INTRODUCTION

TO ACCOUNTING
 Learning Competencies:
i) Define accounting
ii) Describe the nature of accounting
iii)Explain the functions of
accounting in business
iv) Narrate the history of accounting
QUESTION
1. Do your parents ask how you
spend your allowance every day?
2. When deciding between buying a
bottle of soft drinks or fruit juice,
what is the basis of your decision?
Do you compare the prices of both
and then decide?
3. When going home, do you
sometimes choose to walk from
school rather than riding a jeepney
because you want to save?
4. Is accounting important to
you?
In all activities (whether business
activities or non-business activities) and
in all organizations (whether business
organizations like a manufacturing entity
or trading entity or non-business
organizations like schools, colleges,
hospitals, libraries, clubs, temples,
political parties) which require money
and other economic resources,
In other words, wherever money
is involved, accounting is required
to account for it.
I. THE DEFINITIONS OF ACCOUNTING
The most commonly accepted
definitions
of Accounting are expressed by the
authoritative bodies…
1. American Institute of Certified Public
Accountants (AICPA):
“The art of recording, classifying, and
summarizing in a significant manner
and in terms of money, transactions
and events which are in part at least of
financial character and interpreting the
results thereof.”
2. Accounting Standards Council (ASC):
“A service activity.
Its function is provide quantitative
information, primarily financial in
nature, about economic entities, that is
intended to be useful in making
economic decisions.”
3. American Accounting Association
(AAA):
“The process of identifying, measuring
and communicating economic
information to permit informed
judgments and decisions by users of
the information.”
II. FUNCTIONS OF
ACCOUNTING
The primary function of
accounting is
to provide financial reports to
various
end-users for economic
 1. IDENTIFYING
this involves selecting economic
events that are relevant to a
particular business transaction
The economic events of an
organization are referred to as
transactions.
2. RECORDING
this involves keeping a
chronological diary of events that
are measured in pesos.
The diary referred to in the
definition are the journals and
ledgers.
3. Classifying
> It is concerned with systematic
analysis of recorded business
transactions and events with a view
to group that are in nature as one
cluster in an accounting elements
Assets, Liabilities or Capital
4. Summarizing
It involves presenting the classified
data in a manner which is
understandable and useful to the
end-users of accounting information
This process leads to the
preparation of a Trial Balance, SOCI,
SFP
5. Analyzing and Interpreting
This is the final function of accounting
 The recorded financial data are
analyzed and interpreted in a manner
that the end-user can make a
meaningful judgement about financial
condition and profitability of the
business operations
6. Communicating
After analyzation and
interpretation, the accounting
information has to be
communicated to the end user
( financial statements)
III. Nature of Accounting
1. 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.
2. Accounting is a process
it follows some definite steps like the
collection, recording, classification,
summarization, finalization, and
reporting of financial data
3. Accounting is discipline
Accounting is a discipline that
observes professional standards
and professional ethics as other
fields of professions like medicine,
law, engineering, and others.
4. Art
It is an art because it perform its
service
It entails creativity and skills to elp
us attain some objectives
It is the application of skills and
expertise
5. Science
Because it is regulated by
accounting rules, principles and
theories
It follows the cause and effect
relationship s known b the double
entry system that in every
6. The language of Business
It serves as a means of
communication
It communicates the result of
business operation to various
parties, like the owners, lenders,
investors, etc.
7. Eye of the business
It enable the owner of the business
to check on his financial progress.
 IV. History of Accounting
Accounting is as old as civilization itself.
 It has evolved in response to various
social and economic needs of men.
Accounting started as a simple recording of
repetitive exchanges.
The history of accounting is often seen as
indistinguishable from the history of finance
and business.
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 Cradle of Civilization
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.
• 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.
• 14th Century - Double-Entry Bookkeeping
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.
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.
Nowadays, investors seek investment
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
VI. USERS OF ACCOUNTING INFORMATION
A. Internal users
Comprising the management group

B. External users
Comprising the financing and public groups
A. Internal users
Management group
Are those who own or manager and control the
business entity
A. Internal users
1. Management
2. Members of the board of directors
3. Top decision management
4. Middle-level managers
5. Supervisors
6. Employees
B. External users
do not own or manage and control business entity
Comprising the financing and public groups
1. Investors
2. Employees
3. Lenders
4. Supplies and other trade creditors
5. Customers
6. Government and its agencies
ENRICHMENT (5 MINS)
Go back to the unanswered question
during your introduction of this topic.
Ask the learners the following
questions:
Is accounting important to you?
Does it affect your daily activities?
How?
EVALUATION (10 MINS)
Give a short quiz.
Ask the following questions:
1. Define accounting?
EVALUATION (10 MINS)
Answer:
Accounting is the process of
IDENTIFYING, RECORDING and
COMMUNICATING economic events
of an organization for interested
users.
END