Professional Documents
Culture Documents
Module Sample Shs
Module Sample Shs
DEFINE ACCOUNTING
“Accounting is the process of IDENTIFYING, RECORDING, and COMMUNICATING
economic events of an organization to interested users.” (Weygandt, J. et. al)
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.
Examples of economic events or transactions - In a bakery business:
• sales of bread and other bakery products
• purchases of flour that will be used for baking
• purchases of trucks needed to deliver the products
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 which will be
discussed in future chapters.
3. COMMUNICATING – occurs through the preparation and distribution of financial and other
accounting reports.
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NATURE OF ACCOUNTING
According to Accounting Theory (http://accountingtheory.weebly.com/nature-and-scope-of-
accounting.html): “Accounting is a systematic recording of financial transactions and the presentation
of the related information to appropriate persons.” Based on this definition we can derive the
following basic features of accounting:
• 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. •
Accounting is a process: A process refers to the method of performing any specific job step by step
according to the objectives or targets. Accounting is identified as a process, as it performs the
specific task of collecting, processing and communicating financial information. In doing so, it
follows some definite steps like the collection, recording, classification, summarization,
finalization, and reporting of financial data.
• Accounting is both an art and a
discipline. Accounting is the art of
recording, classifying, summarizing
and finalizing financial data. The word
‘art’ refers to the way something is
performed. It is behavioral knowledge
involving a certain creativity and skill
to help us attain some specific
objectives. Accounting is a systematic
method consisting of definite
techniques and its proper application
requires skill and expertise. So by nature, accounting is an art. And because it follows certain
standards and professional ethics, it is also a discipline.
• Accounting deals with financial information and transactions: Accounting records financial
transactions and data, classifies these and finalizes their results given for a specified period of
time, as needed by their users. At every stage, from start to finish, accounting deals with financial
information and financial information only. It does not deal with non-monetary or non-financial
aspects of such information.
• Accounting is an information system: Accounting is recognized and characterized as a
storehouse of information. As a service function, it collects processes and communicates financial
information of any entity. This discipline of knowledge has evolved to meet the need for financial
information as required by various interested groups.
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Arithmetica, the first book published that contained a detailed chapter on double-entry
bookkeeping.
• French Revolution (1700s)
The thorough study of accounting and development of accounting theory began during this period.
Social upheavals affecting government, finances, laws, customs and business had greatly
influenced the development of accounting.
• The Industrial Revolution (1760-1830)
Mass production and the great importance of fixed assets were given attention during this period.
• 19th Century – The Beginnings of Modern Accounting in Europe and America
The modern, formal accounting profession emerged in Scotland in 1854 when Queen Victoria
granted a Royal Charter to the Institute of Accountants in Glasgow, creating the profession of the
Chartered Accountant (CA).
In the late 1800s, chartered accountants from Scotland and Britain came to the U.S. to audit British
investments. Some of these accountants stayed in the U.S., setting up accounting practices and
becoming the origins of several U.S. accounting firms. The first national U.S. accounting society
was set up in 1887. The American Association of Public Accountants was the forerunner to the
current American Institute of Certified Public Accountants (AICPA).
In this period rapid changes in accounting practice and reports were made. Accounting standards
to be observed by accounting professionals were promulgated. Notable practices such as mergers,
acquisitions and growth of multinational corporations were developed.
A merger is when one company takes over all the operations of another business entity resulting in
the dissolution of another business. Businesses expanded by acquiring other companies. These
types of transactions have challenged accounting professionals to develop new standards that will
address accounting issues related to these business combinations.
• 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 financial data across borders.
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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.
RECORDING – this involves keeping a chronological diary of events that are measured in
pesos.
COMMUNICATING – occurs through the preparation and distribution of financial and other
accounting reports.
Nature of Accounting
“Accounting is a systematic recording of financial transactions and the presentation of the related
information to appropriate persons.” Based on this definition we can derive the following basic
features of accounting.
Accounting is a service activity.
Accounting is both an art and a discipline.
Accounting deals with financial information and transactions
Accounting is an information system
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 busines
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OC Module 1 Worksheet
Name: Grade Level & Section:
Date: Score: Parent/Guardian’s Signature:
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2. Define Accounting.
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•How much daily or monthly sales do I need in order to recover my fixed cost? (break-even)
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•Can I afford to set up a new store in another place? Where do I get the funds? (financing
decisions)
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RESOURCES:
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This module is for TLCA leaners use only (NOT FOR SALE)