accounting and its environment

7/26/2019 Accounting and Its Environment

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Accounting andIts Environment



is a service activity. Its function is to providequantitative information, primarily nancial in nature,about economic entities , that is intended to be usefulin making economic decision.

- Accounting Standards Council

Is the art of recording, classifying and summarizingin a signicant manner and in terms of money,transactions and events which are in part at least of anancial character and interpreting the resultsthereof.-

-American Institute of Certied Public Accountants

Accounting



is the process of identifying, measuringand communicating economicinformation to permit informed udgment

and decision by users of the information.-American Accounting Association

Accounting



Information should be USEFUL INDECISION MAIN!"

Information is li#el$ to be FINANCIAL IN

NA%U&E

Accounting is about 'UAN%I%A%I(EINFO&MA%ION

)

*

+



!I"#$%&LUCA ,ACIOLI- .Father of

Accounting/In '()(he pub

lished his book,SUMMA DE A&I%0ME%ICA1

!EOME%&IA1 ,&O,O&%IONI E%,&O,O&%IONALI%A *+verything

about Arithmetic,eometry,

roportions and roportionality.

Particularis de Computis et Scripturisor /0etails of 1alculation and %ecording.

- double entry bookkeeping.-23 1hapters.

-there are 2 books discussed in"umma.



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-the book in which the transactions are recorded

in the currency in which they are conducted.- chronological

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-second book. 4erchant9s private book.

-entries made are in one currency, chronologicaland in narrative form.

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-last book.

-alphabetical listing of all the business accountsalong with the running balance of each particularaccount.

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+ Com2onents of Accounting

)

*

+

IDEN%IF3IN!4 Anal$tical Com2onent

MEASU&IN!4 %echnical Com2onent

COMMUNICA%IN!4 Formal Com2onent

-recognition or non-recognition of business activities asaccountable events.

-process of preparing and distributing accounting reportsto potential users of accounting information.

-assigning of peso amounts to the accountable economictransactions and events.



"ummarizing

1lassifying

%ecording

Implicit in the 1ommunication rocessare:

-or 6$5%7A8I;I7 is the process of systematicallymaintaining a record of all economic businesstransactions after they have been identied and

measured.

-is the preparation of nancial statements whichinclude the statement of nancial position, statementof comprehensive income, statement of changes in

equity and statement of cash <ows..

-is the sorting or grouping of similar and interrelatedeconomic transactions into their respective classes.



i= #o keeping systematic record

ii= #o ascertain the results of the operation

iii= #o ascertain the nancial position of the business

iv= #o protect business properties

v= #o facilitate rational decision > making

vi=#o provide information to the ta? authorities

$bectives of Accounting

-to provide quantitative nancial information abouta business that is useful to statement users

particularly owners and creditors, in maingeconomic decisions!



@orms of usiness $rganizations

)" SOLE ,&O,&IE%O&S0I,

also known as the sole trader orsimply a 2ro2rietorshi2, is a type ofbusiness entity that is owned and runby one individual or one legal person.




O&

*" ,A&%NE&S0I,

A business owned by two or more persons who bindthemselves together to contribute money, property or

industry to a common fund, with the intention of dividingthe prot among themselves.



+" CO&,O&A%ION


An articial being created by operation of law,

having the right of succession and the powers,attributes ad properties e?pressly authorized bylaw or incident to its e?istence.



#ypes of usiness

%3,E AC%I(I%3 '. "+%CI1+ Selling people"s time

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#uying and selling products

2. 4A75@A1#5%I7 Conversion of raw

materials into nished products

(. %AF 4A#+%IA8" $rowing or e%tracting ofraw materials

G. I7@%A"#%51#5%+ Selling the utili&ation or

use of infrastructures3. @I7A71IA8 'eceiving deposits,

lending and investingmoney

H. I7"5%A71+ Pooling of premiums ofmany to meet claims of

few



%he Accountanc$ ,rofession

CA&EE& O,,O&%UNI%IES

'. ublic Accountingublic accountants render independent and e?pert nancial

services to the public. Accountants collect professional fees for theirservices. #hey oer three kinds of services, namely auditing, ta?ationand management advisory services.

D. rivate Accounting *1ommerce and Industry=

1As are employed in business entities in various capacity asaccounting sta, chief accountant, internal auditor and controller.



2. overnment Accounting

#he focus of government accounting is the custody andadministration of funds. Accountants are employed in many branchesof government, more particularly the I%, 1ommission on Audit,0epartment of udget and 4anagement, "ecurities and e?change1ommission and the local government units.

(. +ducationEAcademe #his guarantees the continued development of the profession.

y this, accountants are considered modern day heroes as theymake others understand the body of accounting knowledge and

prepare the candidates for the tough 1A e?ams.



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AUDI%IN!

5OOEE,IN!

rimary service oered by most publicpractitioners.It is the e?amination of nancial statementsby independent certied public accountant

for the purpose of e?pressing an opinion asto the fairness with which the nancialstatements are prepared.

4echanical task involving the collection of

basic nancial data. It is procedural andlargely concerned with development andmaintenance of accounting records. It isthe how of accounting.



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COS%ACCOUN%IN!

FINANCIALACCOUN%IN!

1ost accounting is the branch ofaccounting that provides economic andnancial information to decision makerswithin a company. It is limitedpredominantly to use within the company

to aid management in the process ofmaking choices that will benet thestockholdersEowners by ma?imizingcompany prots that translate intoma?imizing stockholder wealth.

rimarily concerned with the recording ofbusiness transactions and the eventualpreparation of nancial statements.



FINANCIALMANA!EMEN%

MANA!EMEN%

ACCOUN%IN!

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It refers to the eJcient and eectivemanagement of money *funds= in such amanner as to accomplish the obectives ofthe organization. It includes how to raise

the capital, how to allocate it i.e. capitalbudgeting. 7ot only about long termbudgeting but also how to allocate theshort term resources like current assets.

It incorporates cost accounting data andadapts them for specic decisions whichmanagement may be called upon tomake. It is needed by management inplanning, controlling an evaluating theentity9s operations.



%A6A%ION

!O(E&NMEN%ACCOUN%IN!

#a? accounting includes the preparation ofta? returns and the determination of the ta?consequences of certain proposed businessendeavors or transactions.

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overnment accounting is concerned withsystematic and scientic recording of

government revenues and e?penditures. Itreveals how public funds have beengenerated and utilized for the welfare of thegeneral public.



Ob7ectivit$

Integrit$

CODE OF E%0ICS

Fundamental ,rinci2les 8,ICO,9

,rofessionalCom2etence and Due

Care

Con:dentialit$

,rofessional 5ehavior



ACCOUN%ANC3 AC% OF*;;<

Also known as the &e2ublic Act No" =*=> is the law regulating thepractice of accountancy in the hilippines

"igned by resident loria 4acapagal-Arroyo on Ma$ )+1 *;;<.

"ome of the contents include:

o "cope of racticeo rofessional %egulatory oard and its 1ompositiono #he 1A +?aminationso Kualications of Applicants for +?aminationso "cope of +?aminationo %ating in the 8icensure +?aminationo @ailing 1andidates to #ake %efresher 1ourse



International Accounting "tandards andAccounting "tandards in the hilippines

ernational Accounting Standards

1 -IA" -I@%"E I@%I1 -Interpretations

,hili22ines

A"1 -"@A"E A"@%"1 -@%"I1EI1 -Interpretations

-are authoritative statements of howparticular types of transaction andother events should be re<ected innancial statements.



USE&S OF ACCOUN%IN!INFO&MA%ION

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Investors LendersSu22liers andother tradecreditors

Em2lo$ees

,ublic

Customers

!overnment andtheir agencies




Investors1oncerned with the risk inherent in, and returnprovided by, their investments.

LendersInterested in the information that enablesthem to determine whether their loans, andthe interest attaching to them will be paidwhen due.

Su22liers andother tradecreditors

Interested in information that enables them todetermine whether amounts owing to themwill be paid when due.




Em2lo$ees

Interested in information about

the stability and protability oftheir employers. #hey are alsointerested in information whichenables them to assess theability of the entity to provide

remuneration, retirementbenets and employmentopportunities.

Customers

1ustomers have an interest

in information about thecontinuance of an entity,especially when they have along term involvement with,or are dependent on, theentity.




!overnment andtheir agencies

Interested in the allocation of resources and,therefore, the activities of entities. #hey alsorequire information in order to regulate the

activities of entities, determine ta?ationpolicies and as the basis for national incomeand similar statistics.

,ublic #he nancial statements may assist the publicby providing information about the trends and

recent developments in the prosperity of theentity and the range of its activities.



Accounting embraces auditing. Auditing isone of the areas of accounting specialization.

Accounting is essentially constructive in

nature. It ceases when nancial statements areprepared.

Auditing is analytical. #he work of an auditor

begins when

the work of an accountant ends.

Accounting vs" Auditing



Bookkeeping is procedural and largely

concerned with development and maintenance ofaccounting records. #he /how of accounting.

Accounting is conceptual and is concerned with

the /why, reason or ustication for any actionadopted.

Accounting vs" 5oo##ee2ing

accounting and its environment

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