INTRODUCTION

TO ACCOUNTING
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WARREN BERON ERROJO.,LPT,MBA

PARTIME-LECTURER

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Learning Outcomes:
1. Define accounting and know its purpose.
2. Describe the nature of accounting
3. Explain the function of accounting
4. Narrate the history /origin of accounting
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ACCOUNTING – is commonly called the “language of
business". It means that through the information about a
business entity is communicated. It delivers financial
information to different users through the financial statements
which are then end-product reports in accounting.
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Example: Mr. Teatro started a printing business. He invested
100,000.00 personal money to start the company's operations. After a
month ,Mr. Teatro wants to know how much the business made and if
the money invested is still there. Without a way of recording the
activities of the business, no basis can be used to answer the
questions. Otherwise, it can be pointed‘- out that the business
generated a lot of profit for one month without proof and figures. If the
company transactions are tracked, like out of 100k initial investment,
70,000.00 was used to buy printers and pay the bills.Easily the
balance of cash left will be _______?.If there is a collection of 50k
from customers, then the balance of cash would be_____?
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Definition of Accounting
There are definitions of accounting given by the
different accounting bodies
AMERICAN INSTITUTE OF CERTIFIED ‘- PUBLIC
ACCOUNTANT (AICPA) – defines Accounting as the art
of recording, classifying and summarizing in a significant
manner under terms of money, transaction and events
which are part at least of a financial character and
interpreting the results thereof
.
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This definition of accounting will provide a better understanding of accounting in terms
of the following:

1.Accounting is considered as an art and a science – accounting is a considered as an

art because it requires the use of skills and creative judgement.One has to be trained
ij this discipline to be able to perform accounting functions well. As as science because
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it is a body of knowledge. However, accounting is not an exact science since the rules
and principle are constantly changing (improved)

2.Accounting involves interconnected phases – recording pertains to writing down or

keeping records of business transactions. Classifying involve grouping similar items that
have been recorded. Since they are classified, information is summarized into reports
which are called “financial statement”

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3.Accounting is concerned with transactions and
events having financial character – For example
hiring an additional employee is qualitative
information with n o financial character. Hence, it is
not recorded. However, the payment‘-
of salaries,
acquisition of an office building, sales of goods, etc.
are recorded because they involve financial in
nature.

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3.Accounting is concerned with transactions and
events having financial character – For example
hiring an additional employee is qualitative
information with n o financial character. Hence, it is
not recorded. However, the payment‘-
of salaries,
acquisition of an office building, sales of goods, etc.
are recorded because they involve financial in
nature.

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3.Accounting is concerned with transactions and
events having financial character – For example
hiring an additional employee is qualitative
information with n o financial character. Hence, it is
not recorded. However, the payment‘-
of salaries,
acquisition of an office building, sales of goods, etc.
are recorded because they involve financial in
nature.

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4.In accounting, business transaction are
expressed in terms in money – They are
assigned amounts when processed in an
accounting system. Using ‘- one of the
examples above.it is not enough to record
that the company paid salaries for April. It
must include monetary figure say for
example 20,000.00 salaries expense. 9
5.Interpreting the results – interpreting
the results is part of the phases of
accounting. Information is useless if it
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cannot be interpreted and understood.
The amounts, figures and other data in
the financial reports have meaning that
are useful to the users. 10
Other definition of accounting
- According to American Accounting
Association(AAA) accounting is the process
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of classifying, measuring and communicating
economic information to permit informed
judgment and decision by users of the
information.
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According to A.W. Johnson, accounting is the
collection,compilation and systematic
recording of business transaction in terms of
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money, the preparation of financial
reports,the analysis and interpretation of
these reports and the use of theses reports
for the information and guidance of
management. 12
According to Weygandt,Kieso and
Kimmel, Accounting is an
information system that identifies
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records and communicates the

economic events of an
organization to interested users.
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Nature of Accounting
Accounting is the systematic recording of financial transactions
and presentations of the related information of the appropriate
person. The basic features if accounting are as follows.
1.Accounting a process. A process refers to the method of
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performing any specific job step by step according to the
objectives or target. It identified as a process as it perform as
the specific task of collecting, processing and communicating
financial information. In doing so, it follows some definite step
like collection of data recording, classification, summarization
finalization and reporting
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2.Accounting is an art. – The word art refers to
the ways of performing something. It is a
behavioral knowledge involving certain creativity
and skill that may help us to attain
‘- some specific
objectives. It is a systematic method consisting of
definite techniques and its proper application
requires kills and expertise. So, by nature
accounting is an art.
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3.Accounting is a means and an end –
accounting find outs the financial results and
position of any entity and the same time ,it
communicates this information to its users.
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The users then take their own decision on the

basis of such conformations it can be said
that mere keeping of accounts can be a
primary objectives of any person or entity. 16
4.Accounting deals with financial information
and transaction
Accounting records the financial transaction
and date after classifying ‘- the same and
finalizes their result for a definite period of
time for conveying them their users. So start
to the end, at very stage, accounting deals
with financial information.
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5.Accounting is an information
system- Accounting is recognized
and characterized as ‘-a storehouse
of information. As a service function,
It collect processes and
communicate financial information
of any entity. 18
Functions of Accounting in Business

Accounting is a discipline, well-equipped with techniques and

methods through which all types of transactions measurable in
terms of money or moneys worth, can ‘-
be recorded, classifies
and summarized in a proper and systematic way.
-It helps to present and explain income, expenditure, profit-loss
and assets–liabilities of a particular period and helps the
management and investors to be provided with necessary
information and statement
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Accounting
. is a tool to measure the financial
position of any entity involving on economic
activity. Accounting is an aid to
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management. It is a system that keeps a
record of financial events and analyzes them
for presenting reports of the financial result
and position of an economic activity
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History and Origin of Accounting
The history of accounting is so diversified as the history of
the evolution of human civilization ,the beginning of the
evolution of human civilization and the beginning of the
evolution is so to say twins. Accounting made its beginning
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since the ancient period of time. But when ,where and how
the process of accounting practices exactly started is not very
much clear.in the ancient period of time, when people
happened to live in the forest, jungles and caves and hunted
animals for their livelihood, they used to inscribe the records
of their daily hunting on the walls of the caves.
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With the passage of time, human beings gradually started
their social lives and started keeping their accounts by
marking ticks on walls, making rope-knots and using
varioussymbols.With the gradual–increased demand of
human needs and desires, the necessity
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of accounting was
felt sharply. At one stage Luca Pacioli- the father of
accounting brought a revolutionary change in the field of
accounting by writing a book on Mathematics-”Summa de
Arithmetica Geometria Propotioniet Proportionlita” containing
a chaptern”De compute it Scriptures in which double entry
System of book keeping was explained
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The Double Entry System – is a recognized
and generally accepted system all over the
world and till date, this system
‘- is being used
widely with its basic principle unchanged. On
the basis of these basic principle, the
accountants of modern age have established
a scientific accounting system
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FOUR ASPECTS OF ACCOUNTING

1. RECORDING – writing down of business transactions chronologically in the books of accounts as they transpire.
2. CLASSIFYING – sorting similar and related business transactions into the three categories of assets, liabilities
and owners equity.

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3. SUMMARIZING - preparing the financial statements from the
transactions recorded in the books of accounts designed to meet the
information needs of its users.
4. INTERPRETING - representing the qualitative and quantitative financial
information about the business transaction in a‘-language comprehensible to
the users of financial statements. Interpreting data in the financial
statements, users are able to determine the financial standing of the company
as well as its stability and growth potential. Users interpret financial
information relating to specific business decisions. This makes accounting
the language of the business.
 
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LIFE IS LIKE AN
ACCOUNTING IT MUST
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BE BALANCE
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Thank you 27