ABMFABM1 q3 Mod1 Introduction-To-Acctg.
ABMFABM1 q3 Mod1 Introduction-To-Acctg.
Accountancy, Business,
and Management 1
Quarter 3 – Module 1:
Introduction to Accounting
Fundamentals of Accountancy, Business, and Management 1
Alternative Delivery Mode
Quarter 1 – Module 1: Introduction to Accounting
First Edition, 2020
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This module was collaboratively designed, developed and reviewed by educators both
from public and private institutions to assist you, the teacher or facilitator in helping
the learners meet the standards set by the K to 12 Curriculum while overcoming
their personal, social, and economic constraints in schooling.
This learning resource hopes to engage the learners into guided and independent
learning activities at their own pace and time. Furthermore, this also aims to help
learners acquire the needed 21st century skills while taking into consideration their
needs and circumstances.
In addition to the material in the main text, you will also see this box in the body of
the module:
As a facilitator you are expected to orient the learners on how to use this module.
You also need to keep track of the learners' progress while allowing them to manage
their own learning. Furthermore, you are expected to encourage and assist the
learners as they do the tasks included in the module.
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For the learner:
The hand is one of the most symbolized part of the human body. It is often used to
depict skill, action and purpose. Through our hands we may learn, create and
accomplish. Hence, the hand in this learning resource signifies that you as a learner
is capable and empowered to successfully achieve the relevant competencies and
skills at your own pace and time. Your academic success lies in your own hands!
This module was designed to provide you with fun and meaningful opportunities for
guided and independent learning at your own pace and time. You will be enabled to
process the contents of the learning resource while being an active learner.
What I Need to Know This will give you an idea of the skills or
competencies you are expected to learn in the
module.
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Assessment This is a task which aims to evaluate your
level of mastery in achieving the learning
competency.
1. Use the module with care. Do not put unnecessary mark/s on any part of the
module. Use a separate sheet of paper in answering the exercises.
2. Don’t forget to answer What I Know before moving on to the other activities
included in the module.
3. Read the instruction carefully before doing each task.
4. Observe honesty and integrity in doing the tasks and checking your answers.
5. Finish the task at hand before proceeding to the next.
6. Return this module to your teacher/facilitator once you are through with it.
If you encounter any difficulty in answering the tasks in this module, do not
hesitate to consult your teacher or facilitator. Always bear in mind that you are
not alone.
We hope that through this material, you will experience meaningful learning and
gain deep understanding of the relevant competencies. You can do it!
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What I Need to Know
This module was designed and written with you in mind. It is here to help you
master the introduction to accounting. The scope of this module permits it to be used
in many different learning situations. The language used recognizes the diverse
vocabulary level of students. The lessons are arranged to follow the standard
sequence of the course. But the order in which you read them can be changed to
correspond with the textbook you are now using.
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What I Know
The following are statements about the definition and nature of accounting. Write O
if you believe that the statement is part of the definition and nature of accounting
and write X if it does not.
Lesson
Definition and Nature of
1 Accounting
In order to effectively communicate and understand each other, people must
use the same language. In a story called business, accounting is known as its
language and the accountant is the storyteller.
What’s In
Mahinhin sold 2 pairs of shoes to Maganda for ₱350.00 each. She bought it
from the supplier for ₱250.00 each.
1. How much is Mahinhin’s total sales?
2. How much is the total cost for the two pairs of shoes?
3. How much is Mahinhin’s total profit?
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What’s New
What is It
Accounting Defined
“Accounting is 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.”
-American Institute of Certified Public Accountants (AICPA)
There are three (3) important activities implied by the given definitions –
identifying, recording, and communicating economic events of the organization to
intended users. These activities make up the accounting process. Take a look at
the illustration below.
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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.
You should also note that the accounting process includes the bookkeeping
function, but it only involves the recording of economic events. It is therefore just
one part of the accounting process.
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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.
What’s More
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What I Can Do
Assessment
Write your thoughts! On a sheet of paper, write a brief description to answer the
following questions in relation to the meaning and nature of accounting.
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What I Know What I can do
What's More
1. X A.
1. Communicating 1. American Institute of
2. O
2. Identifying Certified Public Accountants
3. X
3. Recording 2. Financial Reporting
4. O
Standards Council
5. X 4. Recording
3. American Accounting
6. X 5. Communicating Association
7. X
B.
8. O 1. service activity
9. X 2. discipline
10. O 3.deals with financial
information
What's In 4. Information system
5. means and not an end
1. ₱700 6.process
2. ₱500 7. art
3. ₱200
Assessment
Answers may vary.
Write explanations that
clearly demonstrates in-
depth understanding of
the concept and give
sufficient details to the
discussion.
Answer Key
understanding of the concept.
watch a video presentation on the definition of accounting that will enhance your
Using this link, https://www.youtube.com/watch?v=dbeEeKA_3UQ&feature=share
Additional Activities
What I Know
The items below are about the historical developments in accounting. Read
each item carefully and choose the letter of your choice. Write your answers on your
answer sheet.
2. In which civilization are accountants called the "eyes and ears" of the king?
a. Egyptian b. Babylonian
c. Sumerian d. Roman
5. In which century did William Seward Burroughs invent and patent the
first workable adding machine?
a. 17th Century b. 18th Century
c. 19 Century
th d. Present
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8. In which period did the formal accounting profession emerge?
a. 14th Century b. 18th Century
c. 19 Century
th d. Present
Lesson
2 History of Accounting
Theodore Roosevelt once said, “The more you know about the past, the
better prepared you are for the future.” In order to understand the accounting that
we are practicing today and to adapt to future developments, it is a must to know
how it all started.
This module will give you a glimpse of the past and will help you appreciate
the present.
What’s In
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What’s New
The accounting that we are using today is a result of the developments that
transpired in the past. The complex system of accounting that we have today began
with simple day to day transactions which evolved significantly throughout the
centuries.
What is It
HISTORY OF ACCOUNTING
➢ Egypt
• Dr. Gunter Dreyer of the German Institute of Archaeology
recently discovered numerous inscribed bone labels attached to
bags of oil and linen in the tomb of King Scorpion I at Abydos,
Egypt.
• The labels dated back 5300 years are the world's earliest
known writing. It describes inventory owners, amounts, and
suppliers.
• In ancient Egypt, the accountant was called the "eyes and ears"
of the king.
• “Zero” was not yet invented.
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➢ Babylonia
• 59 symbols were built from just two symbols.
➢ Greece
• The public economy of the Athenians had a highly developed
system of accounting and auditing.
• Accounts were kept by clerks and controlled by “checking
clerks.”
• Accountability was assured by public exposure of accounts on
stone.
➢ Rome
• Practices of private life led to public accounting process
• Transactions were first entered in a “day book” (memorandum
or “adversaria” in Latin).
• Monthly, the entries were transferred to the ledger (“codex
tabulae”). The codex could be used in court to substantiate
contracts and claims.
• In government, there was separation of responsibilities.
• Use of tally sticks started.
➢ 63BC-14AD
• The Roman government kept detailed financial information of
the deeds of Emperor Augustus regarding the stewardship of
Roman resources.
• This is evidenced by Res Gestae Divi Augusti (The Deeds of the
Divine Augustus)
• In 23BC, Augustus prepared a rationarium (account) which
listed public revenues, the amounts of cash in the aerarium
(treasury), in the provincial fisci (tax officials), and in the hands
of the publicani (public contractors); and that it included the
names of the freedmen and slaves from whom a detailed
account could be obtained.
➢ 14th Century
• The year Luca Pacioli, the Father of Accounting was born.
• He wrote the book entitled "Summa de Arithmetica, Geometria:
Proportioni et Proportionalita".
• One section of the book was devoted to methods of recording
merchant transactions, including ideas about double-entry
bookkeeping.
➢ 17th Century (The French Revolution)
• 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.
• Rise of cost accounting
• Josiah Wedgwood – Entrepreneur & Cost Accountant
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➢ 18th Century
• William Seward Burroughs invented and patented the first
workable adding machine in 1885 in St. Louis, Mo.
• Production increased dramatically after 1900.
➢ 19th Century
• The beginning 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).
➢ Present
• At present times, accounting standards are already available to
guide accountants in their practice of the profession. Some of
these standards are the GAAP, IFRS/PFRS and the IAS/PAS.
These standards are continually developed and improved to
suit and accommodate the changing needs of businesses and
various organizations.
• The most notable development in the present is the increased
dependence on digitalization and smart technologies, continued
globalization of the accounting profession, and the imposition
of increased regulations on the profession.
What’s More
On a separate sheet of paper, copy, and arrange the following events correctly as
they appear in the timeline of accounting by writing the numbers 1-5 on the space
provided.
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What I Have Learned
What I Can Do
Below is a table with two columns. Listed under column A are the
developments in accounting under column B are the periods in history. Match the
development in accounting with its period by writing the letter of your answer on a
separate sheet of paper.
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Assessment
On a separate sheet of paper, copy the table below and narrate the history of
accounting by giving one significant development in each period.
Additional Activities
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Assessment
What I Know What's More
1. D __2___ Development in
2. A the Roman Empire
3. B ___4__ Signing of Charter
4. C by Queen Victoria
5. B
___1__ Early development
6. A
in Mesopotamia
7. C
8. C ___5__ Formation of
9. A accounting standards
10. D such as IAS and IFRS
___3__ Dissemination of
double-entry
bookkeeping in Italy
What’s in
1. Identifying What I Can Do
2. Recording
3. Communicating 1. B
2. A
3. D
4. F
5. E
Answer Key
What I Know
The following are users of financial information. Classify each of the following as
either external user by writing E, or internal user by writing I. Use a separate sheet
of paper for your answers.
Lesson
Users of Financial
3 Information
What’s In
On a separate sheet of paper, copy, and arrange the following events correctly as
they appear in the timeline of accounting by writing the numbers 1-5 on the space
provided.
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What’s New
What is It
The users of accounting information are divided into two (2) broad groups: External
Users and Internal Users.
➢ External Users
External users are parties outside of the organization but affect and are
affected by the organization. They are communicated with accounting
information usually in the form of financial statements. The purpose of
financial statements is to cater for the needs of such diverse users of
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accounting information in order to assist them in making sound financial
decisions.
a) Customers – They are the main source of income of businesses and they
acquire goods and services for a fee. Customers have interest in the
accounting information for assessing the financial position of a business,
especially, when they have a long term involvement with, as it enables to
maintain a steady source of business.
b) Creditors – They are the providers of additional funds when the initial
investment of owners is exhausted and lend resources to businesses
usually in the form of money. Creditors are interested in accounting
information because it enables them to determine the credit worthiness
of the business. The credit terms and standards are set on the basis of
the financial health of a business, so, it helps them to analyze by using
the accurate information accordingly.
c) Potential Investors – They are the providers of additional funds when the
initial investment or owners is exhausted and they invest resources in
the business hoping to earn decent returns. They need the information
because they are concerned with the risk inherent in investing and the
returns. Since it is important to assess the feasibility of making
investments in the company, they need to analyze before they provide
any financial resources to the company.
d) Government – This is an external user whose primary role is to regulate
businesses and studies financial statements to determine amount of
taxes payable. Government wants to know earnings or sales for a
particular period for the purpose of taxation.
e) Academe – They use accounting information primarily for academic
purposes. The academe is not confined in the accountancy field but for
other fields of study like banking and finance, entrepreneurship, and
economics similarly make use of financial statements.
f) General Public - The general public is the last group considered to be an
external user. Citizens and residents of the country even though they do
not plan to transact with the business. They use financial statements to
gauge the condition of the economy. By analyzing the financial
statements of the companies, the public can properly respond to the
various economic cycles.
➢ Internal Users
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improvements in terms of business results. Besides, accounting
information is useful to help managers do their jobs better.
b) Employees – They are persons in the company aside from managers and
owners who do not have authority to implement decisions. Employees
use the accounting information to find out the financial health, amount
of sales and profitability of business to determine their job security, the
possibility of future remuneration, retirement benefits, and employment
opportunities.
c) Owners (or Stockholders) - They are the existing investors of the company
and the ones concerned mostly with the profits of the company. Owners
use the accounting information for analyzing the viability and profitability
of their investments. Accounting information enables the owners to
assess the ability of the business organization to pay dividends. It also
leads them to determine any future course of action.
How these users make use of the accounting information will depend on the
decisions they have to make. Below is a summary of all the users of accounting
information, their examples, and the decisions that they make based on the
accounting information.
Type of Users Example of users Decision made
using the
accounting
information/
Benefits from
accounting
information
Customers Clients, people Whether or not to
acquiring goods or build relationship
services of a with the business
business for a fee.
Creditors Banks, lending Whether or not to
institutions, wealthy lend resources to
individuals and the business; try to
sometimes the see the risks before
government lending funds
Potential investors Wealthy individuals, Whether or not to
other businesses invest in the
planning to invest business, primary
concern is the
ability of the
business to provide
acceptable returns
Government Different Oversees business
government operations with the
agencies and taxing end goal of
authorities improving the
economy, check the
accuracy of financial
statement to ensure
correct amount of
taxes payable
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Academe Professors, Uses accounting
lecturers, students information in
and researchers teaching
accountancy,
researches
loopholes, and
possible
improvements in the
field
General public Common people not Concerned with the
connected with the overall performance
company of the economy, use
financial
information to
estimate economic
performance
Management Board of Directors, Uses financial
Top Management, information in
middle-level making business
managers, decision
supervisors
Employees Laborers, Field Check if the
workers, non- business is
managerial profitable enough to
employees provide
compensation and
other benefits
Owners or Founders of the Concerned with the
stockholders company, owners, returns earned from
stockholders, their investments,
partners, owners taking active
proprietors roles in the
operations of the
business.
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What’s More
A B
A. They use accounting information
for studying the field of
1. Employees accountancy and to be able to
produce future accountants and
business managers.
B. They study the financial records
2. Academe of the company to determine the
taxes payable.
C. They check whether the
3. Owners company is profitable enough to
pay salaries and compensation.
D. They look at financial statements
so they will know how much
4. Customers
return on investment they have
earned from the company.
E. They are interested whether a
company will continue to honor
5. Government
product warranties and support
its product lines.
F. They primarily use financial
reports in order to respond
accordingly to the issues of the
company.
➢ External users are parties outside of the organization but affect and are
affected by the organization.
Examples
▪ customers
▪ creditors
▪ potential investors
▪ government
▪ academe
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▪ general public
What I Can Do
The following are statements about the internal and external users of
financial information. On a separate sheet of paper write TRUE if the statement is
true and FALSE if otherwise.
4. The difference between potential and existing investors is the fact that potential
investors have already taken the risk.
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Assessment
Read each item carefully. Choose the correct answer from the given choices. Write
the letter of your answer on a sheet of paper.
1. Which of the following statements about users of accounting information is
incorrect?
a. Management is an internal user. b. Taxing authorities are external users.
c. Present creditors are external d. Regulatory authorities are internal users.
users.
4. These users are interested in information that enables them to assess whether
the loans owing to them will be paid when due.
a. Employees b. Investors
c. Customers d. Creditors
6. These users are interested in information that will enable them to assess the
ability of an entity to provide retirement benefits and employment opportunities.
a. Employees b. Creditors
c. Clients d. Board of Directors
7. Of all the external users, which group would most least likely examine a
company’s financial statements?
a. Government b. General Public
c. Customers d. Creditors
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8. Statement 1: Potential Investors are Internal users.
Statement 2: Existing Investors are Internal users.
a. Statement 1: True ; Statement 2: True
b. Statement 1: True ; Statement 2: False
c. Statement 1: False ; Statement 2: True
d Statement 1: False ; Statement 2: False
9. Which of the following does NOT fall under the category of customers?
Additional Activities
On a separate sheet of paper, answer the following questions about the users of
financial information in not less than five (5) sentences.
1. In your own point of view, which external user benefits the most from
accounting information? Explain.
2. How about among the internal users? Explain.
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What I Know What's In What I can do
1. I
2. E 1. True
3. I 2. False
4. E 3. False
5. E 4. False
6. E 5. True
7. E 6. True
7. False
8. I
8. False
9. E
10. I
What's More 9. True
10. False
1. C
2. A
3. F
4. E
5. B
Assessment
Answers may vary.
Write explanations that
clearly demonstrates in-
depth understanding of
the concept and give
sufficient details to the
discussion.
Answer Key