CHAPTER I.

Accounting in Action
Accounting: ● Accounting process includes the
- is the system that measures business bookkeeping function. Bookkeeping
activities, process that information usually involves only the recording of
into reports, and communicates these economic events. It is therefore just
findings to decision makers. one part of the accounting process. In
- Accounting consists of three activities total, accounting involves the entire
– it identifies, records and process of identifying, recording and
communicates the economic events communicating economic events.
of an organization to interested users. WHO USES ACCOUNTING DATA: The
- As a starting point to the accounting information that a user of financial
process, a company identifies the economic information needs depends upon the kinds of
events relevant to the business. decisions the users make. There are two
- Once the economic events are identified, broad groups of users of financial
the company records these events in order to information: internal users and external
provide a history of its financial activities. users.
Recording consists of keeping a systematic, 1. INTERNAL USERS - Internal users of
chronological diary of events, measured in accounting information are managers who
pesos. plan, organize and run the business.
- Finally, the company communicates the In running a business, internal users must
collected information to interested users by answer many important
means of accounting reports, the most questions as such:
common of which are called financial ● FINANCE: Is cash sufficient to pay
statements. To make the reported financial dividends to stockholders?
information meaningful, companies report ● MARKETING: What price for a product
the recorded data in a standardized way. It will maximize the company’s net
accumulates information resulting from income?
similar transactions. ● HUMAN RESOURCE: Can we afford to
- An example is when a company give the company’s employees pay
accumulates all sales transactions over a raises this year?
certain period of time and reports the data ● MANAGEMENT: Which company’s
as one amount in the company’s financial product line is the most profitable?
statements. Such data are said to be Should any product line be eliminated?
reported in the aggregate. By presenting the To answer these and other questions, internal
reported data in the aggregate, the users need detailed information on a timely
accounting process simplifies a multitude of basis. Managerial accounting provides
transactions and makes a series of activities internal reports to help users make decision
understandable and meaningful. about their companies. Examples are
● A vital element in communicating financial comparisons of operating
economic events is the accountant’s alternatives, projections of income from new
ability to analyze and interpret the sales campaigns and forecasts of cash needs
reported information. Analysis involves for the next year.
use of ratios, percentages, graphs and 2. EXTERNAL USERS - External users are
charts to highlight significant financial individuals and organizations outside a
trends and relationships. company who want financial information
Interpretation involves explaining the about the company. The two most common
uses, meaning and limitations of types of external users are investors and
reported data.
creditors. Investors (owners) use accounting question: What are the responsibilities
information to make decision to buy, and obligations of the parties
hold or sell ownership shares of a company. involved?
Creditors (such as suppliers and bankers) ● Identify the alternatives and weigh
use accounting information to evaluate the the impact of each alternative on
risks of granting credits or lending money. various stakeholders – Select the most
- Financial accounting provides economic ethical alternative, considering all the
and financial information for investors, consequences. Sometimes there will be
creditors and other external users. The one right answer. Other situations
information needs of external users vary involve more than one right solution;
considerably. these situations require an evaluation
● Taxing authorities such as the Bureau of each and a selection of the best
of Internal Revenue want to know alternative.
whether the company complies with GENERALLY ACCEPTED ACCOUNTING
tax laws. Regulatory agencies such as PRINCIPLES:
the Securities and Exchange The accounting profession has developed
Commission want to know whether the standards that are generally accepted and
company is operating within universally practiced. This common set of
prescribed rules. standards is called generally accepted
● Customers are interested in whether accounting principles (GAAP). These
the company will continue to honor standards indicate how to report economic
product warranties and support its events.
product lines. The primary accounting standard
● Labor unions want to know whether setting body in the United States is the
the owners have the ability to pay Financial Accounting Standards Board
increased wages and benefits. (FASB). The Securities and Exchange
THE BUILDING BLOCKS OF ACCOUNTING: Commission (SEC) is the agency in the US
government that oversees US financial
ETHICS IN FINANCIAL REPORTING: The markets and accounting standard setting
standards of conduct by which one’s actions bodies. The SEC relies on the FASB to develop
are judged as right or wrong, honest or accounting standards, which public
dishonest, fair or not fair are ethics. companies must follow.
Effective financial reporting depends on Many countries outside of the United
sound ethical behavior. When analyzing States have adopted the accounting
various ethics cases, as well as experiences in standards issued by the International
your own life, I is useful to apply the three Accounting Standards Board (IASB). These
steps: standards are called International Financial
● Recognize an ethical situation and the Reporting Standards (IFRS).
ethical issues involved – Use your As markets become more global, it is
personal ethics to identify ethical often desirable to compare the results of
situations and issues. Some businesses companies from different countries that
and professional organizations provide report using different accounting standards.
written copies of ethics for guidance in In order to increase comparability, in recent
some business situations years, the two standard setting bodies have
● Identify and analyze the principal made efforts to reduce the difference
elements in the situation – Identify the between the US. GAAP and IFRS. This process
stakeholders –persons or groups who is referred to as convergence.
may be harmed or benefited. Ask the
 As a result of these convergence ASSUMPTIONS: Assumptions provide a
efforts, it is likely that someday there will be foundation in the accounting process. Two
a single set of high quality accounting main assumptions are the monetary unit
standards that are used by companies assumption and the economic entity
around the world. assumption.
I. MONETARY UNIT ASSUMPTION
MEASUREMENT PRINCIPLES: GAAP The monetary unit assumption requires that
generally uses one of two measurement companies include in the accounting records
principles, the cost principle or the fair value only transaction data that can be expressed
principle. Selection of which principle to in money terms. This assumption enables
follow generally relates to trade-offs between accounting to quantity (measure) economic
relevance and faithful representation. events. The monetary unit assumption is vital
Relevance means the financial information is to applying the cost principle.
capable of making a difference in a decision. This assumption prevents the inclusion
Faithful representation means that the of some relevant information in the
numbers and descriptions match what really accounting records. For example, the health
existed or happened – if it is factual. of the company’s owner, the quality of
I. COST PRINCIPLE service and the morale of the
The cost principle (or historical cost principle) employees are not included. The reason:
dictates that companies record assets at Companies cannot quantify this information
their cost. This is true not only at the time the in money terms. Though this information is
asset is purchased but also over the time the important, companies record only events that
asset is held. For example, a company can be measured in money.
purchases a land for P300,000, the company II. ECONOMIC ENTITY ASSUMPTION
initially reports it in its accounting records at An entity can be any organization or unit in
P300,000. But what does the company do if society. It may be a government unit, a
by the next year, the fair value of the land school district or a church. The economic
has increased to P400,000. Under the cost entity assumption requires that the activities
principle, it continues to report the land at of the entity be kept separate and distinct
P300,000. from the activities of its owner and all other
II. FAIR VALUE PRINCIPLE economic activities. To illustrate, Mr X, owner
The fair value principle states that assets and of LMN Company must keep his personal
liabilities should be reported at fair value (the living costs from the expenses of the
price received to sell as asset or settle a company.
liability). Fair value information may be more A. Proprietorship – A business owned by one
useful than historical cost for certain types of person is generally a proprietorship. The
assets and liabilities. For example, certain owner is often the manager/operator of the
investment securities are reported at fair business. Usually only a relatively small
value because market value information is amount of money (capital) is necessary to
usually readily available for these types of start in business as a proprietorship. The
assets. In determining which measurement owner (proprietor) receives any profit, suffers
principle to use, companies weigh the factual any losses, and is personally liable for all
nature of cost figures versus the relevance of debts of the business. There is no legal
fair value. In general, most companies distinction between the business as an
choose to use cost. Only in situations where economic unit and the owner, but the
assets are actively traded such as investment accounting records of the business activities
securities, do companies apply fair value are kept separate from the personal records
principle extensively. and activities of the owner.
B. Partnership – A business owned by two or We can express the relationship of
more persons associated as partners is a assets, liabilities and owner’ equity as an
partnership. In most aspect, a partnership is equation:
like a proprietorship except that more than
one person is involved. Typically a Assets = Liabilities + Owner’s Equity
partnership agreement (written or oral) sets
forth such terms as initial investment, duties This relationship is the basic accounting
of each partner, division of net income (or net equation. Assets must equal the sum of
loss), and settlement to be made upon death liabilities and owner’s equity. Liabilities
or withdrawal of a partner. Each partner appear before owner’s equity in the basic
generally has unlimited personal liability for accounting equation because they are paid
the debts of the partnership. Like a first if a business is liquidated. The
proprietorship, for accounting purposes, accounting equation applies to all economic
the partnership transactions must be kept entities regardless of the size, nature of
separate from the personal activities of the business or form of business organization. It
partners. Partnership are often used to applies to a small proprietorship such as a
organize retail and service-type businesses corner grocery store as well as to a giant
including professional practices (lawyers, corporation. The equation provides the
doctors, architects and certified public underlying framework for recording and
accountants) summarizing economic events.
C. Corporation – A business organized as a
separate legal entity under state Assets
corporation laws and having ownership Assets are resources a business owns. The
divided into transferable shares of stock business uses its assets in carrying out such
is a corporation. The holders of the shares activities as production and sales. The
(stockholders) enjoy limited liability, that is, common characteristic possessed by all
they are not personally liable for the debts of assets is the capacity to provide future
the corporate entity. Stockholders may services or benefits. In a business, that
transfer all or part of their ownership shares service potential or future economic benefit
to other investors at any time. (Or sell their eventually results in cash inflows (receipts).
shares). The ease with which ownership can Examples of commonly used assets are:
change adds to the attractiveness of ● Cash – The Cash account shows the
investing in a corporation. Because cash effect of a business transactions.
ownership can be transferred without Cash means money and any medium
dissolving the corporation, the corporation of exchange that a bank accepts at
enjoys an unlimited life. face value. Cash includes currency,
coins, money orders, certificates of
THE BASIC ACCOUNTING EQUATION deposit and checks. The cash account
- The two basic elements of a business are includes all cash items, whether they
what it owns and what it owes. Assets are the are kept on hand, in a safe, in a cash
resources a business owns. Liabilities and register, or in a bank.
owner’s equity are the rights or claims ● Notes Receivable – A business may
against these resources. Claims of those to sell its goods or services in exchange
whom the company owes money (creditors) for a promissory note, which is a
are called liabilities. Claims of owners are written pledge that the customer will
called owner’s equity. pay the business a fixed amount of
money at a certain date. The Notes
Receivable account is a record of the
 promissory notes that the business money borrowed to purchase the
expects to collect in cash. delivery truck.
● Accounts Receivable - A business may ● Company A may also have salaries
sell its goods or services in exchange and wages payable to employees and
for an oral or implied promise for sales and real estate taxes payable to
future cash receipts. Such sales are the local government
made on credit (on account). The All of these persons or entities to whom
Accounts Receivable account contains Company A owes money are its creditors.
these amounts. Creditors may legally force the liquidation of
● Prepaid Expenses – a business often a business that does not pay its debts. The
pays certain expenses in advance. A law requires that creditors be paid before
prepaid expense is an asset because ownership claims. Commonly used liability
the business avoids having to pay in accounts are:
cash in the future for the specified ● Notes Payable – This account is the
expense. The ledger holds a separate opposite of Notes Receivable account.
asset account for each prepaid Notes Payable
expense. Prepaid Rent and Prepaid represent the amounts that the business
Insurance are prepaid expenses that must pay because it signed a promissory
occur often in business. Office note to purchase goods or services.
Supplies are also accounted for as ● Accounts Payable – This account is
prepaid expenses. the opposite of Accounts Receivable
● Land – The Land account is a record of account. The oral or implied promise
the land that a business owns and uses to pay off debts arising from credits
in the its operations purchase of goods appears in the
● Building – The cost of a business’s Accounts Payable account. Such a
building – office, warehouse, garage purchase is said to be made on
and factory – appear in the Building account. Other liability categories and
Account. accounts are added as needed. Taxes
● Equipment, Furniture and Fixtures – a Payable, wages payable and Salary
business has a separate asset account Payable are accounts that appear in
for each type of equipment – Office may ledgers.
Equipment and Store Equipment for Owner’s Equity
example. The furniture and Fixtures The ownership claim on total assets is
account shows the cost of this asset. owner’s equity. It is equal to total assets
Liabilities minus total liabilities. Here is, why: the assets
Liabilities are claims against assets – that is of a business are claimed by either creditors
existing debts and obligations. Businesses of or owners. To find out what belongs to
all sizes usually borrow money and purchase owners, we subtract the creditors’ claims (the
merchandise on credit. These economic liabilities) from assets. The remainder is the
activities result in payables of various sorts. owner’s claim on the assets – the owner’s
● Company A, for instance, purchases equity. Since the claims of the creditors must
cheese, sausages, flour and beverages be paid before ownership claims, owner’s
on credit from suppliers. These equity is often referred to as residual equity.
obligations are called accounts In a proprietorship or a partnership, owner’s
payable. equity is often split into separate accounts
● Company A has a note payable to for the owner’s capital balance and the
Land Bank of the Philippines for the owner’s withdrawals.
● Capital – This account shows the ● Expenses – the cost of operating a
owner’s claim to the assets of the business is called expense. Expenses
business. After total liabilities are have the opposite effect on revenues
subtracted from total assets, the so they decrease the owner’s equity. A
remainder is the owner’s capital. The business needs a separate account for
owner’s investment in the business is each category of its expenses, such as
recorded directly to the Capital Salary Expense, Rent Expense,
account. The balance of the Capital Advertising Expense and Utilities
account equals the owner’s investment Expense. Expense accounts are
in the business plus net income and decreasing in owner’s equity.
minus net losses and owner INCREASES IN OWNER’S EQUITY: In a
withdrawals. In addition to the Capital proprietorship, owner’s investment and
account, the following accounts also revenues increases owner’s equity.
appear in the owner’s equity section A. Investment by Owner - Investment by
of the ledger. Owner are the assets the owner puts
● Withdrawals – When the owner into the business. These investments
withdraws cash or other assets from increases owner’s equity. They are
the business for personal use, its recorded in a category called owner’s
assets and its owner’s equity both capital.
decrease. The amounts taken out from B. Revenues – Revenues are the gross
the business appear in a separate increase in owner’s equity resulting
account entitled Withdrawals or from businessactivities entered into
Drawings. If withdrawals were for the purpose of earning income.
recorded directly in the Capital Generally, revenues result fromselling
account, the amount of owner merchandise, performing services,
withdrawal would not be highlighted. renting property and lending money.
To separate these two amounts for Common sources of revenues are
decision making, businesses use a sales, fees, services, commission,
separate account for Withdrawals. interest, dividends, royalties and rent.
This account shows a decrease in Revenues usually result in an increase
Owner’s Equity. in an asset. They may arise from
● Revenues – the increase in owner’s different sources and are called
equity from delivering goods or various names depending on the
services to customers or clients is nature of the business.
called revenues. The ledger contains DECREASES IN OWNER’S EQUITY: In a
as many revenue accounts for proprietorship, owner’s drawings and
amounts as needed. A company would expenses decreases
have Service Revenue for amounts owner’s equity.
earned by providing accounting A. Drawings – An owner may withdraw
services for clients. If the business cash or other assets for personal use.
loans money to an outsider, it will also We use a separate classification called
need an interest Revenue account for drawings to determine the total
the interest earned on the loan. If the withdrawals for each accounting
business rents to a tenant, it will need period. Drawings decrease the owner's
a Rent Revenue account. Increases in equity. They are recorded in a
revenue are increases in owner’s category called Owner’s Drawing
equity. B. Expenses – Expenses are the cost of
assets consumed or services used in
 the process of earning income. They decrease
the owner's equity that results from operating
the business.
In summary, owner’s equity is increased by the owner’s
investment and by revenues from business operations.
Owner’s equity is decreased by owner’s withdrawal of
assets and by
expenses. Shown below expands the basic accounting
equation by showing the accounts that comprise
owner’s equity. This format is referred to as the
expanded accounting equation.

Using the Accounting Equation Transactions

(business transactions) are business economic events
recorded by accountants. Transactions may be external
or internal. External transactions involve economic
events between the company and some outside
enterprises. For example, a company’s purchase of
cooking equipment from a supplier, payment of
monthly rent to the landlord and sale of commodities to
customers are external transactions. Internal
transactions are economic events that occur entirely
within one company, the use of cooking and cleaning
supplies are internal transactions for a company.
Companies carry on many activities that do
not represent business transactions. Examples are
hiring of employees, answering the telephone, talking
with customers and placing merchandise orders. Some
of these may lead to business transactions. Employees
will earn wages and suppliers will deliver ordered
merchandise. The company must analyze each event to
find out if it affects the components of the accounting
equation. If it does, the company will record the
transactions.
Each transaction must have a dual effect on
the accounting equation. For example, if an asset is
increased, there must be a corresponding:
(1) decrease in another asset, or
(2) increase in a specific liability, or
(3) increase in owner’s equity.
Significant facts on the illustrative summary are:
● Each transaction is analysed in terms of its
effect on:
a. The three components of the basic accounting
equation,
b. Specific items within each component The two
sides of the equation must always be equal.
FINANCIAL STATEMENTS: The Company prepares four
financial statements from the summarized accounting
data:
1. An Income Statement presents the revenues and
expenses and resulting net income or net loss for a
specific period of time.
2. An Owner’s Equity Statement summarizes the
changes in owner’s equity for a specific period of time
3. A Balance Sheet reports the assets, liabilities and
owner’s equity at a specific date.
4. A Statement of Cash Flows summarizes information
about the cash inflows (receipts) and outflows
(payments) for a specific period of time.
 ● OWNER’S EQUITY STATEMENT: The Owner’s
Equity Statement reports the changes in
owner’s equity for a specific period of time. The
time period is the same as that covered by the
Income Statement. Data for the preparation of
the Owner’s Equity Statement comes from the
owner’s equity columns of the tabular
summary and from the Income Statement. The
first line of the statement shows the beginning
owner’s equity amount (which was zero at the
start of the business). Then come the owner’s
investment, net income (or loss), and the
owner’s drawing. This statement indicates why
owner’s equity has increased or decreased
during the period. If the owner makes any
additional investments, the company reports
them in the owner’s equity statement as
investments.
● BALANCE SHEET: Violet Company’s balance
sheet reports the assets, liabilities and owner’s
equity at a specific date (September 30, 2019).
The company prepares the balance sheet from
the column heading of the tabular summary
and the month-end data shown in its last line.
Observe that the balance sheet lists assets at
the top followed by liabilities and owner’s
equity. Total assets must equal total liabilities
and owner’s equity. Violet reports only one
liability – accounts payable- in its balance
sheet. In most cases, there will be more than
one liability when two or more liabilities are
involved, it customary way of listing as follows:

The balance sheet is a snapshot of the company’s

financial position at a specific moment in
Note that the statements are interrelated: time (usually a month-end or year-end).
1. Net income of P27,500 in the Income Statement is ● STATEMENT OF CASH FLOWS: The Statement
added to the beginning balance of Owner’s Capital in of Cash Flows provides information on the cash
the Owner’s Equity Statement. receipts and payments for a specific period of
2. Owner’s Capital of P164,500 at the end of the time. The statement of cash flows reports
reporting period shown in the Owner’s Equity (1) the cash effects of a company’s operations
Statement is reported in the Balance Sheet. during a period,
3. Cash of P80,500 in the Balance Sheet is reported in (2) its investing transactions,
the Statement of Cash Flows. Also, explanatory notes (3) the financing transactions,
and supporting schedules are an integral part of every (4) the net increase or decrease in cash during
set of financial statements. the period, and
● INCOME STATEMENT: The income statement (5) the cash amount at the end of the period.
reports the revenues and expenses for a Reporting the sources, uses and change in cash is
specific period of time. The income statement useful because investors, creditors, and others want to
lists revenues first, followed by expenses. know what is happening to a company’s most liquid
Finally, the statement shows net income (or net resource. The statement of cash flows provides answers
loss). Net income results when revenue exceeds to the following simple but important questions.
expenses. A net loss occurs when expenses a. Where did cash come from during the period?
exceed revenues. b. What was cash used for during the period?
 c. What was the change in the cash balance Convergence – the process of reducing the difference
during the period? between GAAP and IFRS.
ACCOUNTING CAREER OPPORTUNITIES Corporation – a business organized as a separate legal
A. Public Accounting: Individuals in public accounting entity under state corporation law, having ownership
offer expert services to the general public. A major divided into transferable shares of stock.
portion of public accounting involves auditing. In Cost Principle – an accounting principle that states
auditing, a certified public accountant (CPA) examines that companies should record assets at their costs.
company financial statements and provides an opinion Drawings – withdrawal of cash or other assets from an
as to how accurately the financial statements present unincorporated business for the personal use of the
the company’s results and financial position. Analysts, owner (s).
investors and creditors rely heavily on this “audited Economic Entity Assumption - an assumption that
opinion” which CPAs have the exclusive authority to requires that the activities of the entity be kept
issue. separate and distinct from the activities of its owner
● Taxation is another major area of public and all other economic entities.
accounting. The work that tax specialists Ethics – the standards of conduct by which one’s action
perform includes tax advice and planning, are judged as right or wrong, honest or dishonest, fair
preparing tax returns and representing clients or not fair.
before government agencies such as the Expanded Accounting Equation – Assets = Liabilities +
Bureau of Internal revenue. Owner’s Capital- - Owner’s Drawing + Revenues –
● A third area in public accounting is Managerial Expenses.
Accounting. It ranges from installing basic Expenses – the cost of assets consumed or services
accounting software or highly complex used in the process of earning revenue.
enterprise resource planning systems, to Fair Value Principle – an accounting principle stating
providing support services for major marketing that assets and liabilities could be reported at fair
projects or merger and acquisition activities. value (the price received to sell an asset or settle a
Many CPAs are entrepreneurs. They form small liability).
or medium-sized practices that frequently Faithful Representation - numbers and descriptions
specialize in tax or consulting services. match really existed or happened – it is factual.
B. Private Accounting: Instead of working in public Financial Accounting – the field of accounting that
accounting, you might choose to be an employee of a provides economic and financial information for
for-profit company. In private (managerial) investors, creditors and other external users.
accounting, you would be involved in activities such as Financial Accounting Standards Board – a private
cost accounting (finding the cost of producing specific organization that established generally accepted
products), budgeting, accounting information system accounting principles (GAAP).
design and support, or tax planning and preparation. Forensic Accounting – an area of accounting that uses
C. Opportunities in Government: There is also a very accounting, auditing and investigative skills to conduct
high demand for accounting educators at public investigations into theft and fraud. Generally Accepted
colleges and universities and in state and local Accounting Principles – common standards that
government. indicate how to report economic events.
D. Forensic Accounting: Forensic accounting uses Income Statement – financial statement that presents
accounting, auditing and investigative skills to conduct the revenues and expenses and resulting net income or
investigations into theft and fraud. This includes tracing net loss of a company for a specific period of time.
money-laundering and identity theft activities as well International Accounting Standards Board (IASB) – an
as tax evasion. accounting standard-setting body that issues
standards adopted by many countries outside of the
GLOSSARY United States.
Accounting – the information system that identifies, Investment by Owner – the assets an owner puts into
records and communicates the economic events of an the business.
organization to interested users. Liabilities – creditors claim on total assets.
Auditing – the examination of financial statements by Management Consulting – an area of public
a certified public accountant (CPA) in order to express accounting ranging from development of accounting
an opinion as to the fairness of presentation. and computer systems to support services for
Assets – Resources a business owns. marketing projects and merger and acquisition
Balance sheet – a financial statement that reports the activities.
assets, liabilities and owner’s equity at a specific date. Managerial Accounting – the field of accounting that
Basic Accounting Equation – Assets = Liabilities + provides internal reports to help users make decisions
Owners Equity about their companies.
Bookkeeping – a part of accounting that involves only Monetary Unit Assumption – an assumption stating
the recording of economic events. that companies include in the accounting records only
transaction data that can be expressed in terms of
money.
Net Income – the amount by which revenues exceed
expenses.
Net Loss – the amount by which expenses exceed
revenues. Owner’s equity- the ownership claim on total
assets
Owner’s Equity Statement – a financial statement that
summarizes the changes in owner’s equity for a specific
period of time.
Partnership – a business owned by two or more
persons associated as partners.
Private (or Managerial) Accounting - an area of
accounting within a company that involves such
activities as cost accounting, budgeting design and
support of accounting information systems and tax
planning and preparation.
Proprietorship – a business owned by one person.
Public Accounting – an area of accounting in which the
accountant offers expert service to the general public.
Relevance – financial information that is capable of
making a difference in a decision.
Revenues – the gross increase in owner’s equity
resulting from business activities entered into for the
purpose of earning income.
Securities and Exchange Commission (SEC) – a
government agency that oversees the U.S. financial
markets and accounting standard- setting bodies.
Statement of Cash Flows – a financial statement that
summarizes information about the cash inflows
(receipts) and cash outflows (payments) for a specific
period of time.
Taxation – an area of public accounting involving tax
advice, tax planning, preparing tax returns and
representing clients before government agencies.
Transactions – the economic events of a business that
are recorded by accountants.