INTRODUCTION TO ACCOUNTING

 THE ACCOUNTING STANDARDS COUNCIL (ASC),

DEFINES ACCOUNTING AS FOLLOWS;
“IT 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.”
DEFINITION OF ACCOUNTING BY THE COMMITTEE ON
ACCOUNTING TERMINOLOGY OF THE AMERICAN
INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS(AICPA):

“ACCOUNTING IS AN ART OF RECORDING,

CLASSIFYING, SUMMARIZING IN A SIGNIFICANT
MANNER AND IN TERMS OF MONEY,
TRANSACTIONS, AND EVENTS WHICH ARE IN PART
AT LEAST, OF A FINANCIAL CHARACTER, AND
INTERPRETING THE RESULTS THEREOF.”
 WHY IS ACCOUNTING IMPORTANT?
PEOPLE ARE NOW LIVING IN AN ERA OF
ACCOUNTABILITY
HAVE TO PAY THE FOLLOWING:
**INCOME TAXES **TUITION FEES
**HOUSE RENTAL **SALARIES FOR HELPERS
**TELEPHONE AND LIGHT BILLS
 ALL THESE INVOLVES ACCOUNTING
 PEOPLE'S LIVES INVOLVES ACCOUNTABILITY TO
ONE'S SELF AND TO OTHERS SUCH AS THE
 IMPORTANCE OF KEEPING BUSINESS RECORDS
GOVERNMENT REQUIREMENT - SPECIALLY BY
THE BUREAU OF INTERNAL REVENUE(BIR). FOR
ACCURATE DETERMINATION OF TAXES DUE' TO
THE GOVERNMENT.
OWNERS UPDATED ON THE INFORMATION
ABOUT BUSINESS OPERATIONS.
BOOKS OF ACCOUNTS - RECORDS KEPT BY THE
BUSINESS. DATA KEPT ARE FINANCIAL IN
NATURE.
FINANCIAL STATEMENTS- REPORT ABOUT THE
 ACCOUNTING AND BUSINESS
PROFIT - PRIMARY MOTIVE IN BUSINESS
 ACCOUNTING HELPS TO DETERMINE WHETHER
THE BUSINESS EARNED A PROFIT (RESULT OF
OPERATING A BUSINESS
THREE POSSIBLE RESULTS OF OPERATION:
1. PROFIT
2. LOSS
3. BREAKEVEN
 RESULTS OF OPERATION:
1. PROFIT - INCOME ˃ EXPENSES
EX. P 120,000 ˃ P 80,000

2. LOSS - INCOME ˂ EXPENSES

EX. P 80,000 ˂ P 120,000

3. BREAKEVEN- INCOME = EXPENSES

EX. P120,000 = P120,000
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
(GAAP)

THESE ARE UNIFORM SET OF ACCOUNTING

RULES, PROCEDURES, PRACTICES AND
STANDARDS THAT ARE FOLLOWED IN PREPARING
THE FINANCIAL STATEMENTS.
REQUIREMENTS - PRINCIPLE TO BECOME A GAAP:
1. PRINCIPLE OF RELEVANCE
2. PRINCIPLE OF OBJECTIVITY
3. PRINCIPLE OF FEASIBILITY