Accounting
It is a facet of business that is responsible for providing information that is useful for
making economic decisions.
This is the process of identifying, recording, and communicating economic information
that is useful in making economic decisions.
Accounting is the language of business, an Information System, a service activity.
accounting is a body of knowledge which has been systematically gathered, classified,
and organized.
Qualitative, Quantitative and Financial Information
The types of information provided by accounting.
Accountable events
are those that affect the assets, liabilities, equity, income, and expense of a business.
Identifying
This essential element of the definition of accounting is the recognition or non-
recognition of business activities as accountable events.
accounting processes that comes first ahead of the others.
Staffing
In business, human resource department are involved with
Recording
This accounting process is the recognition or non-recognition of business activities as
accountable events.
Communicating
accounting process pertains to preparation and distribution of accounting reports to
potential users of accounting information.
Bookkeeping
It refers to the process of recording the accounts or transaction of an entity.
Fra Luca Pacioli
He is considered as the father of modern accounting.
Marketing
It is a facet of business that is responsible for building good rapport with prospective
clients and customers.
Management
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The primary responsible for the financial information of an entity.
Management Accounting
This branch of accounting is generally used by the management for planning and
controlling purposes.
This refers to the accumulation and preparation of financial reports for internal users
only.
Accounting Education
It refers to teaching accounting and accounting-related subjects in an organized learning
environment.
INFORMATION PRODUCED BY THIS BRANCH OF ACCOUNTING AIMS TO EDUCATE
STUDENTS IN THE FIELD OF ACCOUNTANCY.
Tax Accounting
It embraces the preparation of various tax returns and tax planning necessary to
minimize the impact of taxes on the firm.
Financial Accounting
It focuses on general purpose reports known as financial statements.
This is primarily concerned with the recording and classifying of business transactions
culminating in preparation of general-purpose financial statements or reports regarding
the business’ financial position, operating results, and cash activities in accordance with
the GAAP.
Government accounting
This refers to the accounting for the government and its instrumentalities, focusing
attention on the custody of public funds, the purpose, or purposes to which such funds
are committed, and the responsibility and accountability of the individuals entrusted
with such funds.
Auditing
It is primarily centered on the critical examination of financial statements by an
independent CPA to express an opinion regarding the fairness of the contents of the
financial statements.
Management Advisory Services
It aids the management. Accountants generally provide industrial advice to their clients
regarding accounting, finance, budgeting, business policies, and organization
procedures, systems, product costs, distribution, and other business activities.
Employees
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These users are interested in information about the profitability and stability of an entity
to assess the ability of the entity to provide remuneration, retirement benefits and
employment opportunities.
Employers
These users are interested in information about the stability and profitability of the
entity.
The company’s ability to pay salaries.
Lenders & other creditors
These users are interested in information that enables them to assess whether their
loans, the related interest thereon and other amounts owing to them will be paid when
due.
Investors
needs the accounting information of an entity to evaluate the risk of his investment in
the company.
These users require information on risk and return on investment.
Board of Directors
is an internal user of financial information.
THE CONSENT OF THIS GROUP OF INDIVIDUALS IS NECESSARY BEFORE THE INCOME OF
THE CORPORATION CAN BE DISTRIBUTED.
THESE INTERNAL USERS OF ACCOUNTING INFORMATION ARE VIEWED AS THE BRAINS
OF THE COMPANY.
Sole Proprietorship
IS THE EASIEST FORM OF BUSINESS ORGANIZATION TO ESTABLISH
CORPORATION
CAN EXTEND ITS LIFE FOR A PERIOD NOT EXCEEDING 50 years
THIS FORM OF BUSINESS ORGANIZATION IS UNDER HEAVY GOVERNMENT REGULATION.
CORPORATIONS ARE CONSIDERS HAVING UNLIMITED LIFE because they are not affected
by the death, withdrawal, or admission of stockholders.
Financial Statements
MOSTLY USED BY ACCOUNTANTS IN COMMUNICATING THE RESULTS OF OPERATIONS TO
OUTSIDE PARTIES.
Audited Financial Statements
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FINANCIAL STATEMENTS THAT UNDERGO THE PROCESS OF AUDITING.
General Purpose Financial Statements
FINANCIAL ACCOUNTING IS CONCERNED WITH
National Internal Revenue Code (NIRC)
THE PRIMARY GUIDELINES FOLLOWED BY TAX ACCOUNTANTS.
PFRS
The set of standards followed in the Philippines
International Accounting Standards Committee
The International Accounting Standards are pronouncements issued by
Net Surplus
DESCRIBE THE PROFITS OF A COOPERATIVE.
OBJECTIVE OF FINANCIAL REPORTING
To help intended users in their economic decisions.
Prudence
Also known as conservatism
Matching Principle
According to this concept, revenues and expenses exhibiting cause and effect
relationships should be recognized in the same accounting period.
most closely related to the accrual basis of accounting.
Separate Legal Existence
This assumption states that a business is an entity separate and distinct from its owners.
Going concern assumption
This assumption allows accountant to defer the recognition of expenses into the future.
Solving Examples:
1. Janky, the accountant of SAYONASYA Company, recorded sales of P 2,000,000 for the month of
October. Related to this sale are the salaries of factory employees worth P 250,000 and bonuses
amounting to 3% of the total sales. What amount of expense should Janky record?
The correct answer is: 310,000
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2. During the year, the equity of Krystle Company increased by P30,000 while its liabilities
decreased by P10,000. How did Krystle Company’s assets change during the year?
The correct answer is: Increased assets and increased liabilities
3. The liabilities of Ryan Company total P200,000 while its equity only amounts to half of its total
assets. What is the total equity of Ryan Company?
The correct answer is: 200,000
4. The assets of Rianne Company total P200,000 while its liability only amounts to P100,000.
What is the total equity of Rianne Company?
The correct answer is: 100,000
5. During the year, the equity of Krystle Company decreased by P30,000 while its liabilities
increased by P10,000. How did Krystle Company’s assets change during the year?
The correct answer is: Decrease of P20,000
6. The equity of Ryana Company total P200,000 while its liability only amounting to a third of its
total assets. What are the total liabilities of Rianne Company?
The correct answer is: 100,000
7. What should the equities of Rie Company be if the liabilities are only a third of its total assets
and the total assets is P500,000?
The correct answer is: 333,333
8. What should the assets of Raya Company be if its equity was P125,000 and its liabilities
amount only to a fifth of its total assets?
The correct answer is: 156,250
9. When an entity buys goods through credit, how will the accounting equation be affected?
The correct answer is: Increased assets and increased liabilities
10. The following transactions would not change the accounting equation, except one. Which is
the exception?
The correct answer is: Disposal of expired merchandise
11. In which of the following cases can the accounting equation be rewritten as?
The correct answer is: Assets - Liabilities = Equity
12. When an entity performs service for cash, how will the accounting equation be affected?
The correct answer is: Increased equity and increased assets
13. Choose the effect of transaction in the accounting equation; Received cash from owner as
additional investment, P600,000
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The correct answer is: Increase an asset, increase owner’s equity
14. Choose the effect of transaction in the accounting equation; Determined that the cost of
supplies on hand was P1,440 so P4,560 of supplies were used during the month
The correct answer is: Decrease an asset, decrease owner’s equity
15. Choose the effect of transaction in the accounting equation; Paid advertising expense,
P5,000
The correct answer is: Decrease an asset, decrease owner’s equity
16. When an entity buys an equipment for cash, how will the accounting equation be affected?
The correct answer is: No effect
17. The following transactions would change the accounting equation, except one. Which is the
exception?
The correct answer is: Deposit of cash in bank
18. Choose the effect of transaction in the accounting equation; Paid creditors on account,
P20,000
The correct answer is: Decrease an asset, decrease a liability
19. Choose the effect of transaction in the accounting equation; Paid rent for the current month,
P2,000
The correct answer is: Decrease an asset, decrease owner’s equity
20. Choose the effect of transaction in the accounting equation; Received cash from customers
on account, P25,440
The correct answer is: Increase an asset, decrease another asset
21. If the assets of Randel Company decreased by P10,000 while its equity remained constant,
which of the following transactions could correspondingly occur?
The correct answer is: Payment of a bank loan worth P10,000
22. Choose the effect of transaction in the accounting equation; Purchased supplies for cash,
P6,000
The correct answer is: Increase an asset, decrease another asset
23.Choose the effect of transaction in the accounting equation; Billed customers for delivery
services on account, P55,200
The correct answer is: Increase an asset, increase owner’s equity
24. Choose the effect of transaction in the accounting equation; Cash received from delivery
services amounting P92,700
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The correct answer is: Increase an asset, increase owner’s equity
25. Choose the effect of transaction in the accounting equation; Owner withdrew cash for
personal use, P20,000
The correct answer is: Decrease an asset, decrease owner’s equity
Which of the following is a difference between the cash basis of accounting and the accrual
basis of accounting?
The correct answer is: In cash accounting, expenses are recognized when they are actually paid.
Which of the following statements describes the time period assumption?
The indefinite life of a company can be subdivided into periods of equal lengths for financial
reporting purposes.
All of the following statements regarding the IFRS are true, except
The correct answer is: Being comprehensive and all-encompassing, the IFRS needs no further
modifications.
Which of the following regarding accounting estimates is true?
The correct answer is: Accounting estimates are necessary in the preparation of financial
statements.
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