INTRODUCTION

TO ACCOUNTING
BM 111:
FUNDAMENTALS
OF ACCOUNTING
FSM 122: PRINCIPLES
OF ACCOUNTING
 CONTENT
o Definition of Accounting
o Accounting vs Bookkeeping vs Auditing
o Fields of accounting
o History of accounting and Development of Accounting
o Users of Accounting Information
o Basic Underlying Accounting Assumptions Accounting
Constraints
o Conceptual Framework
o Phases of Accounting
o Kinds of Business Organizations
 LEARNING OURCOMES
o Trace the brief history and development of the field of
accounting.
o Define accounting and its related concepts
o Identify the principles guiding the study of accounting such as
underlying assumptions and accounting constraints
o Know the purpose of accounting and the uses and users of
accounting generated information.
o Enumerate and explain the phases of accounting in the
accounting cycle.
o Describe the different kinds of a business as to operation and
organization
 Definition of Accounting
 The 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 a financial
character, and interpreting the results thereof.
 It is the process of identifying, measuring and
communicating economic information to permit informed
judgment and decision by users of information.
 Definition of Bookkeeping
 Primarily concerned with the mechanical and the routine
functions of accounting involving recording and
preparation of financial statements.
 Accounting is broader than bookkeeping as it includes not
only the preparation of financial statements but also the
analysis and interpretation of the generated accounting
information.
 Definition of Auditing
 The examination of the financial statements to determine whether
they conform to established standards (GAAP: Generally Accepted
Accounting Principles). Now called Philippine Standards of
Accounting (PSA) & Philippine Financial Reporting Standards
(PFRS).
 “ The work of an auditor begins when the work of an accountant
ends”
 Kinds of audit:
 External or Independent Audit
 Internal Audit
Accounting vs Bookkeeping vs
Auditing
 Fields of Accounting
 A. Functional Accounting
 1. Financial Accounting
 2. Management Accounting
 3. Auditing
 4. Tax Accounting
 5. Cost Accounting
 6. Accounting Systems Installation
 Fields of Accounting
 B. OCCUPATIONAL ACCOUNTING
 1. Public Practice – Independent auditor/s
 2. Private Practice (Commerce and Industry)
 3. Government Accounting
 4. Research and Education
History and Development of
Accounting
 Users of Accounting Information
 1. The owners; management
 2. Investors (present and potential)
 3. Employees
 4. Lenders
 5. Suppliers and other trade creditors
 6. Customers
 7. Government and other Agencies
 8. Public
 Basic Underlying Accounting Assumptions
Accounting
 Accounting Entity Assumption
 Going Concern Assumption
 Monetary Unit Assumption
 Periodicity Assumption/Time period Assumption
 Calendar Year – Jan. 1 to Dec. 31
 Fiscal Year – Starts any time of the year and ends 12 months after
 Accrual
 Revenues are recorded when they are earned not when they are received/collected.
 Expenses are recorded when they are incurred not when they are paid/disbursed.
Basic Accounting Constraints
 Phases of Accounting
 1. Recording
 journalizing
 2. Classifying
 posting to the ledger
 3. Summarizing
 Preparing Financial Statements from the ledger or trial balance
 4. Interpreting
 analysis phase
Kinds of Business Organizations
 A. As to Operation or Source of Income
 1. Service business
 2. Merchandising or Trading Business
 3. Manufacturing Business
 B. As to Organization
 1. Sole or Single Proprietorship
 2. Partnership
 3. Corporation
 4. Cooperative
 REFERENCES
 See Reference in our Syllabus (BM 111:
FUNDAMENTALS OF ACCOUNTING and FSM 122:
PRINCIPLES OF ACCOUNTING)
 Fundamentals of Accounting Outline Notes by Dalifer A.
Gano, CPA, MBA, MAEd (module)
THE END!
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NEXT TOPIC WILL BE
ACCOUNTING ELEMENTS AND
RELATIONSHIPS