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01 Fabm

This document discusses key accounting concepts and terms. It defines accounting as the process of recording, summarizing, analyzing and reporting financial transactions of a business to oversight agencies. It describes key financial statements like the balance sheet, income statement, statement of cash flows, and statement of changes in equity. It also distinguishes between bookkeeping and accounting, noting that bookkeeping involves recording transactions while accounting is a broader process. Finally, it provides a brief timeline of the history and development of accounting, highlighting Luca Pacioli's popularization of the double-entry bookkeeping system in 1494.

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Mavs Madriaga
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0% found this document useful (0 votes)
222 views32 pages

01 Fabm

This document discusses key accounting concepts and terms. It defines accounting as the process of recording, summarizing, analyzing and reporting financial transactions of a business to oversight agencies. It describes key financial statements like the balance sheet, income statement, statement of cash flows, and statement of changes in equity. It also distinguishes between bookkeeping and accounting, noting that bookkeeping involves recording transactions while accounting is a broader process. Finally, it provides a brief timeline of the history and development of accounting, highlighting Luca Pacioli's popularization of the double-entry bookkeeping system in 1494.

Uploaded by

Mavs Madriaga
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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 Accounting

 Bookkeeping
 Equity
 Cash Flows
 Income Statement
 Statement of Financial
Positions
Accounting is the process of recording
financial transactions pertaining to a
business. The accounting process includes
summarizing, analyzing, and reporting these
transactions to oversight agencies,
regulators, and tax collection entities.
Accounting principles are the rules and
guidelines that companies must follow when
reporting financial data. The
Financial Accounting Standards Board (FASB)
issues a standardized set of accounting
principles in the U.S. referred to as generally
accepted accounting principles (GAAP).
The statement of financial
position, often called the
balance sheet, is a financial
statement that reports the
assets, liabilities, and equity
of a company on a given
date. In other words, it lists
the resources, obligations,
and ownership details of a
company on a specific day.
The statement of changes in
equity shows the change in an
owner's or
shareholder's equity throughout
an accounting period. Also called
the statement of retained
earnings, or statement of
owner's equity, it details the
movement of reserves that make
up the shareholder's equity
In financial accounting, a cash
flow statement, also known
as statement of cash flows, is
a financial statement that shows
how changes in balance sheet
accounts and income
affect cash and cash equivalent
s, and breaks the analysis down
to operating, investing, and
financing activities.
Summary of significant
accounting policies. ... The policy
summary is mandated by the
applicable accounting framework
(such as GAAP or IFRS). These
frameworks require an entity to
disclose its most important policies,
the appropriateness of
those policies, and how they impact
the reported financial position of the
entity.
Accounting
(three widely accepted definition)
American Accounting Association (AAA)
Is the process of identifying, measuring,
and communicating economic information
to informed judgements and decisions by
users of the information.
American Institute of Certified Public
Accountant ( AICPA):
 Defines accounting as the art of recording,
classifying, and summarizing in a significant
manner and in terms of money, transactions, and
events which are in part of at least of financial
character, and interpreting the results.
Accounting Standard Council (ASC)
It sees accounting as 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 conditions.
Nature of Accounting:
Accounting is an art
Accounting deals with transactions that are
financial in nature.
Accounting is a process
Accounting is an information system
Accounting is a means not an end
Accounting is a service activity.
The word “art” refers to the design on
how something can be performed .
•Creativity and skills
•Systematic
• Techniques and proper skills
•Skills and expertise
It deals with transactions that are financial
in nature.
• ASC requires that transactions have to be
measured in terms of money.
• All transactions that are non-monetary are
not within the scope of accounting
Accounting is a process.
• It performs specific actions such as
Identifying
Measuring
Communication financial information
It has a logical steps in accounting cycle:
Recording
Classifying
Summarizing Financial Transactions
Communicating the results
Accounting is an Information System.
•Financial Data
•Proposed Financial Information
•Communicated Financial Statement
Accounting is a means and not an end.
• Tangible output (Financial Statements)
• Users can make economic decisions based
on the assertion on financial statements
Accounting is a service activity.
•It is concerned in providing the
service of ensuring the financial
statements are available to users on a
timely basis.
Functions of accounting in business:
1.To fulfill stewardship function of the
management (or owners).
2.To help interested users come up with
informed decisions.
3.To support daily operations of the business
In a nutshell:
• Accounting is a language of business. It serves as means of
communication between the business and interested users, whether
internal or external.
• Provides a smooth flow of communication between business in and
out of the business.
• It is the reflection of how business manage the business.
• Interested users can make informed decisions based on the past
performance and the current financial conditions of the business
• It gives recommendations on how to improve the operational and
effectiveness and efficiency of the company.
Difference between Bookkeeping and Accounting
Accounting is broader as includes bookkeeping
function.
Bookkeeping is just confined with recording of
monetary transactions, which is one part of the
accounting process.
Timeline of History and Development Accounting
Highlighting Pacioli (1494)
Pacioli popularized the system of recording
business transaction using memorandum,
journal books, and ledger books.

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