11

ABM – Specialized Subject

3rd Quarter – Module 1
Fundamentals of Accountancy,
Business and Management 1
Fundamentals of Accountancy, Business and Management 1 – Grade 11
Alternative Delivery Mode
Quarter 1 – Module 1:
First Edition, 2020

Republic Act 8293, section 176 states that: No copyright shall subsist in any work of
the Government of the Philippines. However, prior approval of the government agency or office
wherein the work is created shall be necessary for exploitation of such work for profit. Such
agency or office may, among other things, impose as a condition the payment of royalties.

Borrowed materials (i.e., songs, stories, poems, pictures, photos, brand names,
trademarks, etc.) included in this module are owned by their respective copyright holders. Every
effort has been exerted to locate and seek permission to use these materials from their
respective copyright owners. The publisher and authors do not represent nor claim ownership
over them.

Published by the Department of Education

Secretary: Leonor Magtolis Briones
Undersecretary: Diosdado M. San Antonio
 Development Team of the Module
Writers: Manuel L. Hermosa, EdD

Editors: Remylinda T. Soriano, EPS

Contributors: Ma. Cristina A. Labay/ Isabel A. Gumaru (Language)

Illustrator: Writers

Layout Artist: Writers

Management Team : Malcolm S. Garma, Regional Director Name of Regional Director

Genia V. Santos, CLMD Chief Name of CLMD Chief
Dennis M. Mendoza, Regional EPS In Charge of LRMS
Maria Magdalena M. Lim, CESO V, Schools Division
Superintendent
Aida H. Rondilla, CID Chief
Lucky S. Carpio, EPS In Charge of LRMS
Division ADM Coordinator
Name of Division ADM Coordinator
Resources • Accounting Theory (n.d.) Retrieved from ttp://accountingtheory.weebly. com/nature-and-scope-
of—accounting • Valencia, E. and Roxas, G. (2009). Basic Accounting, 3rd ed. Valencia Education Supply •
Ferrer R.C. et.al. (2017). Fundamentals of Accountancy, Business and Management part 1, Bandolin
Enterprise, (Publishing and Printing) Bakekang Sur, Baguio City • Rabo, Joy S. et.al. (2019). Fundamentals
of Accountancy, Business and Management 1 (K to 12 Revised Edition), Vibal Publishing, Manila • Valix,
Conrado T. et.al. (2015). Financial Accounting, Vol. 1, First part. GIC Enterprises & Co. Inc • Weygandt, J. et.
al. (2012) Accounting Principles 10th ed. John Wiley & Sons (Asia) Pte. Ltd.
:

Printed in the Philippines by ________________________

Department of Education – National Capital Region
Office Address: ____________________________________________
Telefax: ____________________________________________
E-mail Address: ____________________________________________

What I Need to
Know.
This module was written for you to accomplish at home. It was carefully designed
so that you can work at your own pace and allow self-discovery of the concept through
activities that you will perform. Activities were also selected to allow independent
learning which also aims to develop students’ reading comprehension skills through
understanding written texts.

After going through the module, you are expected to:

 1. define accounting;
2. describe the nature of accounting; and
3. narrate the history/origin of accounting.

What I Know…..

I. Fill in the blanks and identify the following terms.

1) Accounting is often referred to as a ____________________ because it is

fundamental to communication of financial information .
2) The early history of ________________ cannot be traced with much accuracy.
3) _______________________ is the initial activity or clerical part of accounting.
4) _______________________ are those that affect the assets, liabilities, equity,
income and expense of a ________________________.
5) As a practical art, accounting requires the use of creative skills and
________________ .

II. TRUE or FALSE

Instruction: Before each statement, write TRUE if the statement is correct or FALSE if
the statement is incorrect.

______________ 1) Accounting is a process of identifying, recording and

communicating economic information that is useful in making economic decisions.
_______________ 2) Accountable events are those that affect the assets, liabilities,
equity, income and expenses of a business.
_______________ 3) Sociological and psychological matters are within the scope of
accounting.
_______________ 4) Account is the basic storage of information in accounting.
_______________ 5) Accounting is a process with the basic purpose of providing
information about economic systems intended to be useful in making economic
decisions.

III. MULTIPLE CHOICE

Instruction: Choose the letter corresponding to the correct answer for each of the
questions provided below.

1. This is a process of identifying, recording and communicating economic information

that is useful in making economic decisions.
 a. Accounting b, Bookkeeping
c. Auditing d. Marketing
2. Which of the following is not an appropriate description of accounting?
a. Accounting is an information system.
b. Accounting is an exact science rather that an art.
c. Accounting is the language of business.
d. Accounting is a service activity.
3. Which of the following accounting processes comes first ahead of the others?
a. Interpreting b. Recording
c. Communicating d. Identifying
4. The types of information provided by accounting is/are
a. Quantitative information b. Qualitative information
c. Financial Information d. All of the above
5. This essential element of the definition of accounting is the recognition of business
activities as accountable events.
a. Measuring b. Identifying
c. Communicating d. Reporting

What is In Learning Module 1

Lesson 1 – What is Accounting?

2 – Nature of Accounting.
3- History of Accounting.
Define Accounting
“Accounting is the process of IDENTIFYING, RECORDING, and
OMMUNICATING economic events of an organization to interested users.” (Weygandt,
J. et. al).

The highlighted words are::

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
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.

COMMUNICATING – occurs through the preparation and distribution of financial

and other accounting reports.

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.

Functions of Accounting in Business

Accounting is the means by which business information is communicated to
business owners and stakeholders. The role of accounting in business is to provide
information for managers and owners to use in operating the business. In addition,
accounting information allows business owners to assess the efficiency and
effectiveness of their business operations. Prepared accounting reports can be
compared with industry standards or to a leading competitor to determine how the
business is doing. Business owners may also use historical financial accounting
statements to create trends for analyzing and forecasting future sales.
Accounting helps the users of these financial reports to see the true picture of the
business in financial terms. In order for a business to survive, it is important that a
business owner or manager be well-informed.

Example: Mr. Juan is a retired government employee who is good at baking. One
day he decides to put up a bakery shop in your barangay. He renovates a portion of his
house to serve as the area for the production of bread. He purchases baking equipment
and raw materials to produce five different types of bread. Mr. Juan also hires Jose to
help him with the baking and, at the same time, to be in-charge of sales. Mr. Juan pays
Jose on a weekly basis. Every day, Mr. Juan’s wife deposits the daily cash sales in their
bank account at XY Savings Bank. With the help of accounting, what possible decisions
or questions of Mr. Juan can accounting provide an answer to?

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.
Following is the 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 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.
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.
• 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.

Activity: 1.1. Delineate Accounting and explain the

concepts learned from its definition.
1.2. Why do we need to study accounting?
 Activity: 2.1. Encapsulate the Nature of
What’s Accounting.

New Activity: 2.2.. Identify Accounting activities that

encountered in everyday life in your
home and community. Explain how it will
connect to accounting.

Activity: 4. Summarize the history of

Accounting.

What ‘s More…

1. www.investopedia.com/terms/a/accounting.asp
2. www.merriam-webster.com/dictionary/accounting
3. www.en.wikipedia.org/wiki/Accounting
4. https://en.wikipedia.org/wiki/History_of_accounting
5. https://ph.video.search.yahoo.com/yhs/search?fr=yhs-itm-
001&hsimp=yhs-001&hspart=itm&p=define+accounting#id=
1&vid=3a962982f5b818a588e2a2517f70df7e&action=click
6. https://accountingtheory.weebly.com/nature-and-scope-of-
accounting.html
 What I have Learned:

 Accounting is a process of identifying, recording and communicating economic

information that is useful in making economic decision.
 Only “accountable events” are recorded in the accounting books. Accountable events
are those that affect the assets, liabilities, equity, income and expenses of a business.
 The information processed in an accounting system is communicated to interested
users through accounting reports (e.g. financial statements)
 Accounting is considered the “language of business” because it is essential in the
communication of financial information
 Accounting provides non-business owners with information that aids in making,
among others, investment and credit decisions.
 Accounting provides managers with information that aids them in performing their
management functions of (a) planning, (b) organizing, (c) staffing, (d) directing and (e)
controlling
 Assessment:
I. FILL IN THE BLANKS
Instruction: Complete the following statements.

1. As a _________________, accounting is a body of knowledge which has been

systematically gathered, classified and organized.
2. Good management is the key to a business _____________________.
3. A ____________________ is one that consists of an input, a process, and an
output.
4. ______________________ is a type if information expressed in numbers,
quantities, or units.
5. Accounting as a _____________________________ is likened to a Global
Positioning System (GPS) attached to a car.

II. TRUE or FALSE

Instruction: Before each statement, write TRUE if the statement is correct or FALSE if
the statement is incorrect.
_________ 1) Auditing is a process of identifying, recording and communicating
economic information that is useful in making economic decision.
_________ 2) The basic objective of accounting is to provide quantitative financial
information about an entity that is useful in making rational economic decision.
_________ 3) Financial information is a quantitative information.
_________ 4) Quantitative information is expressed in units and numbers.
_________ 5) All types of events are recorded in the accounting books.
_________ 6) As a practical art, accounting is a body of knowledge which has been
systematically gathered, classified and organized.
_________ 7) Bookkeeping and accounting are synonymous.
_________ 8) Accounting is often referred to as a “Language of business” because it is
fundamental to the communication of financial information.
_________ 9) Marketing is responsible in creating value for customer and building
strong customer relationships.
_________10) Management is a process of establishing common objectives,
coordinating efforts towards those objectives, and efficiently and effectively utilizing
available resources so as to achieve certain goals.

III. MULTIPLE CHOICE

Instruction: Choose the letter corresponding to the correct answer for each of the
questions provided below.

1) It is a facet of business that is responsible for building good rapport with prospective
clients and customers.
a) Production b) Management
c) Marketing d) Accounting
2) It is face of business that is responsible for providing information that is useful for
making economic decisions
a) Production b) Management
c) Marketing d) Accounting
3) In business, human resource department are involved with
a) Planning b) Directing
c) Staffing d) Organizing
4) He is considered as the father of modern accounting.
a) Devin Pascoli b) Amatino Manucci
c) Fra Luca Pacioli d) Jacques Savary
5) The primary responsible for the financial information of an entity are:
a) Stockholders b) Employees
c) Investors d) Management
6) __________ needs the accounting information of an entity to evaluate the risk of his
investment in the company.
a) Shareholders b) Lenders of Finance
c) Investors d) Creditors
7) It refers to the process of recording the accounts or transactions of an entity.
a) Accounting b) Bookkeeping
c) Auditing d) Journalizing
8) The accounting process is the recognition or non-recognition of business activities as
accountable events.
a) Identifying b) Communicating
c) Measuring d) Recording
9) Which accounting process pertains to preparation and distribution of accounting
reports to potential users of accounting information.
a) Identifying b) Communicating
c) Measuring d) Recording
10) Which of the following is not a valid statement regarding measuring process of
accounting?
a) The Philippine peso is the unit of measure used in recording accountable
economic transactions.
b) Useful financial information needs to be expressed in terms of a common
financial denominator.
c) Current cost is the most common measure of financial transactions.
d) Measuring is considered as the technical component of the accounting
process.
 Worksheet:
Name : _______________________________ Grade & Section: ___________

A. Critical Thinking:

I. Case Analysis: Analyze the case and determine if he gain or loss? Show your
computation and explain.
After graduation from high school, Jose Mercado decided to put up photocopying
business because there was none near the vicinity of the school. Students had to walk
far just to go to the nearest photocopying center. Jose knew that the demand for
photocopying service among high school students was high because teachers often
assigned readings and lecture notes that should be photocopied.
Jose opened his photocopying business on July 1, 2019. He rented a commercial
space located in front of the high school gate for P 5,000 per month. He also borrowed
P 50,000 (without interest) from his father to buy a brand new photocopying machine
costing P30,000 and to pay for other start-up expenses. He planned to pay thus
P50,000 in four years. Form his personal savings, Jose Spent P10,000 for supplies like
bond papers, staplers, paper clips, and other supplies that would need in his business.
He also paid P2,000 for business permits and licenses. And because Jose had to attend
to his classes in a nearby university, he hired a staff with a weekly salary of P1,000 to
operate the business. Jose planned to visit his photocopying shop after his class every
day to check on it.

II. Collaboration and Communications:

Please answer the following questions briefly.

1. Define what is accounting? How accounting used in our daily activities?

2. In your community give examples of decisions or questions that can be supported
by accounting information.
3. What is the nature of accounting?
4. What is the function of accounting in business?
5. What are the functions of manager? Give examples where accounting is used as aid
in performing the management functions.