DEFINITION, NATURE AND SCOPE OF ACCOUNTING

Sources : Valix, Conrado. (2008). Theory of Accounts

The Accounting Standards Council, now known as, Financial Reporting Standards
Council, defines accounting as follows:

ACCOUNTING is a service activity. Its function is to provide quantitative

information, primarily financial in nature, about economic entities, that is
intended to be useful in making economic decisions.

The Committee on Accounting Terminology of the American Institute of Certified Public

Accountants defines accounting as follows:

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 a financial character and interpreting the results thereof.

BOOKKEEPING AND ACCOUNTING

Bookkeeping is the recording of economic events. It is only one part of the accounting
process
Accounting involves the entire process of identifying, recording and communicating
economic events

COMPLETE SET OF FINANCIAL STATEMENTS (IAS 1)

• a statement of financial position as at the end of the period;
• a statement of comprehensive income for the period
a. an income statement
b. a statement of comprehensive income
• a statement of changes in equity for the period;
• a statement of cash flows for the period;
• notes, comprising a summary of significant accounting policies and other
explanatory information; and
• a statement of financial position as at the beginning of the earliest comparative
period when an entity applies an accounting policy retrospectively or makes a
retrospective restatement of items in its financial statements, or when it
reclassifies items in its financial statements.

USERS OF FINANCIAL INFORMATION

• Internal Users
• External users

EXTERNAL USERS OF FINANCIAL STATEMENTS

• Government and their agencies
• Suppliers and other trade creditors
• Public
 • Lenders
• Investors
• Customers
• Employees and labor unions

BRANCHES OF ACCOUNTING/ AREAS OF SPECIALIZATION

• Financial Accounting – focuses on the development and communication of
financial information to external users, particularly, the creditors and investors.
• Management accounting – focuses on the development and communication of
financial information to internal users
• Auditing – focuses on the examination of financial statements by an independent
certified public accountant for the purpose of expressing an opinion on the
fairness of presentation of financial statements
• Government accounting – focuses on the development and communication of
transactions involving receipt and disposition of government funds
• Taxation services – focuses on the preparation of tax returns and rendering of tax
advice

FORMS OF BUSINESS ORGANIZATION

1. ACCORDING TO OWNERSHIP
• Proprietorship
• Partnership
• Corporation
2. ACCORDING TO TYPE OF ACTIVITY
• Service enterprise
• Merchandising business
• Manufacturing business

BASIC ACCOUNTING CONCEPTS

Underlying assumptions in the preparation of financial statements
• accrual basis
• going-concern
Qualitative characteristics of financial statements
• understandability
• relevance
• reliability
• comparability

GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP) –conventions, rules

and procedures necessary to define what is accepted accounting practice followed in the
preparation and presentation of financial statements
• Entity
• Monetary
 • Cost
• .Objectivity
• Going-concern
• Materiality
• Time period
• Revenue recognition
• Matching
• Accrual
• Consistency
• Conservatism
• Disclosure

CAREER OPPORTUNITIES FOR ACCOUNTANTS

• Public accounting
o Auditing
o Tax services
o Management consulting
• Accounting in Commerce and Industry
• Government accounting
• Not-for-profit accounting
• Academe

VALUES THAT CPAs SHOULD POSSESS

• Professional ethics
o Integrity
o Objectivity and independence
o Professional competence and due care
o Confidentiality
o Professional behavior
• Moral values

RELATIONSHIP OF ACCOUNTING TO OTHER FIELDS OF DISCIPLINE

o General Management
o Marketing
o Finance
o Real estate