WHAT IS ACCOUNTING?

AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS ( AICPA )

• ACCOUNTING IS AN ART OF RECORDING, CLASSIFYING AND SUMMARIZING IN A SIGNIFICANT MANNER AND IN
TERMS OF MONEY, TRANSACTION AND EVENTS, WHICH ARE IN PART AT LEAST OF A FINANCIAL CHARACTER AND
INTERPRETING THE RESULT THEREOF.

PHILIPPINE INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANT ( PICPA )

• 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
NATURE OF ACCOUNTING

• ACCOUNTING IS A SYSTEMATIC PROCESS

• ACCOUNTING IS AN ART
• ACCOUNTING IS A SERVICE ACTIVITY
FOUR ASPECTS OF ACCOUNTING
• RECORDING
WRITING DOWN OF BUSINESS TRANSACTIONS CHRONOLOGICALLY IN THE BOOKS OF ACCOUNTS AS THEY REQUIRE.

• CLASSIFYING
SORTING SIMILAR AND RELATED BUSINESS TRANSACTIONS INTO THE THREE CATEGORIES ( ASSET, LIABILITIES AND EQUITY )

• SUMMARIZING
PREPARING THE FINANCIAL STATEMENTS FROM THE TRANSACTIONS RECORDED IN THE BOOKS OF ACCOUNT THAT ARE DESIGNED
TO MEET THE INFORMATION NEEDS OF ITS USER.

• INTERPRETING
REPRESENTING THE QUALITATIVE AND QUANTITATIVE FINANCIAL INFORMATION ABOUT THE BUSINESS TRANSACTIONS IN A
LANGUAGE COMPREHENSIBLE TO USERS OF FINANCIAL STATEMENT.
DIFFERENT BRANCHES OF ACCOUNTING
• FINANCIAL ACCOUNTING
• MANAGEMENT ACCOUNTING
• GOVERNMENT ACCOUNTING
• AUDITING
• TAX ACCOUNTING
• COST ACCOUNTING
• ACCOUNTING EDUCATION
• ACCOUNTING RESEARCH
USERS OF ACCOUNTING INFORMATION
EXTERNAL USERS INTERNAL USERS
• CUSTOMERS • MANAGEMENT
• CREDITORS • EMPLOYEE
• POTENTIAL INVESTORS • OWNERS OR STOCKHOLDERS
• GOVERNMENT
• ACADEME
• PUBLIC
FORMS OF BUSINESS ORGANIZATION
• SOLE PROPRIETORSHIP

• PARTNERSHIP

• CORPORATION
 SOLE PROPRIETORSHIP
ADVANTAGE DISADVANTAGE
• EASE OF INFORMATION • UNLIMITED LIABILITY
• THE OWNER HAS FULL CONTROL OF THE • DIFFICULTY OF RAISING ADDITIONAL CAPITAL
BUSINESS • OWNERS BIAS
• OWNER CAN MIX PERSONAL AND BUSINESS
ASSETS
• OWNERS HAVE ALL THE PROFITS FOR
THEMSELVES
• SIMPLE TAXATION
 PARTNERSHIP
ADVANTAGE DISADVANTAGE
• SEPARATE LEGAL EXISTENCE • UNLIMITED LIABILITY
• EASIER TO CREATE THAN A CORPORATION • LIMITED LIFE
• BETTER ABILITY TO ACQUIRE ADDITIONAL
CAPITAL THAN SOLE PROPRIETORSHIP
• LARGER POOL OF HUMAN CAPITAL THAN SOLE
PROPRIETORSHIP
 CORPORATION
ADVANTAGE DISADVANTAGE
• ABILITY TO ACQUIRE ADDITIONAL CAPITAL • HEAVILY REGULATED BY THE GOVERNMENT
• TRANSFERABLE OWNERSHIP RIGHTS • DOUBLE TAXATION
• LIMITED LIABILITY OF STOCKHOLDERS • NOT EASY TO FORM
• LARGE POOL OF HUMAN CAPITAL • MORE EXPENSIVE TO FORM
TYPES OF BUSINESS ACTIVITIES
• SERVICE

• TRADING/ MERCHANDISING

• MANUFACTURING