Introduction in

Accounting
Prepared by: Ivy C. Masilungan, MA
History of Accounting

• The earliest accounting system was found as early as 2000

BC in the cities of Babylonia, Greece, Egypt, and in 3500
BC in Assyria
• The first accounting book was written by Cotrugli in
Naples
• The modern double entry bookkeeping system could be
traced from the book prepared in 1494 by an Italian
mathematician, Fr. Luca Pacioli, entitled Summa de
Aritmetica
History of Accounting

• In 15th century, the Italian merchants usually entrusted

their properties to their servants or employees
 Properties (assets) owned by merchants
 Debts (liabilities) owed to others
 Debtor is one who borrow money or buys something with a
promise to pay on future date
 Creditor is one who lends money or sells something to be
collected in the future
 Debit and Credit
History of Accounting

• It was only after 16th century, when trading in foreign

ports started by ship and train
 Calculation of profit
 Preparation of a profit and loss report

• The 19th century is a witness to massive development of

trade and industry
 Improve the process of recording and reporting financial
information
What is Accounting

• It is the process of recording financial transactions

pertaining to a business

• It is the language of business (to earn profit)

Accounting Process

Financial
Source Trial
Journal Ledger Statement
Document Balance
s
5 Elements of Accounting

• Asset – something that company owned

• Liability – present obligation of the company
• Equity – money that the owner put in the business
• Expense – cost of operation to generate income
• Revenue – gross inflow of cash
Do you still remember?

• Accounting Equation  ASSETS = LIABILITIES + EQUITY

• Assets  Cash, Accounts Receivable
• Liabilities  Accounts Payable, Loan Payable
• Equity  Capital
• Single / sole proprietorship  there is only one owner
Do you still remember?

• Normal balance of asset (debit), liabilities (credit), and

equity (credit)
 How these accounts are increased / decreased?
Assets are increased when debited
Liabilities and Equity are increased when credited
Assets are decreased when credited
Liabilities and Equity are decreased when debited
Statement of Financial Position

• Same as balance sheet

• This statement includes the amount of the company’s

total assets, liabilities and owner’s equity which in
totality provides the condition of the company on a
specific date.
Exercise: Prepare a Personal SFP

• Write down your current savings and everything that you

owned (clothes, pen, pencil, etc)
• Write down the amount that you owe from your parents
(tuition), siblings, friends, etc)
• Deduct the amount you owe from the amount you own
• Associate amounts owned with assets and amount owed
with liabilities with the net amount as equity
• Deadline: Tomorrow, 10:00 AM