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Week 1 Introduction to Accounting

Introduction to Accounting

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Rellie Castro
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10 views4 pages

Week 1 Introduction to Accounting

Introduction to Accounting

Uploaded by

Rellie Castro
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Introduction to Accounting

Lesson Overview
This lesson introduces students to accounting by exploring its definition, nature,
history, and users of accounting information. By understanding these foundational
concepts, students will grasp how accounting serves as the language of business
and a tool for decision-making.

Learning Objectives
At the end of this lesson, students should be able to:
1. Define accounting and explain its role in business.
2. Describe the nature and key characteristics of accounting.
3. Narrate the evolution of accounting and its historical milestones.
4. Differentiate between internal and external users of accounting information
and provide examples of each.

Lesson Content
1. Definition of Accounting
Accounting is a systematic process of identifying, recording, and communicating
economic events of an organization to interested users. These events are measured
in monetary terms and presented through financial statements, enabling users to
make informed decisions.
 Identifying – involves in the selection of the economic events which are
important to a particular business transaction. Examples of transactions in a
merchandising store are sales of merchandise, purchases of merchandise,
and purchases of delivery truck.
 Recording – is the act of keeping a chronological record of events that are
measurable in accounting documents like journals and ledgers.
 Communicating – refers to the process of communicating financial reports
to the users of financial information.
2. Nature of Accounting
 Service Activity: Accounting provides financial reports to assist decision-
makers.
 A Process: It involves collecting, processing, and communicating financial
information systematically.
 Art and Discipline: Accounting is both a skillful art for recording and
summarizing data and a discipline with established principles.
 Focus on Financial Transactions: Only monetary events are recorded.
 Storehouse of Information: It organizes and communicates financial data
for decision-making.
3. History of Accounting
 Cradle of Civilization (3600 B.C.):
o Accounting began with clay tablets in Mesopotamia to record
transactions such as accounts receivable and payable.
 Double-Entry Bookkeeping (14th Century):
o Luca Pacioli, known as the Father of Accounting, formalized the double-
entry system in Italy.
o His book, Summa de Arithmetica, outlined this system, forming the
foundation of modern accounting.
 French Revolution (1700s):
o Social and economic upheavals spurred the development of accounting
theory.
 Industrial Revolution (1760-1830):
o Accounting adapted to the rise of fixed assets and mass production.

 Modern Accounting in Europe and America (19th Century):


o The profession formalized with the establishment of the first U.S.
accounting society in 1887 and Scotland’s formal recognition of the
profession in 1854.
 The Present (20th Century and Beyond):
o Global standards emerged with international organizations like the
American Institute of Certified Public Accountants (AICPA) and
International Financial Reporting Standards (IFRS).
4. Users of Accounting Information
Internal Users:
 Management:
o Uses financial data to evaluate performance, plan budgets, and guide
decision-making.
 Employees:
o Assess financial stability for job security.
 Owners:
o Evaluate profitability and resources for investments or expansion
plans.
External Users:
 Creditors:
o Analyze creditworthiness to determine loan terms.

 Tax Authorities (e.g., Bureau of Internal Revenue):


o Verify tax compliance.

 Investors:
o Assess the viability of investing in the business.

 Customers:
o Evaluate a supplier’s financial health for stable partnerships.

 Regulatory Authorities:
o Ensure compliance with laws (e.g., SEC, DTI).

Discussion Points
1. Why is accounting referred to as the “language of business”?
2. How did historical events like the Industrial Revolution influence accounting
practices?
3. Discuss the significance of internal and external users in shaping accounting
standards.

Interactive Activities
Activity 1: Timeline Creation
 Task: Create a visual timeline of accounting’s history from the Cradle of
Civilization to the Present.
 Discussion: Highlight one key milestone and its impact on modern
accounting.
Activity 2: Identifying Users
 Task: Categorize a list of accounting users into internal or external groups.
 Example Items: CEO, customers, tax auditors, shareholders, employees.
Activity 3: Case Study Analysis
 Task: Analyze a scenario where a company’s financial report is used by
different stakeholders. Discuss how each user benefits from the information.

Assessment
1. Multiple Choice Questions:
o Who is known as the Father of Accounting? (Answer: Luca Pacioli)

o What is one characteristic of accounting as a service activity? (Answer:


Provides financial reports to aid decision-making)
2. Short Answer:
o Explain the role of accounting during the Industrial Revolution.

o Differentiate between internal and external users of accounting.

3. Performance Task:
o Draft a financial summary highlighting the key information needed by
an investor and a creditor.

Conclusion
Accounting is a cornerstone of business operations, evolving through history to
meet society’s needs. Its systematic approach ensures reliable financial data for
diverse users, making it indispensable in today’s economic landscape.

References
1. DepEd Quarter 3 Module 1: Introduction to Accounting
2. Weygandt, J. J. (2005). Accounting Principles
3. Historical context adapted from module content.

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