FUNDAMENTALS OF ACCOUNTANCY, BUSINESS & MANAGEMENT 1 | MODULE 1

LESSON 1: The Definition, Nature and 4. DATINGUI

History of Accounting 5. INTUSERERLAN

Most Essential Learning Competency: Unlocking Difficulties:

 Define accounting Business Transactions – is an event that
 Describe the nature of accounting has some effects on the resources of a firm
 Narrate the history/origin of or on the source of a firm’s assets.
accounting
 Define external users and give Certified Public Accountant – A Certified
examples Public Accountant shall be considered in the
 Define internal users and give practice of his profession, if the nature and
examples character of his employment whether as an
officer or employee in a private enterprise or
Objectives: educational institution involves decision-
At the end of the lesson, students are making requiring professional knowledge in
expected to: the science of accounting or when he
 Define accounting represents his private employer before any
 Describe the nature of accounting government agency on tax matters related to
 Narrate the history and origin of accounting, and such employment or position
accounting requires that the holder thereof must be a
 Recognize the users of accounting Certified Public Accountant; or if he holds or
information. And, is appointed to a position in the accounting
 Value the importance of accounting occupational group in the government or in
information to its users. government-owned or controlled
corporations, including those performing
Pre-test: proprietary functions, where a civil service
eligibility as a Certified Public Accountant is a
Directions: Write T if the statement is true, and prerequisite. (Professional Regulations
F, if it is False. Commission)

1. The Philippine Institute of Certified Financial Statements – are structured

Public Accountants (PICPA) is the financial representation of the financial
professional organization of the position of and the transactions undertaken
accountants in the Philippines. by an enterprise.
2. Cost accounting is focused on the
recording of business transactions Discussion:
and on the periodic preparation of the
financial statements. ACCOUNTING AS A” LANGUAGE OF A
3. Financial accounting is an area of BUSINESS”
study that discusses the accumulation Any business primary aims to
of cost data such as materials, labor, generate profits and to properly manage its
and overhead and the accounting for limited and scarce resources.
costs and inventories.
Definition of accounting:
4. The users of the financial statements
who decide whether or not they would 1. Accounting is a service activity. Its
put their money in a business function is to provide quantitative
endeavors or in other forms of income information primarily financial in
– generating ventures are the lenders. nature, about economic entities, that
5. A corporation is a business owned by is intended to be useful in making
a single person. economic decisions. (Financial
Reporting Standards Council)
Recall: 2. Accounting is the process of
Arrange the jumbled letters to unlock the identifying, measuring, and
mystery words communicating economic information
1. GTCOUACNI to permit informed judgments and
2. ACTONTRAINS decision by users of the information.
3. NEBISUSS (American Accounting Association)
a. Identifying – this accounting recognition of business activities as
process is the recognition or non- “accountable events”
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FUNDAMENTALS OF ACCOUNTANCY, BUSINESS & MANAGEMENT 1 | MODULE 1
There are 3 types of transactions: And improvement of th4e firm’s
 Business Transactions – these general accounting system and
are transactions which are other system deemed necessary
recorded in the financial books. for controlling and distributing
 Personal transactions – these manufacturing costs. In addition,
are transactions which are not advises on financial planning,
recorded in the financial books. budgeting, forecasting, and
 Neither business nor personal inventory control are offered.
transactions – these are 3. Tax services – this includes
business events that are not preparation and filing of income tax
recorded in the financial books. returns.
Private accounting – it is an accounting job
b. Measuring – this accounting done in private business enterprise. The
process is the assigning of Peso number of accountings in the firm depends
amounts to the accountable upon the size and the needs of the business.
economic transactions and events. Accountants in private firms may or may not
c. Communicating – this is the be a Certified Public Accountant. However,
process of preparing financial the controller or the head of the department is
statements and interpreting the usually a CPA.
results thereof.
1. General Accounting – this includes
3. Accounting is the art of recording, the recording transactions and
classifying, and summarizing in a preparing financial reports for the use
significant manner and in terms of of the management, owners,
money, transactions and events which creditors, governmental units, and
are, in part at least, of financial other interested parties.
character, and interpreting the results 2. Cost accounting – this has to do with
thereof. (American Institute of the controlling, determining, and
Certified Public Accountants). controlling costs particularly those
costs in producing a product or
BRANCHES OF ACCOUNTING service.
Accounting has the following 3. Budgeting – this provides
fields/branches in which an accountant management a plan for future
finds himself employed; operations and after this plan has
been applied, summarizes and reports
Public Accounting – it is a professional comparing the actual accomplishment
service rendered by a Certified Public with the plan are provided.
Accountant and his employees to the 4. Internal Auditing – Aside from the
public for a fee. The following are the audit done by a public accountant,
most common services offered by a some business firms usually maintain
public accountant: a staff of internal auditors who check
the records prepared and maintained
1. Auditing – this is the principal
in each department or branch. These
service that a public accountant
internal auditors see to it that the
offers. In making an audit, he
established accounting procedures
carefully examines tests and
are being followed throughout the
checks the accuracy of the reports
year.
and the financial data from which
5. Government accounting –
the reports were taken. Then he
government officials, like private
expresses his opinion on the
business firms, rely on accumulated
fairness of the audited reports.
accounting data. Accountants are
2. Management advisory services –
responsible for the accumulation of
this includes the design,
these data. They also check and audit
installation.
the income payroll and tax returns
submitted to the government.
6. Accounting education – faculty
members in accounting in various
colleges and universities are certified
public accountants.

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FUNDAMENTALS OF ACCOUNTANCY, BUSINESS & MANAGEMENT 1 | MODULE 1
7. International Accounting – this field The history of accounting or accountancy is
of accounting is concerned with the thousands of years old and can be traced to
transactions and special problems of ancient civilizations.
multinational business organization in
dealings in the international trade. The early development of accounting dates
8. Social Accounting – this involves the back to ancient Mesopotamia, and is closely
measurement of social costs and related to developments in writing, counting
benefits such as the measurement of and money and early auditing systems by the
traffic patterns for the most efficient ancient Egyptians and Babylonians. By the
use of traffic funds. time of the Emperor Augustus, the Roman
9. government had access to detailed financial
information.
BUSINES ORGANIZAITON
In India Chanakya wrote a manuscript similar
Business organizations can be classified into to a financial management book, during the
2: period of the Mauryan Empire. His book
1. According to Ownership "Arthashasthra" contains few detailed aspects
a. Single or sole proprietorship – of maintaining books of accounts for a
this type of business is owned and Sovereign State.
manage by only one person. The Italian Luca Pacioli, recognized as The
Usually the owner is also the Father of Accounting and Bookkeeping, was
manager of the business. the first person to publish a work on double-
b. Partnership – this is a business entry bookkeeping, and introduced the field in
organization with two or more Italy.
owners. The owners are called
partners; agree on capital The modern profession of the chartered
contributions, management or the accountant originated in Scotland in the
firm distribution of profits and nineteenth century. Accountants often
losses, and other matters belonged to the same associations as
pertaining to the operation of the solicitors, who often offered accounting
firm. services to their clients. Early modern
c. Corporation – this is the business accounting had similarities to today's forensic
organization of not less than five accounting. Accounting began to transition
person called shareholders. It is into an organized profession in the nineteenth
organized by operation of law. century, with local professional bodies in
2. According to nature or activity: England merging to form the Institute of
a. Service – this deals with the Chartered Accountants in England and Wales
rendering of services to the in 1880.
customers such as tailoring shops,
Accounting records dating back more than
beauty shops.
7,000 years have been found in
b. Trading or merchandising – this
Mesopotamia, and documents from ancient
type of business deals with the
Mesopotamia show lists of expenditures, and
buying of goods and selling the
goods received and traded. The development
same goods in the same form for
of accounting, along with that of money and
profit. Examples are sari-sari
numbers, may be related to the taxation and
stores, grocery.
trading activities of temples:
c. Manufacturing - this involves
purchases of raw materials and The early development of accounting was
converting these raw materials closely related to developments in writing,
into finished products. Examples counting, and money. In particular, there is
are textile manufacturing firms, evidence that a key step in the development
factories. of counting—the transition from concrete to
abstract counting—was related to the early
development of accounting and money and
History of Accounting took place in Mesopotamia
Other early accounting records were also
found in the ruins of ancient Babylon, Assyria
and Sumeria, which date back more than primitive accounting methods to record the
7,000 years. The people of that time relied on growth of crops and herds. Because there was
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FUNDAMENTALS OF ACCOUNTANCY, BUSINESS & MANAGEMENT 1 | MODULE 1
a natural season to farming and herding, it The employees are interested
was easy to count and determine if a surplus in the profitability and in the stability of
had been gained after the crops had been the business. Targeted profit that is
harvested or the young animals weaned. met by the united efforts of the
Between the 4th millennium BC and the 3rd employees may result to bonuses and
millennium BC, the ruling leaders and priests salary increase.
in ancient Iran had people oversee financial 3. Investors
matters. In Godin Tepe (‫ )تپه گدین‬and Tepe The investors are interested in
Yahya (‫)يحيی تپه‬, cylindrical tokens that were the profitability and in the public
used for bookkeeping on clay scripts were confidence on the offered products
found in buildings that had large rooms for and services. Increased demand on
storage of crops. In Godin Tepe's findings, the offers may increase the share
the scripts only contained tables with figures, price of a corporation.
while in Tepe Yahya's findings; the scripts 4. Creditors
also contained graphical representations. The The creditors are interested in
invention of a form of bookkeeping using clay the liquidity of the business. Being
tokens represented a huge cognitive leap for faithful to loan agreements will result
mankind. to a lasting relationship between the
management and the creditors.
During the 1st millennium BC, the expansion 5. Suppliers
of commerce and business expanded the role The suppliers are interested in
of the accountant. The Phoenicians invented the liquidity and in the business model
a phonetic alphabet "probably for of the company, which may present
bookkeeping purposes", and there is the needs of the business in supplying
evidence that an individual in ancient Egypt demandable products and services.
held the title "comptroller of the scribes." 6. Government
There is also evidence for an early form of The government is concerned
accounting in the Old Testament; for with the obligations of the business in
example, the Book of Exodus describes paying taxes. Income tax and other
Moses engaging Ithamar to account for the taxes are due to be paid on a
materials that had been contributed towards frequency as set by the tax collection
the building of the tabernacle. agency.
7. Public
By about the 4th century BC, the ancient
The public is concerned with
Egyptians and Babylonians had auditing
the offered products and services that
systems for checking movement in and out of
may contribute to the well-being of the
storehouses, including oral "audit reports",
society. Other things to consider are
resulting in the term "auditor" (from audire, to
the environmental safeguards and the
hear in Latin). By the 2nd century BC, the
community health.
importance of taxation had created a need for
the recording of payments, and the Rosetta Exercise:
Stone also includes a description of a tax 1. Define accounting
revolt. 2. Describe the nature of accounting and
its branches.
USERS OF ACCOUNTING INFORMATION
3. Give examples of business
1. Management organizations according to its nature.
The management is interested 4. Briefly discuss the history and origin
in the profitability and in the financial of accounting
condition of the business. Strong
liquidity may compel the management Generalization:
to expand by opening branches in Accounting is a service activity. Its
other areas. function is to provide quantitative information,
2. Employees primarily financial in nature, about economic
entities that are intended to be useful in
making economic decisions (Financial
Reporting Standards Council). It is also the
process of identifying, measuring, and
communicating economic information to
permit informed judgments and decision by Accounting Association). Accounting is the art
users of the information (American of recording, classifying, and summarizing in a
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FUNDAMENTALS OF ACCOUNTANCY, BUSINESS & MANAGEMENT 1 | MODULE 1
significant manner and in terms of money, 14 Textile mills
transactions and events which are, in part at 15 Furniture store
least, of financial character, and interpreting
the results thereof. (American Institute of Identify the following users whether they are
Certified Public Accountants). internal or external. Write I for internal and E
There are 3 types of transactions: for external.
Business Transactions, Personal 1. Management
transactions, and neither business nor 2. Employees
personal transactions 3. Investors
4. Creditors
Accounting has the following 5. Suppliers
fields/branches in which an accountant finds 6. Government
himself employed; public and private 7. Public
accounting. Public Accounting consists; .
Auditing, Management advisory services, and
Tax service. Private Accounting consist of the References:
following: General Accounting, Cost
accounting, Budgeting, Internal Auditing, Arganda, Cardenas-Atis, Del Rosario. (2012).
Government accounting, Accounting Accounting Principles 1. Mandaluyong
education, International Accounting, and City`: National Bookstore .
Social Accounting.
Types of business organization can Erasmus Rekenmeesters. (n.d.). Erasmus
be classified into two: according to ownership Rekenmeesters. Retrieved from A
as sole proprietorship, partnership and Brief History of Accounting:
corporation and according to the nature of the https://erasrek.co.za/blog/history-of-
business as service, trading or accounting/
merchandising, and manufacturing. Hernane, Milagros (2006) Principles of
The history of accounting or Financial Accounting. Manila City
accountancy is thousands of years old and
can be traced to ancient civilizations. The Manalaysay, B. (2017). Fundamentals of
Italian Luca Pacioli, recognized as The Father Accountancy, Business, and
of accounting and bookkeeping was the first Management 1. Mandaluyong City:
person to publish a work on double-entry Anvil Publishing Inc.
bookkeeping, and introduced the field in Italy.
Post-test:

Indicate the type of firm to where each of the

listed businesses below belongs. Use the
following classification A. Service b. Trading
or Merchandising C. Manufacturing
1 Hotels
2 Restaurants
3 Appliance store
4 Dress shop
5 Department store
6 Automobile repair shop
7 Schools
8 Medical clinic
9 Newsstand
10 Shoe factory
11 Barber shop
12 Poultry supply store
13 Grocery store