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 Sangat National High School
Senior High Department

Fundamentals of ABM 1
(Accountancy, Business, and Management)

Content 1: Introduction to Accounting

Prepared by: NERISSA MENDAROS-AUXILIO, MBA

 Learning Competencies
The learners….
➢ define accounting (ABM_FABM11-111a-1)
➢ describe the nature of accounting (ABM_FABM11-111a-2)
➢ explain the functions of accounting in business (ABM_FABM11-
111a-3)
➢ narrate the history/origin of accounting (ABM_FABM11-111a-4)
 Functions of Accounting in Business
• Accounting is often referred as “language of business” because it is
fundamental to the communication of financial information.
• Accounting has the following two broad functions in business:
➢ To provide non-owners of business (i.e., external users) with information
that is useful in making, among others, investment and credit decisions; and
➢To provide business owners and managers (i.e., internal users with
information that is useful in managing the business.
 Managing a Business
• Good management is the key to a business’ success.
• On the other hand, mismanagement is, one way or another, the cause of
every business’ failure.
• Management, therefore, is no laughing matter.
• It cannot be taken lightly.
• To be a good manager, one must equip himself or herself with the right
management tools – and one important management tool is accounting!
 Management, defined
• 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.
• Managing a business requires more than just technical skills. A business
manager is likened to a musical conductor who leads a group of musicians
to perform a musical piece to the best of their abilities.
• A successful business manager sees the “big picture” and understands each
detail. He or she has the ability to think “inside and outside the box” and to
make both long-term (strategic) and short-term (tactical) plans.
 Major Facets of a Business
• As a future business professional, you need to understand each of the following
major facets of a business:
• A. Finance – refers to how a business generates and manages its funds. Finance is
responsible in providing adequate resources needed for the other facets to function
properly.
• B. Production- refers to how goods are produced or services are rendered.
Production is responsible for the quality of goods and services and the efficiency by
which they are produced or rendered.
• C. Marketing – refers to how goods or services are communicated to customers.
Marketing is responsible in creating value for customers and building strong
customer relationships.
 Major Facets of a Business
• D. Accounting – provides a measure of how well the other facets of the business are
performing. Accounting is responsible in providing useful information that aids in
making business decisions.
• A manager makes countless business decisions. Few examples of these decisions
include:
• a. How much money needs to be invested in the business? b. How much inventory is
enough c. Is the business spending too much on its marketing activities? d. Is the
business earning profits? e. Shall the business continue or cease existence?
• Each of the major facets of business is mutually dependent.
• They work hand in hand. Without the other, the business will not fully achieve its
goals.
 Story
Once upon a time, there lived a turtle, a monkey, and a snake.
Mr., Turtle is diligent and has excellent cooking skills but is very shy and timid. No
wonder Mr. Turtle is still single at age 40.

Mr. Monkey is charismatic, has an outgoing personality and has many friends but
sometimes Mr. Monkey can be very trusting. No wonder many girls have taken
advantage of Mr. Monkey in the past.

Mr. Snake is very intelligent and cunning. But unlike Mr. Turtle and Mr. Monkey,
Mr. Snake is cold as ice and lazy. No wonder Mrs. Snake left him.
One day, Mr. Turtle and Mr. Monkey decided to put up a fast food restaurant. Mr.
Turtle was in-charge of the cooking while Mr. Monkey did the marketing.
When Mr. Snake heard about this, he offered himself to be the business’ cashier
and bookkeeper. With his slyness, he was able to make Mr. Turtle and Mr.
Monkey accept him as co-owner of the business for a very minimal amount of
investment.
As skillful and diligent as he is, Mr. Turtle was able to formulate recipes that never
failed to make customers smile. With Mr. Monkey’s marketing skills, the business’
customers and market share continued to grow.
After years of operation, the business gained considerable growth. The business
even received recognition from various organizations for its excellence. However,
Mr. Turtle and Mr. Monkey, the founders of the business, have never tasted yet
the fruits of their labor in monetary terms. They got frustrated, which eventually
led them to cease their operations and call it quits.

The End
It seems there is no happy ending to the story. Why? …….
No one knows for sure, but here are possible reasons:

1. Maybe the business earned no profits because of excessive expenses despite

of increased sales;
2. Maybe they had the wrong pricing decision, e.g., excessively low pricing;
3. Maybe the business was assessed with excessive taxes; or
4. Maybe Mr. Snake embezzled the business’ money …….and so on.

There are so many “maybes” but all of these can only be corroborated by
accounting information!
Accounting as a Managerial Tool
• As mentioned earlier,
accounting is an essential
managerial tool.
• This is because accounting
provides information that
helps a business manager
perform his or her
management functions.
 ACCOUNTING CODE
• DC (DEBIT/CREDIT)
• ADE (ASSETS/DRAWING/EXPENSES)
Increase side= Debit ; Decrease side= Credit
• LER (LIABILITIES/EQUITY/REVENUE)
Increase side= Credit; Decrease side=Debit
 GROUP ACTIVITY
• List all the items you have in your possession right now. (at least 10)
• These are things you own.
• How do you acquire it? Cash or on Account.
• Share it to your classmates.
 ASSETS
• An asset is a resource with economic value that an individual,
corporation, or country owns or controls with the expectation that it
will provide a future benefit.
• Assets are reported on a company's balance sheet.
• They're classified as current, fixed, financial, and intangible.
• They are bought or created to increase a firm's value or benefit the
firm's operations.
Some assets are recorded on
companies' balance sheets
using the concept of historical
cost.
Historical cost represents the
original cost of the asset when
purchased by a company.
Historical cost can also include
costs (such as delivery and set
up) incurred to incorporate an
asset into the company's
operations.
A trademark is a
recognizable sign, phrase,
or symbol that denotes a
product or service and
legally differentiates it
from all others of its kind.
 Current Assets

• In accounting, some assets are referred to as current.

• Current assets are short-term economic resources that are
expected to be converted into cash or consumed within one year.
• Current assets include cash and cash equivalents, accounts
receivable, inventory, and various prepaid expenses.
 Functions of a Manager
• 1. Planning – involves the process of mapping out or arranging in detail
how a business goal is to be achieved.
• 2. Organizing – after a plan is formulated, a manager needs to organize his
or her personnel and other resources according to the plan.
Organizing involves assigning responsibilities and granting authority to
personnel.
• 3. Staffing – involves the process of selecting, training and developing
employees. This function is commonly referred to as human resource
management.
 Functions of a Manager
• 4. Directing – after a plan is formulated and resources are organized and
made available, a manager needs to lead his personnel to ensure that each is
performing his or her responsibilities towards the organization’s common
goal to the best of his or her ability.
Directing involves motivating, communicating, guiding and encouraging
personnel.
• 5. Controlling – after the other elements are in place, a manager needs to
continuously monitor results against goals and take corrective actions
necessary to ensure that the plan remains on track.
FUNCTIONS MANAGEMENT ACCOUNTING
DECISION INFORMATION
1. Planning • The need to improve sales and • The current and past levels of
the business’ ability of doing the business’ sales.
so. • Forecast of sales
2. Organizing • Do we need additional • The current productive
production facilities and capacity of existing facilities
equipment to cater the and equipment.
planned increase in sales? • The marketing costs spent in
• Do we have the ability to the past in relation to the sales
spend more on our marketing generated.
activities? • The amount of available cash
and the business’ ability to
generate additional financing.
FUNCTIONS MANAGEMENT ACCOUNTING
DECISION INFORMATION
3. Staffing • Do we need to employ • The number of current
additional personnel? employees compared to the
current level of productivity.
• The amount of available cash
needed to employ additional
personnel.
4. Directing • Are the employees properly • Records of personnel training
motivated, informed, guided and and
encouraged in meeting the development costs.
business’ goal of increasing its • Records of daily sales.
sales?
FUNCTIONS MANAGEMENT ACCOUNTING
DECISION INFORMATION
5. Controlling • Have we met our goal of • Variance analysis on
increasing our sales? differences between actual
sales and expected sales.

Accounting as a managerial tool is likened to a Global Positioning System

(GPS) attached to a car.

It shows exactly where you are (financial position) and how far you have
been (financial performance) this information is vital in determining your
ability to get to your desired destination (strategic and short-term goals).