Notesale: Turn your study into money

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FUNDAMENTALS OF ABM1 | Introduction to Accounting
Philippine Normal University(PNU)
Understanding of the definition, nature, function, and history of
accounting
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Examples of economic events or transactions - In a bakery business:
• sales of bread and other bakery products
• purchases of flour that will be used for baking
• purchases of trucks needed to deliver the products
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The diary referred to in the definition are the journals and
ledgers which will be discussed in future chapters
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COMMUNICATING – occurs through the preparation and distribution of
financial and other accounting reports
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” Based on this definition we can derive
the following basic features of accounting:
• Accounting is a service activity
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• Accounting is a process: A process refers to the method of performing any specific job
step by step according to the objectives or targets
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In doing so, it follows some

definite steps like the collection, recording, classification, summarization, finalization,
and reporting of financial data
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Accounting is the art of recording,
classifying, summarizing and finalizing financial data
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It is behavioral knowledge involving a certain creativity and
skill to help us attain some specific objectives
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So by nature, accounting is an art
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• Accounting deals with financial information and transactions: Accounting records
financial transactions and data, classifies these and finalizes their results given for a
specified period of time, as needed by their users
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It does not
deal with non-monetary or non-financial aspects of such information
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As a service function, it collects processes and communicates
financial information of any entity
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Function of Accounting in business
Accounting is the means by which business information is communicated to business
owners and stakeholders
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In addition, accounting
information allows business owners to assess the efficiency and effectiveness of their
business operations
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Business
owners may also use historical financial accounting statements to create trends for
analyzing and forecasting future sales
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In order for a business to survive, It is important that a
business owner or manager be well-informed
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It has evolved in response to various social and
economic needs of men
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The history of accounting is often seen as indistinguishable from the history
of finance and business
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The oldest evidence of this practice was the “clay
tablet” of Mesopotamia which dealt with commercial transactions at the time such as
listing of accounts receivable and accounts payable
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Pacioli was much revered in his day, and was a friend and
contemporary of Leonardo da Vinci
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Luca Pacioli wrote
Summa de Arithmetica, the first book published that contained a detailed chapter on
double-entry bookkeeping
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Social upheavals affecting government, finances, laws, customs and
business had greatly influenced the development of accounting
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• 19th Century – The Beginnings of Modern Accounting in Europe and America
The modern, formal accounting profession emerged in Scotland in 1854 when Queen
Victoria granted a Royal Charter to the Institute of Accountants in Glasgow, creating the
profession of the Chartered Accountant (CA)
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Some of these accountants stayed in the U
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, setting up
accounting practices and becoming the origins of several U
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accounting firms
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The American Association of Public
Accountants was the forerunner to the current American Institute of Certified Public
Accountants (AICPA)
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Accounting
standards to be observed by accounting professionals were promulgated
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A merger is when one company takes over all the operations of another business entity
resulting in the dissolution of another business
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These types of transactions have
challenged accounting professionals to develop new standards that will address
accounting issues related to these business combinations
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Beyond the industry's self-regulation, the government also
sets accounting standards, through laws and agencies such as the Securities and
Exchange Commission (SEC)
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This is to assure transparency and reliability, and to obtain
greater confidence on accounting information used by global investors
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To remain
competitive, businesses everywhere feel the need to operate globally
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