Fundamentals of Accountancy, Business,
and Management 1
Accountancy, Business, and Management
Lesson 1.1
Introduction to
Accounting
1
Why is accounting the focus in studying business and
management course?
2
In a nutshell: record-keeping, financial data preparation, and
interpretation are the backbone of any company. Financial data
dictates the options and moves of companies that are heavily
reliant on their own financial capabilities. Even when starting a
small business, one of the first questions that come to mind is
the owner’s capacity to produce the funds to support business
operations.
3
Learning
Competencies
This lesson aims to target the following DepEd competencies:
● Define accounting (ABM_FABM11- IIIa-1).
● Describe the nature of accounting (ABM_FABM11- IIIa-2).
● Explain the functions of accounting in business
(ABM_FABM11- IIIa-3).
● Narrate the history/origin of accounting (ABM_FABM11-
IIIa-4).
4
Learning Objectives
In this lesson, you should be able to do the following:
● Discuss the nature, functions, and history of accounting.
● Determine the functions and importance of accounting in
various personal and business situations.
● Create personal goals for this course with accounting
concepts learned.
5
Quick Look
Starting a Business
Are you interested in starting your own business? What are your
considerations and hindrances before starting?
Almost all businesses start with the economic capability of the
owners. The first consideration in starting a business is the sufficiency
of seed capital and its effective utilization.
6
Quick Look
Starting a Business
Once a business starts operating, other considerations arise and
unfold day-to-day:
● “How did we do today?”
● “How much did we earn?”
● “Will we be able to continue our business?”
● “When will be the right time to invest in other things besides our
current business venture?”
7
Quick Look
Starting a Business
Accounting processes deal with regular checks and balances. It
includes manually counting stocks when they arrive, computing the
daily sales, then matching it with expenses to get a simple revenue
computation.
8
Quick Look
Starting a Business
From these, it will evolve to checking stocks on a bigger perspective,
preparing journal entries that will signify day-to-day operations,
making initial checks and balances through ledgers, then finally
preparing financial statements to reflect the company's financial
position and financial performance in the business scene.
9
Why is accounting an essential
element in business
management?
10
Accounting
● the process of identifying, measuring,
and communicating financial
information to allow users to make
informed judgments and decisions
(American Accounting Association,
1966)
11
Accounting
● the art of recording, classifying, and
summarizing transactions and events
which are financial and are
quantifiable in terms of money
(American Institute of Accountants,
1956)
12
Accounting
● It 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. (Accounting Standards
Council) 13
Accounting as a Process
14
Accounting as a Process
Identifying and Analyzing
● start of the accounting
process
● identify financial
transactions to the
business
● analyze the effects of
transactions on the
business
15
Accounting as a Process
Recording or Journalizing
● record or journalize
filtered out transactions
into different accounting
documents
● also known as
bookkeeping
16
Accounting as a Process
Communicating
● the universal language of
business
● the results of the first two
phases are
communicated to internal
and external users
through financial
statements
17
Bookkeeper Accountant
● responsible for ● supplies financial
developing and information to make
informed judgments
maintaining
and better decisions
accounting ● addresses the
records essence of
accounting: the
“decision-usefulness”
of data 18
Simple Accounting in Business
Closer
Look
John, Carlo, and Marie are co-owners of a vacation rental
home. They agreed to split the business's net profit every
quarter. John is the designated manager.
19
Simple Accounting in Business
Closer
Look
Every day, John records
● financial transactions (income from the rental fee and
expenses incurred from utilities, maintenance, repairs,
taxes paid, etc.)
● nonfinancial transactions (record of previous renters,
problems that occurred, clients' feedback, etc.)
20
Simple Accounting in Business
Closer
Look
John performs the accounting process:
1. he identifies the information that could be quantified in
terms of money;
2. he then organizes these into a financial report
summarizing the income, expenses, and net profit
3. he shares them with his siblings to show how much each
one would get for the quarter.
21
Check Your Progress
What is the nature of information being identified and
1 analyzed, recorded or journalized, and communicated
in accounting?
Answer area
22
Nature of Accounting
23
Nature of Accounting
Service Activity
● All the processes that an accountant
undergoes and accomplishes are used by
the business organization and its units in
day-to-day operations.
24
Nature of Accounting
Process
● It is a step-by-step and systematic
procedure to produce results relevant to the
management and other potential users.
25
Nature of Accounting
Art and Discipline
● accountants could still devise their own
tactics while adhering to well-defined
procedures and regulations
26
Nature of Accounting
Deals with Financial Information
● If accounting information is useful, it must
be expressed as a common financial
denominator.
● Therefore, accountable economic
transactions and events have monetary
values.
27
Nature of Accounting
An Information System
● It measures business activities, processes
information into reports, and communicates
these to decision-makers.
28
Simple Accounting in Business
Closer
Look
All departments and units in a company use
accounting information in their operations:
● marketing department – analyzes the
information to determine the impact of their
promotional strategy on monthly sales
● finance department – needs the information to
decide how much funds would be needed to
implement the expansion plan.
29
Simple Accounting in Business
Closer
Look
● production department – uses the information
to determine which of the processes
implemented incurred fewer costs
● human resources department – looks at the
information to determine performance bonuses
and other benefits
30
Check Your Progress
Why is accounting the focus in studying business and
2 management?
Answer area
31
Functions of Accounting
32
Functions of Accounting
Keeping systematic records
● ensures that the correct and relevant data is organized
and detailed to reflect the business's economic
standing
● provides users, such as the management and
investors, with relevant information needed to make
informed decisions
33
Functions of Accounting
Protecting properties of the business
● ensure that the business's assets are monitored and
performing well
● keeps track of assets, most especially cash, must be
thorough to avoid fraud, corruption, and theft
34
Functions of Accounting
Communicating results to various parties
● aims to communicate the financial health and
performance of a company effectively
● produces accurate information essential for internal and
external users to make sound decisions
35
Functions of Accounting
Communicating results to various parties
● Auditing – an independent undertaking where the
information from a completed accounting process is
evaluated to determine whether it abides with
established accounting standards
36
Functions of Accounting
Meeting legal requirements
● ensures that the company meets all the legal
requirements and regulations set forth by the
government
● examples:
○ trade and business standards
○ fair employment agreements
○ proper payment of taxes 37
International Financial Reporting Standards
Closer
Look
The International Financial Reporting Standards, or IFRS, are
established accounting standards set by the IFRS
Foundation and regulated by the International Accounting
Standards Board (IASB) for businesses to follow in preparing
financial statements.
38
International Financial Reporting Standards
Closer
Look
Following the standards ensure that investors are provided
with transparent and reliable information about a company’s
financial position, cash flows, changes in equity, and
performance. The IFRS Accounting Standards are currently
required in 140 jurisdictions worldwide and permitted for
use in many other countries.
39
History of Accounting
40
History of Accounting
Mesopotamian Era
● 3,500 B.C.
● informal recording of
money and trade-
related information
41
History of Accounting
Mesopotamian Era
● use of stone tablets to
record sales and loans
● Hammurabi Code: rules
and regulations for
commercial transactions
42
History of Accounting
Luca Pacioli
● 14th Century
● The Father of Accounting
● introduced the double-entry
system of debit and credit
○ paved the way for
modern accounting
43
History of Accounting
Industrial Revolution
● 17th and 18th century
● development of machines
and factories for mass
production of goods
44
History of Accounting
Industrial Revolution
● accounting was emphasized
with utmost importance and
relevance
● system of checks and
balance to monitor the
process and expenses in
production
45
History of Accounting
Queen Victoria of
British Empire
● 19th century
● first recorded accounting
standards were formalized
during her reign
46
History of Accounting
Queen Victoria of
British Empire
● monitored the reported
transactions of companies
○ evolved into the modern
process of auditing
47
History of Accounting
● Accounting systems continually adapt to the needs of
the global market and the business environment.
● The existence of multinational and transnational
corporations required uniform accounting standards
across different countries and industries.
48
History of Accounting
most credible
accounting
standards
today
GAAP IFRS
Generally
International
Accepted
Financial
Accounting
Accounting
Principles
Standards
49
Keep in Mind
● Accounting is the process of identifying and analyzing, recording
or journalizing, and communicating economic information to
permit informed judgment and decisions by users of information.
50
Keep in Mind
● Accounting is a rather complex field. It is in its nature to deal with
financial information and serve as a service activity, a process, an
art and discipline, and an information system.
● Accounting serves many functions such as:
○ keeping a systematic record of business transactions;
○ protecting properties of the business;
○ communicating results to various parties; and
○ meeting legal requirements.
51
Keep in Mind
● The early accounting practice dates back to the Mesopotamian
Era, when people used stone tablets to record commercial
transactions. As economic activities progressed, accounting
procedures and standards also evolved. Today, different
companies, institutions, and governments worldwide have
generally accepted uniform sets of accounting standards.
52
Performance Task:
What is Accounting?
Sample Mood Board
