History of Accounting

The

most important event in accounting history

happened in 14th century in Italy.
It

was Fra Luca Pacioli, an Italian Mathematician,

scholar and philosopher set down in writing for the
first time a description of the double-entry system of
accounting, which we still use today in much the
same form, in his 1494 text entitled Summa de
Arithmetica, Geometria, Porpotione et Proportionalita
(Everything About Arithmetic, Geometry and
Proportion).
Because

of this, he is considered as the Father of

Accounting
ABM1 Introduction to Accounting SY20162017

History of Accounting

Fra Luca Pacioli

Father of Accounting

ABM1 Introduction to Accounting

SY2016-2017

Definition of Accounting
ABM 1 Definition:
Accounting

is an INFORMATION SYSTEM that

MEASURES, PROCESSES and COMMUNICATES
Information primarily FINANCIAL in nature
About an IDENTIFIABLE ENTITY
For the purpose of making economic DECISIONS

ABM1 Introduction to Accounting SY20162017

Definition of Accounting
ABM 1 Definition:
Accounting

is the LANGAUAGE OF BUSINESS

because it is the COMMUNICATION LINK between
the ENTITY and the USERS of financial information

ABM1 Introduction to Accounting SY20162017

Definition of Accounting
Financial Reporting Standards Council (FRSC)
Definition:
Accounting

is a SERVICE ACTIVITY.
Its main function is to provide QUANTITATIVE
information,
primarily FINANCIAL in nature,
about ECONOMIC ENTITIES,
that are intended to be USEFUL in making
economic DECISIONS.

ABM1 Introduction to Accounting SY20162017

Definition of Accounting
Committee on Accounting Terminology of the
American Institute of Certified Public Accountants
Definition:
Accounting

is an ART of
RECORDING, CLASSIFYING, and SUMMARIZING
In a SIGNIFICANT MANNER in terms of MONEY,
Transactions and events which are in part at
least of a FINANCIAL CHARACTER and
INTERPRETING the results thereof

ABM1 Introduction to Accounting SY20162017

Accounting Process
Accounting cycle refers to the specific tasks
involved in completing an accounting process.
The length of the accounting cycle can be
monthly, quarterly, semi-annually or annually.
It may vary from organization to organization
but the process remains the same.

ABM1 Introduction to Accounting SY20162017

Accounting Process (ARCS-RI)

ABM1 Introduction to Accounting SY20162017

Analyzing
The

accountant must look at transactions

entered into, economic events that have taken
place, and determine the effects on business
These transactions and events are generally
supported by documentary evidences
Example:

Sale of service or sale of product evidenced by

sales invoice
Sales invoice is further supported by a delivery
receipt
Before the delivery of service or product, a
purchase order is received from customer

ABM1 Introduction to Accounting SY20162017

Recording
Involves

writing the effects of the transactions

and events that have been analyzed
This recording may be done manually or it
may be encoded with the use of computers or
data processing machines.
The recording includes (whether done
manually or with computers) inputting of
information in the accounting books called
journals.

ABM1 Introduction to Accounting SY20162017

Classifying
Sorting

or grouping of like transactions and

events into specific account titles

ABM1 Introduction to Accounting SY20162017

Summarizing
The

process that involves grouping together

the various accounts referred to in the
classifying process.
This is where the accounts are grouped into
ASSETS, LIABILITIES, OWNERS EQUITY,
REVENUE and EXPENSES.

ABM1 Introduction to Accounting SY20162017

Reporting
Involves

the preparation of financial

summaries called financial statements which
are communicated to the users of information

Results of operation Income Statement

Financial position Balance Sheet
Cash flows Cash Flows Statement

ABM1 Introduction to Accounting SY20162017

Interpreting
Step

that directs attention to the significance

of various matters and relationships.
Thus step involves the computation of
relationship of figures and narrations based on
figures presented
The relationships may be in percent or in
ratios; and may be within the financial report
or one report in relation to another report

ABM1 Introduction to Accounting SY20162017

Diagram of the Accounting Information

System

ABM1 Introduction to Accounting SY20162017

Summary
Fra

Luca Pacioli is the Father of Accounting

Definitions of Accouting

FRSC
American Institute of CPA

Steps

of the Accounting Process (ARCS-IR)

Diagram of the Accounting Information
System

ABM1 Introduction to Accounting SY20162017

Accounting is
I. A service activity and its function is to provide
quantitative information, primarily financial in
nature about economic entities, that is intended
to be useful in making economic decision
II. The process of identifying, measuring and
communicating economic information to permit
informed judgment and decision by users of the
information
A.
B.
C.
D.

I only
II only
Both I and II
Neither I and II

ABM1 Introduction to Accounting SY20162017

Accounting is
I. A service activity and its function is to provide
quantitative information, primarily financial in
nature about economic entities, that is intended
to be useful in making economic decision
II. The process of identifying, measuring and
communicating economic information to permit
informed judgment and decision by users of the
information
A.
B.
C.
D.

I only
II only
Both I and II
Neither I and II

ABM1 Introduction to Accounting SY20162017

The phase whereby the liquidity, solvency,

stability and profitability of an entity are
significantly portrayed is known as:
A.
B.
C.
D.

Summarizing
Classifying
Recording
Interpreting

ABM1 Introduction to Accounting SY20162017

The phase whereby the liquidity, solvency,

stability and profitability of an entity are
significantly portrayed is known as:
A.
B.
C.
D.

Summarizing
Classifying
Recording
Interpreting

ABM1 Introduction to Accounting SY20162017