Guess Who?

Introduction to Accounting
By: Mr. Gredan D. Gregonia
Did you know that….
• 8,500 B.C.
• origin of keeping accounts started at Mesopotamia
• They use clay token called bullae.
Did you know that….
• 1st dynasty of Babylonia (2286-2242 B.C.)
• Use a law called “Code of Hammurabi”
• Requires merchant to give buyers a sealed
memorandum containing the agreed price of the
goods.
• Transactions is recorded by the Scribe.
• (predecessor of modern accountant)
Did you know that….

• 11th-14th Centuries Inca Empire

• Used knotted cords of different lengths
and colors called “quipu” to keep
accounting records.
Luca Pacioli
• Father of Modern
Accounting
• He developed the
double-entry
bookkeeping
system that has
debit and credit.
• 1494 published his
book Summa de
Arithmetica,
Geometria,
Proportioni et
Proportionalita or
“Everything about
Arithmetic,
Geometry,
Proportions and
Proportionality”,
includes, Particularis
de Computis et
Scripturis or “ Details
of Calculation and
Recording.”
 ACCOUNTING

•AICPA = Art
•ASC = Service
Activity
•AAA = Process
 American Accounting Association
(AAA)

• They defined Accounting as:

• the process of identifying, measuring and
communicating economic information to
permit informed judgement and decision by
users of the information.
 Accounting Standards Council
(ASC)

• They defined Accounting as:

• 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 decision.
American Institute of Certified Public
Accountants
(AICPA)

• They defined Accounting as:

• An 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 a financial
character and interpreting the results there
of.
What they have in common?

• Important points made in defining

Accounting:

• Accounting is about QUANTITATIVE

Information.
• Information is likely FINANCIAL in
NATURE.
• USEFUL in DECISION MAKING.
Overall Objective:

Accounting is to “provide
quantitative financial information
about a business that is useful to a
statement users particularly owners
and creditors in making economic
decisions.”
Nature of
Accounting
Accounting as a…….
• PROCESS
• ART
• DEALS WITH FINANCIAL INFORMATION
AND TRANSACTIONS
• MEANS AND NOT AN END
• INFORMATION SYSTEM
PROCESS
• A process refers to the method of
performing any specific task step by
step according to the objectives, or
target. Accounting is identified as a
process as it performs the specific task of
collecting, processing and communicating
financial information. In doing so, it
follows some definite steps like collection
of data recording, classification
summarization, finalization and
reporting.
ART

• Accounting is an art as it requires

knowledge, interest, and
experience to maintain the books
of accounts in a systematic
manner.
• Also refers to a way of performing
something
DEALS WITH FINANCIAL
INFORMATION AND TRANSACTIONS

• Accounting only deals with

quantifiable financial
transactions. These are the
only events identified by the
accountant, recorded in the
books, and communicated to
different parties.
MEANS AND NOT AN END

•Accounting is a tool to
achieve specific objectives. It
is not the objective itself.
INFORMATION SYSTEM
• Accounting is recognized and
characterized as a storehouse of
information. As a service function, it
collects processes and communicates
financial information of any entity.
This discipline of knowledge has been
evolved out to meet the need of
financial information required by
different interested groups.
Functions of
Accounting
Functions of Accounting

• Keeping Systematic record of a

business transactions.
• Protecting properties of the
business
• Communicating results to
various parties in or connected
with the business
• Meeting legal requirements
Keeping Systematic record of a
business transactions.

• Recording transactions does

not only involve entering the
transactions in the accounting
books. The records should be
systematic enough to enable
easy understanding of readers.
Protecting properties of the
business
• Accounting records serve as an
evidence that properties of a
business do exist or how much of a
particular resource does a
company have.
• Accounting system helps in
preventing employee fraud and
misappropriation of company
resources.
Communicating results to various
parties in or connected with the business

•The accounting reports

produced at the end of each
period are not only used by
external parties, but also by
the management in their
decision-making function.
Meeting legal requirements

• In the Philippines, the government

requires some companies to
provide financial reports quarterly,
semi-annually, or annually. This
procedure aims to protect the
public by providing them the
necessary information to make
sound decisions.
Advantages of
Accounting
Advantages of Accounting
• Provides financial information
• Assistance to Management
• Helps in Decision making.
• Evidence in court.
• Facilitates comparative study.
• Helps in valuation of business.
Limitations of
Accounting
Limitations of Accounting:
• NOT fully exact.
• Ignores Qualitative elements
• Ignores the effect of Price Level
• Accounting may lead to Window
Dressing.
Window Dressing
• Manipulation of accounts to conceal
vital facts present better or worse
financial position than actual.
Assignment:
• Find the meaning of the ff:
• Financial Accounting
• Management Accounting
• Government Accounting
• Auditing
• Tax Accounting
• Cost Accounting

• Differentiate financial accounting to

management accounting.