Overview of Accounting

What is Accounting?

 Accounting is the process of identifying, measuring,

and communicating economic information to permit
informed judgment and decisions by users of
information.
 Three important activities

a. Identifying – is the analytical component.

b. Measuring – is the technical component.
c. Communicating - is the formal component.
Identifying

 Recognition or nonrecognition of business activities as

“accountable” events.

Accountable or Quantifiable when it has an effect on

Assets, Liabilities and Equity.
Measuring

Assigning of peso amounts to the accountable economic

transaction and events.

Historical cost – original cost

Communicating

Process of transforming economic data into useful

accounting information, such as financial statements
and other accounting reports, for dissemination to users.
Communication process:

1. Recording – writing accountable events identified and

measured in the books of account. It is effected through
journal entries.

2. Classifying – involves the grouping of similar and

interrelated items into their respective classes. It is
effected through posting in the ledger.

3. Summarizing – putting together or expressing in

condensed or brief form the recorded and classified
transactions.
Basic purpose of Accounting

 Provide quantitative financial information about

economic activities intended to be useful in making
economic decisions.
Types of information provided by
accounting
 Quantitative information – information expressed in
numbers, quantities or units
 Qualitative information – information expressed in
words or descriptive forms
 Financial information – information expressed in
money.
Types of accounting information
classified as to users’ needs
 General purpose accounting information – designed
to meet the common needs of most statement users.
This information is provided under financial
accounting.
 Special purpose accounting information – designed
to meet the specific needs of particular statement
users. This information is provided by other types of
accounting other than financial accounting
(managerial accounting, tax basis accounting)