 PROFESSOR: Nikki G.

Estores, CPA, MBA


 COURSE TITLE: Fundamentals of Accountancy and
Business, and Management 1

ABM1 Introduction to Accounting SY2016-2017

Classroom Expectations
 Respect yourself, the teacher and others.
 Show respect for the teacher, yourself and others at all times.
 Respect others’ property. Avoid touching or writing on anything that does not
belong to you (including desks, textbooks, teacher’s belongings, walls, whiteboard,
etc.). Don't expect that others will clean-up your messes. Please pick-up after
yourself.
 Respect yourself and the rest of us by using appropriate language and wearing
appropriate clothing.
 Be a kind person.

 Put forth your best effort at all times

 Always do your own best work.
 Put learning ahead of getting good grades.
 Put quality ahead of just getting it done.

ABM1 Introduction to Accounting SY2016-2017

Classroom Expectations
 Be prepared for class each day
 Come prepared with all materials necessary:
 Texbook, pens, papers, yellow pad, calculator

 Follow directions when given

 When directions are given, do your best to follow them the first time. If you are
confused or have questions, ask. I would rather have you stop class to clarify than
be off task while everyone else is working.

 Pay attention, participate and ask questions

 Engage in what is going on in the classroom. If you have a question, ask it!
Otherwise, I might not know until the test that you didn’t understand something.
There are no stupid questions, and chances are, if you are wondering about it,
someone else in the class is to. Be proactive about your learning and don’t be
afraid to ask for help. If you feel most comfortable waiting until after class, that is
okay, too, but do keep communication open between us.

ABM1 Introduction to Accounting SY2016-2017

Classroom Expectations
 Preserve a positive learning environment
 Student actions that interfere with teaching or learning in the classroom will NOT
be tolerated.
 Use class time to learn history/government. Please do not spend your time
grooming, sleeping, talking, writing notes, playing cards, listening to you Ipod,
text-messaging friends, or doing work for other classes.
 Minimize classroom interruptions by arriving to class on time and not leaving the
classroom during the hour.

 Take responsibility for your actions

 If you are confronted about a rule infraction, own up to it. Don’t deny it, lie about
it, or blame someone else.
 Take responsibility for missed assignments.

ABM1 Introduction to Accounting SY2016-2017

Classroom Rules
 Turn off cell phones & electronic devices or keep them in
silent mode

 No food or drink, except water

 Arrive to class on time & ready to learn

 When the bell rings, you need to be sitting in your assigned seat.
 Be “physically” and “mentally” present in the classroom

 Never line up at the door before dismissal

 Please remain in your seat until I have dismissed you. Never line up at the door
before dismissal. Remember, I dismiss you, not the bell.

ABM1 Introduction to Accounting SY2016-2017

Classroom Rules
 Do not cheat, plagiarize, or copy work
 Offensive, derogatory, and profane terms are not tolerated. In order to have a
safe classroom environment where all students feel comfortable, no put downs,
swear words, or slang words with demeaning connotations will be accepted.
Remember, if you don’t have something nice to say, don’t say it at all!

 Use polite and appropriate language

 Offensive, derogatory, and profane terms are not tolerated. In order to have a
safe classroom environment where all students feel comfortable, no put downs,
swear words, or slang words with demeaning connotations will be accepted.
Remember, if you don’t have something nice to say, don’t say it at all!

ABM1 Introduction to Accounting SY2016-2017

COURSE TOPICS:

 Chapter 1: Accounting as an Information System

 Chapter 2: Branches of Accounting
 Chapter 3: Forms of Business Organizations and Types of Businesses
 Chapter 4: Basic Accounting Concepts and Principles
 Chapter 5: Books of Accounts
 Chapter 6: Analysis of Business Transactions
 Chapter 7: Accounting Cycle for a Service Business
 Chapter 8: Completing the Accounting Cycle for Service Business
 Chapter 9: Accounting Cycle for Merchandising Business
 Chapter 10: Special Journals and Subsidiary Ledgers

ABM1 Introduction to Accounting SY2016-2017

Chapter 1: Accounting as an Information System

Learning Objectives: In this chapter, you should be able to:

 Define accounting and describe the nature of accounting

 Narrate the history and origin of accounting
 Explain the functions of accounting in business
 Identify the purpose of financial statements
 Identify the users of financial statements and their use of the
financial statements

ABM1 Introduction to Accounting SY2016-2017

History of Accounting
The most important event in accounting history
happened in 14th century in Italy.

Itwas Fra Luca Pacioli, an Italian Mathematician,

scholar and philosopher set down in writing for the first
time a description of the double-entry system of
accounting, which we still use today in much the same
form, in his 1494 text entitled Summa de Arithmetica,
Geometria, Porpotione et Proportionalita (Everything
About Arithmetic, Geometry and Proportion).

Because of this, he is considered as the “Father of

Accounting”
ABM1 Introduction to Accounting SY2016-2017
History of Accounting

Fra Luca Pacioli

“Father of Accounting”

ABM1 Introduction to Accounting SY2016-

2017
Definition of Accounting
ABM 1 Definition:

Accounting is an INFORMATION SYSTEM that

MEASURES, PROCESSES and COMMUNICATES
Information primarily FINANCIAL in nature
About an IDENTIFIABLE ENTITY
For the purpose of making economic DECISIONS

ABM1 Introduction to Accounting SY2016-2017

Definition of Accounting
ABM 1 Definition:

Accounting is the LANGAUAGE OF BUSINESS because it

is the COMMUNICATION LINK between the ENTITY and
the USERS of financial information

ABM1 Introduction to Accounting SY2016-2017

Definition of Accounting
Financial Reporting Standards Council (FRSC) Definition:

Accounting is a SERVICE ACTIVITY.

Its main function is to provide QUANTITATIVE
information,
primarily FINANCIAL in nature,
about ECONOMIC ENTITIES,
that are intended to be USEFUL in making economic
DECISIONS.

ABM1 Introduction to Accounting SY2016-2017

Definition of Accounting
Committee on Accounting Terminology of the American
Institute of Certified Public Accountants Definition:

Accounting is an ART of
RECORDING, CLASSIFYING, and SUMMARIZING
In a SIGNIFICANT MANNER in terms of MONEY,
Transactions and events which are in part at least of a
FINANCIAL CHARACTER and
INTERPRETING the results thereof

ABM1 Introduction to Accounting SY2016-2017

Objectives of Accounting
 To keep systematic records: Accounting is done to keep
systematic record of financial transactions. The primary objective of
accounting is to help us collect financial data and to record it
systematically to derive correct and useful results of financial
statements
 To ascertain profitability: With the help of accounting, we can
evaluate the profits and losses incurred during a specific accounting
period. With the help of Trading and Profit and Loss Account, we can
easily determine the profit or loss of a firm
 To ascertain the financial position of the business: A balance
sheet or a statement of affairs indicates the financial position of a
company as of a particular date. A properly drawn balance sheet
gives us an indication of the class and value of assets, the nature
and value of liability, and also the capital position of the firm. With
the help of that, we can ascertain the soundness of the business
entity.

ABM1 Introduction to Accounting SY2016-2017

Objectives of Accounting
 Toassist in decision making: To take decisions for
the future, one requires accurate financial statements.
One of the main objectives of accounting is to take right
decisions at the right time. Thus, accounting gives you
the platform to plan for the future with the help of past
records.

 To fulfill compliance of Law: Business entities are

being run and governed according to different legislative
acts. Similarly, different taxation laws are also applicable
to every business house. Everyone has to keep and
maintain different types of accounts and records as
prescribed by corresponding laws of the land. Accounting
helps in running a business in compliance with the law.

ABM1 Introduction to Accounting SY2016-2017

Accounting Process
Accounting cycle refers to the specific tasks involved in
completing an accounting process. The length of the
accounting cycle can be monthly, quarterly, semi-
annually or annually. It may vary from organization
to organization but the process remains the same.

ABM1 Introduction to Accounting SY2016-2017

Accounting Process (ARCS-RI)
Analyzing

Recording

Classifying

Summarizing

Reporting

Interpreting
ABM1 Introduction to Accounting SY2016-2017
Analyzing
 The accountant must look at transactions entered
into, economic events that have taken place, and
determine the effects on business
 These transactions and events are generally
supported by documentary evidences
 Example:
 Sale of service or sale of product evidenced by sales
invoice
 Sales invoice is further supported by a delivery receipt
 Before the delivery of service or product, a purchase
order is received from customer

ABM1 Introduction to Accounting SY2016-2017

Recording
 Involves writing the effects of the transactions and
events that have been analyzed
 This recording may be done manually or it may be
encoded with the use of computers or data
processing machines.
 The recording includes (whether done manually or
with computers) inputting of information in the
accounting books called journals.

ABM1 Introduction to Accounting SY2016-2017

Classifying
 Sortingor grouping of like transactions and events
into specific account titles

ABM1 Introduction to Accounting SY2016-2017

Summarizing
 The process that involves grouping together the
various accounts referred to in the classifying
process.
 This is where the accounts are grouped into ASSETS,
LIABILITIES, OWNER’S EQUITY, REVENUE and
EXPENSES.

ABM1 Introduction to Accounting SY2016-2017

Reporting
 Involves the preparation of financial summaries
called financial statements which are communicated
to the users of information
 Results of operation – Income Statement
 Financial position – Balance Sheet
 Cash flows – Cash Flows Statement

ABM1 Introduction to Accounting SY2016-2017

Interpreting
 Step that directs attention to the significance of
various matters and relationships.
 Thus step involves the computation of relationship of
figures and narrations based on figures presented
 The relationships may be in percent or in ratios; and
may be within the financial report or one report in
relation to another report

ABM1 Introduction to Accounting SY2016-2017

Diagram of the Accounting Information System

Decisions by
Business Activities Users of Financial
Statements

Documents or Analyzing
Reporting with
Supporting Recording
Financial
Accounting Classifying
Statements
Papers Summarizing

ABM1 Introduction to Accounting SY2016-2017

Summary
 Fra Luca Pacioli is the “Father of Accounting”
 Definitions of Accouting
 FRSC
 American Institute of CPA
 Steps of the Accounting Process (ARCS-IR)
 Diagram of the Accounting Information System

ABM1 Introduction to Accounting SY2016-2017

Accounting is
I. A service activity and its function is to provide
quantitative information, primarily financial in nature
about economic entities, that is intended to be
useful in making economic decision
II. The process of identifying, measuring and
communicating economic information to permit
informed judgment and decision by users of the
information

A. I only
B. II only
C. Both I and II
D. Neither I and II

ABM1 Introduction to Accounting SY2016-2017

Accounting is
I. A service activity and its function is to provide
quantitative information, primarily financial in nature
about economic entities, that is intended to be
useful in making economic decision
II. The process of identifying, measuring and
communicating economic information to permit
informed judgment and decision by users of the
information

A. I only
B. II only
C. Both I and II
D. Neither I and II

ABM1 Introduction to Accounting SY2016-2017

The phase whereby the liquidity, solvency, stability
and profitability of an entity are significantly
portrayed is known as:

A. Summarizing
B. Classifying
C. Recording
D. Interpreting

ABM1 Introduction to Accounting SY2016-2017

The phase whereby the liquidity, solvency, stability
and profitability of an entity are significantly
portrayed is known as:

A. Summarizing
B. Classifying
C. Recording
D. Interpreting

ABM1 Introduction to Accounting SY2016-2017

Users of Financial Statements
1. INVESTORS – to determine whether to buy, hold or sell their
investments in equity ownership in the business to and
assess the ability of the investee to pay dividends or to pay
return to investors

2. EMPLOYEES – to determine stability and profitability of

employers; the ability of the employer to pay salaries and
fringe benefits

3. LENDERS – to determine the ability of the borrowers to pay

on time, the loans granted to them by the creditors
4.

ABM1 Introduction to Accounting SY2016-2017

Users of Financial Statements
4. SUPPLIERS – to determine the ability of the customer to pay
debts as they fall due and the ability of the customer to
remain as a continuous buyer.

5. CUSTOMERS – to determine the ability of the enterprise to

be a continuous source of supply and the ability of the
company to exist over a long period of time.

6. GOVERNMENT AGENCIES – to determine the capacity of the

enterprise to pay taxes and its tax compliance, to provide
the bases for monitoring and regulating the activities of
enterprises and individuals

ABM1 Introduction to Accounting SY2016-2017

Users of Financial Statements
7. PUBLIC – to determine the activities of the enterprise and
contribution to the economy in the form of: (1) number of
employees; (2) ownership of assets; (3) prices of their
products; (4) patronage of local suppliers;(5) patronage of
customers

8. MANAGEMENT – to determine the activities of the enterprise

for planning, organizing, leading and controlling.

ABM1 Introduction to Accounting SY2016-2017