Professional Documents
Culture Documents
INTORDUCTION
Accounting is the system that measures business activities,
process that information into reports and communicates the
results to decision-makers.
Accounting quantifies business communication.
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Accounting in the Twentieth Century and Present
Time: After the year 1900 to date is known as modern
accounting age. Within this period all types of branches of
accounting like costing, management accounting, auditing,
taxation, government accounting, socioeconomic accounting,
human resource accounting etc are perfectly established. In
recent years, electronic accountings like software, ebusiness, e-commerce, website etc are very popular to the
users for easiness, cheapness, and fastness.
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Accounting from Industrial Revolution to Nineteenth
Century.
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Time.
Types of Accounting
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Accounting in the Primitive Age: The times before
476 year are known as primitive age of accounting. In this
period accounting is limited upto counting. At that time the
business activities were operated through barter system.
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Accounting in the Middle Age: The period from the
year 476 to 1453 is known as the middle age of accounting.
In this period business activities were expanded from one
country to another country. At that time the business
activities were operated through monetary system.
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Accounting Pre-Industrial Revolution Age: The period
from the year 1454 to 1760 is known as the pre-industrial
revolution of accounting. In this the golden period for
accounting establishment. In this period some books on
accounting written and published like Luca Pacioli's Summa,
Cotrugli's Della etc.
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Accounting from Industrial Revolution to Nineteenth
Century: The period from the year 1760 to the end of
nineteenth century is known as postindustrial period of
accounting. In this period some branches of accounting like
cost accounting is originated. In this period some accounting
standards and institutions like the Institute of Accountants in
Edinburgh is established. Also in this period, the three types
Sole Proprietorship
One owner
Small service-type business and retail
establishment
Receives all the profits and absorbs all losses and
debts
Entity Concepts
Partnership
Owned and operated by two or more persons who
bind themselves to contribute MONEY, PROPERTY,
or INDUSTRY TO A COMMON FUND, with and
intention of DIVIDING the profit among themselves.
Investing Activities*
Investing activities generally involve long-term
assets
Primary Sources owners and creditor
Involve purchasing and disposing assets
necessary for business operations.
Different businesses need to acquire different types
of assets such as land, property, plant, equipment,
patents, copyrights, cash, accounts receivable, etc.
Operating Activitites
Involve the cash effects of transactions that enter
into the determination of net income, such as cash
receipts from sales of goods and services and cash
payments to suppliers and employees for
acquisitions of inventory and expenses.
day-to-day business activities of a company which
determine the company's net income (loss).
Payments
Payments
Payments
Payments
Payments
insurance
Financing Activity
Financing activities include the inflow of cash from
investors, as well as the outflow of cash
to shareholders as dividends as the company
generates income. Other activities which impact
the long-term liabilities and equity of the company
are also listed in the financing activities.
Financing activities liability and stockholders;
equity items and include:
Micro
With asset, before financing, of P 3.0 (Before 1.5)
million or less
Employ not more than 9 workers
Small
With asset, before financing, of above P3.0 (Before
1.5) to 15 million
Employ 10-99 workers
Medium
With asset, before financing, of above P 15. To P
100.
Employ 100-199 workers
Classifying
In order to determine how much one spent in each
of the categories one has to classify the records.
For example in a business, office supplies can be
deducted from the taxes. Dining and entertainment
can also be used as a deduction.
Summarizing
After the recording phase and the classification
stage comes summarizing the various categories
into a linear sheet of information that is easier to
read. From this one can discover how much was
spent, what was kept, what was paid out, where
and other information.
Purpose of Accounting
From the illustration presented, and for a
straightforward answer, it is clear that the ultimate
purpose of accounting is to provide information to
different users. The users utilize the information in
making economic decisions.
Phases of Accounting
The four phases of accounting are as follows:
Recording
Recording is the first phase of accounting in which
all monetary information is recorded in order to
make a record that can be used for various needs.
Accounting records are used for taxes, budgeting,
reporting and business plans.
Without recording the monetary transactions it will
In Summa,
Fundamental Concept
Entity Concept
Most basic concept in Accounting.
Stands apart from other organization and
individuals as a separate economic unit.
Transaction of diff. entities should not be accounted
for together.
Each entity should be evaluated separately.
Periodicity Concept
Allows user to obtain timely information to serve as
a basis on making economic decision about future
activities.
Stable Monetary Unit
The Philippine peso is a reasonable unit of measure
and that its purchasing power is relatively stable.
Accounting Principles
Established by GAAP
Relevance
Meaningful and useful to those who need to know
something about a certain organization.
Objectivity
Is not influenced by a bias or judgement of those
who furnish.
Connotes reliability, trustworthiness, verifiabilityfinding out whether the info. Is correct.
Feasibility
In can be implemented without undue complexity
or cost.
Basic Principles
Objectivity Principle
Based on the most reliable data available.
Reliable data are verifiable when they can be
confirmed by independent observers.
Without this principles records would be based on
whims and opinions and therefore subject to
disputes.
Historical Cost
Acquired asset should be recorded at their actual
cost and not at what management thinks they are
worth as at reporting date.
Revenue Recognition Principle
Recognized in the accounting period when goods
are delivered or services are rendered or
performed.
Expense Recognition Principle