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Accounting and
Its Environment
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What is
ACCOUNTING?

 Accounting is the art and science 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.
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Fundamental Business Model
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SERVICES TRADER MANUFACTURE

Types of
Business
RAW MATERIALS INFRASTRUCTURE FINANCIAL

INSURANCE
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Forms of Business
Organizations

1. Sole Proprietorship

2. Partnership

3. Corporation
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FINANCING INVESTING
Activities in
Business
Organizations

OPERATING
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Accounting Process

Communication

Interpreting

Summarizing

Classifying

Recording

Measurement
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Accounting Process

Communication

Interpreting

Summarizing

Classifying

Recording

Measurement
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Accounting Process

Communication

Interpreting

Summarizing

Classifying

Recording

Measurement
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Accounting Process

Communication

Interpreting

Summarizing

Classifying

Recording

Measurement
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Accounting Process

Communication

Interpreting

Summarizing

Classifying

Recording

Measurement
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Accounting Process

Communication

Interpreting

Summarizing

Classifying

Recording

Measurement
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Users of Information

Internal users External users

 Owners  Suppliers

 Managers  Banks

 Employees
 Customers

 Investors

 Potential investors

 Tax authorities
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Double-entry
Bookkeeping
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Entity
concept

Fundamental Periodicity
Concepts concept

Stable
monetary
unit concept
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Relevance Objectivity Feasibility

Criteria for GAAP

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Historical
Objectivity
Cost

Revenue Expense
recognition recognition
Basic Principles principles principle

Adequate
Materiality
disclosure

Consistency
principle
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