FUNDAMENTALS OF

ACCOUNTANCY,
BUSINESS AND
MANAGEMENT 1
CHAPTER 1 INTRODUCTION TO ACCOUNTING
•Introduction
•Accounting Process
•Nature of Accounting
•Functions of Accounting
•History of Accounting
AT THE END OF THE CHAPTER, THE STUDENTS
SHOULD BE ABLE TO:
• Define accounting
• Describe the nature of accounting
• Explain the functions of accounting in business
• Narrate the history and origin of accounting, and
• Cite specific examples in which accounting is used in
making business decisions
ACCOUNTING
- A system that helps businesses track events that affect them
- Involves identifying the events that affect a business,
recording these events, and communicating the summarized
results of all events within a particular period to interested
parties.
- Aids in improving business and is very beneficial to a
company
THE ACCOUNTING PROCESS
1. Identification of economic events relevant to a business
• Sale of Toyota cars
• Provision of service by the hospital
• Payment to suppliers
• Purchase of equipment for the manufacturing of Bench shirts
There should be transfer of things with value
2. Recording of relevant events
- should be done systematically and
chronologically for easier tracking and
interpretation and is recorded in the accounting
book
3. Summarize all the recorded economic events into
accounting reports
- financial statements is the most popular reports
QUESTIONS
1. Explain briefly the subject of accounting. What are its
purposes?
2. Explain the three steps process of accounting. What is
the role of an accountant in each step?
3. What is a relevant economic event? Give examples of
relevant economic events?
ASSIGNMENT :
Think at least two types of business belonging to
different industries (Petron and Jollibee). Give five
examples of economic events that each company
identifies and records in its respective accounting
books. Discuss why these events or transactions are
recorded in the accounting books.
NATURE OF ACCOUNTING
1. Accounting is a process
- it performs the functions of identifying, recording and
communicating economic events with the end goal of
providing information to internal and external parties.
2. Accounting is an art
- art of recording, classifying, summarizing, and
finalizing financial data. It’s a combination of techniques and
its application requires applied skills and expertise.
3. Accounting deals with financial information and transactions
- deals only with quantifiable financial transactions wherein
transactions included are only those events identified by the
accountant, recorded in the book and communicated to different
parties. Non-financial are not the focus of accounting process but may
be used to interpret and better estimate some financial data.
4. Accounting is a means and not an end
- it is a tool of achieving specific objectives and its not the
objective itself.
5. Accounting is an information system
- is recognized and characterized as a storehouse of
information. Its function is to collects processes and communicates
financial information of an entity.
 FUNCTIONS OF ACCOUNTING
American Accounting Association (AAA)
- defines accounting as “the process of identifying, measuring and
communicating economic information to permit informed judgements and
decisions by the users of information”.

American Institute of Public Accountants (AICPA)

- defines accounting as “ the art of recording, classifying and summarizing
in a significant manner and in terms of money transaction and events
which are in part at least of financial character and interpreting the
results thereof”.
MAIN FUNCTIONS OF ACCOUNTING

1. Keeping systematic record of business transactions

2. Protecting properties of the business
3. Communicating results to various parties in or connected
with the business
4. Meeting legal requirements
QUESTIONS
1.What is the nature of accounting? Describe each
features of accounting and give specific examples
on how each features is applied in the daily
operations of a business.
2.What are the main functions of accounting?
Explain each function in details.
HISTORY OF ACCOUNTING
-is thousands years old and can be even traced to ancient civilizations.
- Early development of accounting can be dated back to ancient
Mesopotamia wherein they followed a system of writing and counting
money and its development can be related to the taxation and trading
activities of temples.
- The reign of Emperor Augustus (63BC-14AD) provided more evidence
on the development of accounting and Roman government kept a
detailed financial information of the deeds of Emperor Augustus
regarding the stewardship of Roman resources.
Res Gestae Divi Augusti (The Deeds of Divine Augustus)
Roman historians Suetonious and Cassius Dio recorded that
in 23BC, Augustus prepared a rationarium (account)
which listed public revenues, the amount of cash in the
aerarium (treasury), in the provincial fisci (tax officials)
and in the hands of publicani (public contractor) and that
it included the names of the freedmen and slaves from
whom a detailed account could be obtained which was
attested by Tacitus.
In the 14th century many consider the dissemination of the
double-entry bookkeeping of Luca Pacioli and Italy is the most
important event in accounting history which made to
acknowledged Pacioli as father of modern accounting.
double-entry bookkeeping – any bookkeeping system that
has a debit and a credit for its transaction and is used today
Luca Pacioli’s Summa de Arithmetica, Geometria, Proportioni
et Proportionalita (Review of Arithmetic, Geometry, Ratio and
Proportion) – the first book printed with the treatise on
bookkeeping
Modern profession of the chartered accountant
originated in Scotland in the 19Th century when
Queen Victoria granted a royal charter to the
Institute of Accountants in Glasglow.
At present times, accounting standards are already
available to guide in their practice of the profession
PFRS – Philippine Financial Reporting Standard
PAS – Philippine Accounting Standards
INDIVIDUAL ACTIVITY:
As discussed in the “History of Accounting” section of
this chapter, accounting is used even in the early
ancient periods. In your quiz notebook, give at least
three examples of how people from earlier periods
made use of the accounting process. How did the
accounting process help such persons in their lives?
CHAPTER SUMMARY:
• Accounting is a system that identifies, records and communicates relevant
economic events to interested users
• Nature of Accounting: Accounting is a process, is an art, deals with financial
information and transactions, a means, not an end and an information system.
• Functions of accounting in business:Keeping systematic record of business
transactions; protecting properties of the business;communicating the results to
various parties interested in or connected in the business; ang meeting legal
requirements
• History of accounting: From its early development in Mesopotamia to the modern
accounting system used in the present day.
QUESTIONS:
1. Do you agree “Accounting is vital to the success of a business?”
Explain
2. Give five examples in which accounting is used in making business
decisions. Explain the role of accounting plays in these decisions.
3. Do you think that non-financial
information is still useful in the
accounting process? Why or why not? Explain.
4. Give a concrete example of how you can use accounting in your
daily life.
5. Give some limitations of accounting.
THANK YOU…..