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FABM1.WEEK1.HISTORY.NATURE.BRANCHES.-FORMS-OF-ORG.pptx
- 1. FUNDAMENTALS OF ACCOUNTANCY, BUSINESS,AND MANAGEMENT 1 SPECIALIZED SUBJECT | ACADEMIC - ABM
- 2. Define accounting “Accounting isthe process of IDENTIFYING, RECORDING, and COMMUNICATING economic events of an organization to interested users.” (Weygandt, J. et. al)
- 3. IDENTIFYING – thisinvolves selecting economic events that are relevant to a particular business transaction The economic events of an organization are referred to as transactions. Examples of economic events or transactions - In a bakery business: sales of bread and other bakery products purchases of flour that will be used for baking purchases of trucks needed to deliver the products
- 4. RECORDING – thisinvolves keeping a chronological diary of events that are measured in pesos. The diary referred to in the definition are the journals and ledgers which will be discussed in future chapters. COMMUNICATING – occurs through the preparation and distribution of financial and other accounting reports.
- 5. The nature ofaccounting According to Accounting Theory “Accounting is a systematic recording of financial transactions and the presentation of the related information to appropriate persons.”
- 6. The following basicfeatures of accounting: Accounting is a service activity. • Accounting provides assistance to decision makers by providing them financial reports that will guide them in coming up with sound decisions.
- 7. Accounting is aprocess. A process refers to the method of performing any specific job step by step according to the objectives or targets. 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 the collection, recording, classification, summarization, finalization, and reporting of financial data.
- 8. Accounting isboth an art and a discipline. Accounting is the art of recording, classifying, summarizing and finalizing financial data. The word ‘art’ refers to the way something is performed. It is behavioral knowledge involving a certain creativity and skill to help us attain some specific objectives. Accounting is a systematic method consisting of definite techniques and its proper application requires skill and expertise. So by nature, accounting is an art. And because it follows certain standards and professional ethics, it is also a discipline.
- 9. Accounting deals withfinancial information and transactions: Accounting records financial transactions and data, classifies these and finalizes their results given for a specified period of time, as needed by their users. At every stage, from start to finish, accounting deals with financial information and financial information only. It does not deal with non- monetary or non-financial aspects of such information.
- 10. Accounting is aninformation 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 evolved to meet the need for financial information as required by various interested groups.
- 11. Discuss the functionof accounting in business Accounting is considered as the “language of business”. Accounting is the means by which business information is communicated to business owners and stakeholders. The role of accounting in business is to provide information for managers and owners to use in operating the business. In addition, accounting information allows business owners to assess the efficiency and effectiveness of their business operations. Prepared accounting reports can be compared with industry standards or to a leading competitor to determine how the business is doing. Business owners may also use historical financial accounting statements to create trends for analyzing and forecasting future sales.
- 12. Accounting helps theusers of these financial reports to see the true picture of the business in financial terms. In order for a business to survive, it is important that a business owner or manager be well-informed.
- 13. Let us nowdiscuss the function of accounting in business. Mr. Juan is a retired government employee who is good at baking. One day he decides to put up a bakery shop in your barangay. He renovates a portion of his house to serve as the area for the production of bread. He purchases baking equipment and raw materials to produce five different types of bread. Mr. Juan also hires Jose to help him with the baking and, at the same time, to be in-charge of sales. Mr. Juan pays Jose on a weekly basis. Every day, Mr. Juan’s wife deposits the daily cash sales in their bank account at XY Savings Bank.
- 14. With the helpof accounting, what possible decisions or questions of Mr. Juan? can accounting provide an answer to? Is my business earning? (profitability) How much daily or monthly sales do I need in order to recover my fixed cost? (break-even) Do I need to hire additional workers to help me with my production? Can I afford to set up a new store in another place? Where do I get the funds? Can I afford to pay a bank loan?
- 15. The history ofaccounting Evolution of accounting: The Cradle of Civilization Around 3600 B.C., record-keeping was already common from Mesopotamia, China and India to Central and South America. The oldest evidence of this practice was the “clay tablet” of Mesopotamia which dealt with commercial transactions at the time such as listing of accounts receivable and accounts payable.
- 16. 14th Century -Double-Entry Bookkeeping The most important event in accounting history is generally considered to be the dissemination of double entry bookkeeping by Luca Pacioli (‘The Father of Accounting’) in 14th century Italy. Pacioli was much revered in his day, and was a friend and contemporary of Leonardo da Vinci. The Italians of the 14th to 16th centuries are widely acknowledged as the fathers of modern accounting and were the first to commonly use Arabic numerals, rather than Roman, for tracking business accounts. Luca Pacioli wrote Summa de Arithmetica, the first book published that contained a detailed chapter on double-entry bookkeeping.
- 17. French Revolution (1700s) The thorough study of accounting and development of accounting theory began during this period. Social upheavals affecting government, finances, laws, customs and business had greatly influenced the development of accounting.
- 18. The Industrial Revolution(1760-1830) Mass production and the great importance of fixed assets were given attention during this period.
- 19. 19th Century –The Beginnings of Modern Accounting in Europe and America The modern, formal accounting profession emerged in Scotland in 1854 when Queen Victoria granted a Royal Charter to the Institute of Accountants in Glasgow, creating the profession of the Chartered Accountant (CA).
- 20. The Present -The Development of Modern Accounting Standards and Commerce The accounting profession in the 20th century developed around state requirements for financial statement audits. Beyond the industry's self-regulation, the government also sets accounting standards, through laws and agencies such as the Securities and Exchange Commission (SEC). As economies worldwide continued to globalize, accounting regulatory bodies required accounting practitioners to observe International Accounting Standards. This is to assure transparency and reliability, and to obtain greater confidence on accounting information used by global investors.
- 21. Nowadays, investors seekinvestment opportunities all over the world. To remain competitive, businesses everywhere feel the need to operate globally. The trend now for accounting professionals is to observe one single set of global accounting standards in order to have greater transparency and comparability of financial data across borders.
- 22. BRANCHES OF ACCOUNTING FINANCIALACCOUNTING - broadest branch and is focused on the needs of external users. It is primarily concerned with the recognition, measurement and communication of economic activities.
- 23. Examples of financialreports include: - statement of financial position ( balance sheet ) - statement of comprehensive income ( income statement ) - statement of cash flows - statement of changes in equity - notes to financial statements
- 24. BRANCHES OF ACCOUNTING MANAGEMENTACCOUNTING - emphasizes the preparation and analysis of accounting information within the organization. Its objective is to provide timely and relevant information for those internal users of accounting information, such as managers and employees in their decision- making needs.
- 25. BRANCHES OF ACCOUNTING GOVERNMENTACCOUNTING - is the process of recording, analyzing, classifying, summarizing, communicating and interpreting financial information about the government in aggregate and in detail reflecting transactions and other economic events involving the receipt, transfer, usability and disposition of assets and liabilities.
- 26. BRANCHES OF ACCOUNTING AUDITING -two types : 1. external auditing – refers to the examination of financial statements by an independent CPA with the purpose of expressing an opinion as to fairness of presentation and compliance with GAAP ( generally accepted accounting principles)
- 27. BRANCHES OF ACCOUNTING AUDITING -two types : 2. internal auditing – deals with the operational efficiency of the company regarding the protection of the company’s assets, accuracy and reliability of the accounting data, and adherence to certain management policies.
- 28. BRANCHES OF ACCOUNTING TAXACCOUNTING - helps clients follow rules set by tax authorities. It includes tax planning and preparation of tax returns. It also involves determination of income tax and other taxes, tax advisory services such as ways to minimize taxes legally, evaluation of the consequences of tax decisions, and other tax-related matters.
- 29. BRANCHES OF ACCOUNTING COSTACCOUNTING - refers to the recording, presentation, and analysis of manufacturing costs.
- 30. BRANCHES OF ACCOUNTING ACCOUNTING EDUCATION - deals with developing future accountants by creating relevant accounting curriculum. Accounting professionals can become faculty members of education institutions.
- 31. BRANCHES OF ACCOUNTING ACCOUNTING RESEARCH - focuses on the search for new knowledge on the effects of economic events on the process of summarizing, analyzing, verifying, and reporting standardized financial information, and on the effects of reported information on economic events.
- 32. QUIZ Identify whatbranch of accounting renders this service. ¼ sheet of paper. 1. Preparation of general-purpose financial statements. 2. Evaluation of the performance of a sales department 3. Develop standards to address a new business set up
- 33. 4. review taxcompliance of the business 5. Evaluate whether a branch of the business complies with the collection and deposit policy of the company
- 34.
- 35. 1. EXTERNAL USERS -are individuals and organizations outside a company who want financial information about the company. These users are not directly involved in managing and operating the business. Ex.investors, creditors, government,lenders, customers, supplier, public.
- 36. 2. INTERNAL USERS -are those individuals inside a company who plan, organize, and run the business. These users are directly involved in managing and operating the business. Ex.employee, manager-owner, board of directors
- 37.
- 38. 1. SOLE /SINGLE PROPRIETORSHIP - A form of business is owned by one person; the simplest, and the most common form of business organization - it is not separate from the owner. The business and the owner are inseparable.
- 39. - the ownerkeeps the profit - the owner makes all decisions - it is easy to form and operate - life of the business is limited to the life of the owner. - amount of capital is limited only by the wealth of the owner.
- 40. 2. PARTNERSHIP - aform of business owned by two or more persons. The details of the arrangement between the partners are outlined in a written document called ARTICLES OF PARTNERSHIP
- 41. 3. CORPORATION - isa business organized as a separate legal entity under the corporation law with ownership divided into transferable shares of stocks. Atleast 5 persons but not more than 15.
- 42. 4.COOPERATIVES -registered associationof persons, with common bond of interest, who have voluntarily joined together to achieve lawful common social or economic end, making equitable contributions to the capital required. At least 15 persons