTRODUCTION TO ACCOUNTING

AT THE END OF THIS CHAPTER

1. Define Accounting

2. Describe the nature of accounting

3. Explain the function of accounting in business

4. Nature the history or origin of accounting

5. Cite specific examples in which accounting is used in making business

decisions.

Definition of Accounting

- is the process of identifying, measuring, and communicating economic

information to permit informed judgments and decisions by users of the
information. ( AAA) - American Accounting Association.

- Language of Business

(Measures business activities, processes that information into reports and

communicates the results to decision-makers

-Accounting is a service activity. Its function is to provide quantitative

information, primarily financial in nature, about economic events that is
intended to be useful in making economic decisions.

(ACCOUNTING STANDARDS COUNCIL)


Accounting is an information system that measures, processes and
communicates financial information about economic entity.
(FINANCIAL ACCOUNTING STANDARDS BOARD)

Accounting is an art of recording, classifying and summarizing in a significant
manner and in terms of money, transactions and events which are, in part at
least of financial character, and interpreting the results thereof.
(AMERICAN INSTITUTE OF CERTIFIED PUBLIC
ACCOUNTANTS)
NATURE OF ACCOUNTING

- a service activity

- a process

- Both an art and discipline

- Deals with Financial information and transactions

- an information system

HISTORY OF ACCOUNTING

LUCA PACIOU – Father of Accounting

In 1494he published his book,

SUMMA DEARITHMETICA, GEOMETRIA, PROPORTIONI
ETPROPORTIONALITA
(Everything about Arithmetic, Geometry, Proportions and
Proportionality. ”

Particularis de Computis et Scripturis or “Details of

Calculation and Recording.”
-double entry bookkeeping.
-36 Chapters

3 Components of Accounting

IDENTIFYING: ANALYTICAL COMPONENT

-recognition or non-recognition of business activities as accountable
events

MEASURING: TECHNICAL COMPONENT

Assigning of peso amounts to the accountable economic transactions andevents.

1. The cradle of civilization

2. 14th century - Double - entry bookkeeping

3. French Revolution ( 1700s )

 4. The industrial Revolution ( 1760-1830 )

5. 19th century - The beginnings of Modern accounting in Europe and America

6. The present - The Development of Modern Accounting Standards and

commerce

The External and Internal Users of Financial Information

INTERNAL USER

- Management

- Employees

- Owners

EXTERNAL USERS

- Creditors

- Tax Authorities

- Investors

- Customers

- Regulatory Authorities