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Introduction to Accounting

Introduction to Accounting
• PART 1: Definition of Accounting
• PART 2: Nature of Accounting
• PART 3: Function of Accounting
• PART 4: History of Accounting
Introduction to Accounting
• PART 1: Definition of Accounting
• PART 2: Nature of Accounting
• PART 3: Function of Accounting
• PART 4: History of Accounting
Introduction to Accounting
PART 1
Definition of Accounting
Definition of Accounting
“Accounting
is the process of
identifying, measuring and communicating
economic information
to permit informed judgment and decision
by users of the information.”
– American Accounting Association,
Definition of Accounting
“Accounting
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,
succeeded by Financial Reporting Standards Council (FRSC)
Definition of Accounting
“Accounting
is the art of
recording, classifying, and summarizing
in a significant manner
and in terms of money,
transactions and events
which are, in part at least, of financial character,
and interpreting the results thereof.”
– American Institute of Certified Public Accountants (AICPA)
TIPS

• Please memorized the


definitions of accounting by
heart
• Know who defined the
definition of accounting
Definition of Accounting
by American Institute of Certified Public Accountants (AICPA):

“Accounting is the art of recording, classifying, and summarizing in a


significant manner and in terms of money, transactions and events
which are, in part at least, of financial character, and interpreting the
results thereof.”
Definition of Accounting
by American Institute of Certified Public Accountants (AICPA):

“Accounting is the art of recording, classifying, and summarizing in a


significant manner and in terms of money, transactions and events
which are, in part at least, of financial character, and interpreting the
results thereof.”
Definition of Accounting
by American Institute of Certified Public Accountants (AICPA):

Accounting is an art.
Art (as defined by Google Dictionary), is the expression or application
of human creative skill and imagination, typically in a visual form such
as painting or sculpture, producing works to be appreciated primarily
for their beauty or emotional power.
Definition of Accounting
by American Institute of Certified Public Accountants (AICPA):

Accounting is an art.
Art deals with the application of knowledge and skills.
Definition of Accounting
– American Institute of Certified Public Accountants (AICPA)
Accounting is an art.
Accounting = Art
Accounting = Science (BSA)
Therefore,
Art = Science
or
Science = Art
Definition of Accounting
by American Institute of Certified Public Accountants (AICPA):

“Accounting is the art of recording, classifying, and summarizing in a


significant manner and in terms of money, transactions and events
which are, in part at least, of financial character, and interpreting the
results thereof.”
Definition of Accounting
– American Institute of Certified Public Accountants (AICPA)
art of recording, classifying, and summarizing

These are the 3 among the 4 Accounting Phases


1. Recording pertains to writing down or keeping records of business
transactions.
Definition of Accounting
– American Institute of Certified Public Accountants (AICPA)
art of recording, classifying, and summarizing

These are the 3 among the 4 Accounting Phases


2. Classifying involves grouping similar items that have been recorded.
Definition of Accounting
– American Institute of Certified Public Accountants (AICPA)
art of recording, classifying, and summarizing

These are the 3 among the 4 Accounting Phases


3. Once they are classified, information is summarized into reports
which we call financial statements.
Definition of Accounting
by American Institute of Certified Public Accountants (AICPA):

“Accounting is the art of recording, classifying, and summarizing in a


significant manner and in terms of money, transactions and events
which are, in part at least, of financial character, and interpreting the
results thereof.”
Definition of Accounting
– American Institute of Certified Public Accountants (AICPA)
…in a significant manner and in terms of money
Transactions should be recorded with amount
Not a diary = no amount
Journal entry = events with amount

– American Accounting Association


Accounting is the process of measuring…
Definition of Accounting
by American Institute of Certified Public Accountants (AICPA):

“Accounting is the art of recording, classifying, and summarizing in a


significant manner and in terms of money, transactions and events
which are, in part at least, of financial character, and interpreting the
results thereof.”
Definition of Accounting
– American Institute of Certified Public Accountants (AICPA)
…transactions and events which are, in part at least,
of financial character

Not all transactions and events should be recorded, only quantitative


information.

– American Accounting Association


Accounting is the process of identifying…
Definition of Accounting
by American Institute of Certified Public Accountants (AICPA):

“Accounting is the art of recording, classifying, and summarizing in a


significant manner and in terms of money, transactions and events
which are, in part at least, of financial character, and interpreting the
results thereof.”
Definition of Accounting
– American Institute of Certified Public Accountants (AICPA)
and interpreting the results thereof.”

This is the 4th Accounting Phase


Financial Statement Analysis

– American Accounting Association


Accounting is the process of communicating…
Definition of Accounting
by American Institute of Certified Public Accountants (AICPA):

“Accounting is the art of recording, classifying, and summarizing in a


significant manner and in terms of money, transactions and events
which are, in part at least, of financial character, and interpreting the
results thereof.”
Definitions of Accounting
Accounting Accounting Accounting
is the process of is a service activity. is the art of
Its function is to provide recording, classifying, and
identifying, measuring quantitative information,
and communicating summarizing
primarily financial in
economic information nature, in a significant manner
to permit informed about economic entities, and in terms of money,
judgment and decision that is intended to be transactions and events
useful
by users of the which are, in part at least,
information. in making economic of financial character,
decisions.
– American Accounting and interpreting the
– Accounting Standards results thereof.
Association Council
– AICPA
Definitions of Accounting
Accounting Accounting Accounting
is the process of is a service activity. is the art of
Its function is to provide recording, classifying, and
identifying, measuring quantitative information,
and communicating summarizing
primarily financial in
economic information nature, in a significant manner
to permit informed about economic entities, and in terms of money,
judgment and decision that is intended to be transactions and events
useful
by users of the which are, in part at least,
information. in making economic of financial character,
decisions.
– American Accounting and interpreting the
– Accounting Standards results thereof.
Association Council
– AICPA
Definitions of Accounting
Accounting Accounting Accounting
is the process of is a service activity. is the art of
Its function is to provide recording, classifying,
identifying, measuring quantitative information,
and communicating and summarizing
primarily financial in
economic information nature, in a significant manner
to permit informed about economic entities, and in terms of money,
judgment and decision that is intended to be transactions and events
useful
by users of the which are, in part at least,
information. in making economic of financial character,
decisions.
– American Accounting and interpreting the
– Accounting Standards results thereof.
Association Council
– AICPA
Definitions of Accounting
Accounting Accounting Accounting
is the process of is a service activity. is the art of
Its function is to provide
identifying, measuring quantitative information, recording, classifying, and
and communicating summarizing
primarily financial in
economic information nature, in a significant manner
to permit informed about economic entities, and in terms of money,
judgment and decision that is intended to be transactions and events
useful
by users of the which are, in part at least,
information. in making economic of financial character,
decisions.
– American Accounting – Accounting Standards and interpreting the results
Association Council thereof.
– AICPA
Definitions of Accounting
Accounting Accounting Accounting
is the process of is a service activity. is the art of
Its function is to provide recording, classifying, and
identifying, measuring quantitative information,
and communicating summarizing
primarily financial in
economic information nature, in a significant manner
to permit informed about economic entities, and in terms of money,
judgment and decision that is intended to be transactions and events
useful
by users of the which are, in part at least,
information. in making economic of financial character,
decisions.
– American Accounting and interpreting the
– Accounting Standards results thereof.
Association Council
– AICPA
Definitions of Accounting - Processes
Accounting Accounting Accounting
is the process of is a service activity. is the art of
Its function is to provide recording, classifying, and
identifying, measuring quantitative information,
and communicating summarizing
primarily financial in
economic information nature, in a significant manner
to permit informed about economic entities, and in terms of money,
judgment and decision that is intended to be transactions and events
useful
by users of the which are, in part at least,
information. in making economic of financial character,
decisions.
– American Accounting and interpreting the
– Accounting Standards results thereof.
Association Council
– AICPA
Definitions of Accounting - Phases
Accounting Accounting Accounting
is the process of is a service activity. is the art of
Its function is to provide recording, classifying,
identifying, measuring quantitative information,
and communicating and summarizing
primarily financial in
economic information nature, in a significant manner
to permit informed about economic entities, and in terms of money,
judgment and decision that is intended to be transactions and events
useful
by users of the which are, in part at least,
information. in making economic of financial character,
decisions.
– American Accounting and interpreting the
– Accounting Standards results thereof.
Association Council
– AICPA
Definitions of Accounting - Purpose
Accounting Accounting Accounting
is the process of is a service activity. is the art of
identifying, measuring Its function is to provide recording, classifying, and
and communicating quantitative information, summarizing
economic information primarily financial in
nature, in a significant manner
to permit informed about economic entities, and in terms of money,
judgment and
decision that is intended to be transactions and events
useful
by users of the which are, in part at least,
information. in making economic of financial character,
decisions.
– American Accounting – Accounting Standards
and interpreting the
Association Council results thereof.
– AICPA
Definitions of Accounting – Language of Business
Accounting Accounting Accounting
is the process of is a service activity. is the art of
Its function is to provide recording, classifying, and
identifying, measuring quantitative information,
and communicating summarizing
primarily financial in
economic information nature, in a significant manner
to permit informed about economic entities, and in terms of money,
judgment and decision that is intended to be transactions and events
useful
by users of the which are, in part at least,
information. in making economic of financial character,
decisions.
– American Accounting and interpreting the
– Accounting Standards results thereof.
Association Council
– AICPA
Sample exam question no.1
Accounting Standards Council defines accounting as…
a. the process of identifying, measuring and communicating economic
information to permit informed judgment and decision by users of the
information.
b. 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.
c. the art of recording, classifying, and summarizing in a significant manner
and in terms of money, transactions and events which are, in part at
least, of financial character, and interpreting the results thereof.
d. None of the above.
Sample exam question no.1 - answer
Accounting Standards Council defines accounting as…
a. the process of identifying, measuring and communicating economic
information to permit informed judgment and decision by users of the
information.
b. 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.
c. the art of recording, classifying, and summarizing in a significant manner
and in terms of money, transactions and events which are, in part at
least, of financial character, and interpreting the results thereof.
d. None of the above.
Sample exam question no.2
Accounting is the process of identifying, measuring and communicating
economic information to permit informed judgment and decision by
users of the information. Is the definition of accounting by the
a. American Institute of Certified Public Accountants
b. Financial Reporting Standards Council
c. American Accounting Association
d. Accounting Standards Council
Sample exam question no.2 - answer
Accounting is the process of identifying, measuring and communicating
economic information to permit informed judgment and decision by
users of the information. Is the definition of accounting by the
a. American Institute of Certified Public Accountants
b. Financial Reporting Standards Council
c. American Accounting Association
d. Accounting Standards Council
Sample exam question no. 3
According to _____, accounting is the art of recording, classifying, and
summarizing in a significant manner and in terms of money,
transactions and events which are, in part at least, of financial
character, and interpreting the results thereof.
a. American Accounting Association
b. American Association of Certified Public Accountants (AACPA)
c. American Institute of Certified Public Accountants (AICPA)
d. Philippine Institute of Certified Public Accountants (PICPA)
Sample exam question no. 3 - answer
According to _____, accounting is the art of recording, classifying, and
summarizing in a significant manner and in terms of money,
transactions and events which are, in part at least, of financial
character, and interpreting the results thereof.
a. American Accounting Association
b. American Association of Certified Public Accountants (AACPA)
c. American Institute of Certified Public Accountants (AICPA)
d. Philippine Institute of Certified Public Accountants (PICPA)
LET’S

DO

A RECAP
RECAP
• We have defined accounting according to:
• American Institute of Certified Public Accountants
• American Accounting Association
• Accounting Standards Council, succeeded by Financial Reporting Standards
Council (FRSC)
RECAP
• From the definitions of accounting we learned the:
• Accounting Processes
• Identifying
• Measuring
• Communicating
• Accounting Phases
• Recording
• Classifying
• Summarizing
• Interpreting
• Purpose of Accounting
REFERENCES
Abrugar, V. (2011, May 29). What is Accounting? Retrieved from
businesstips.ph: https://businesstips.ph/what-is-accounting/
Accountingverse. (2018). What is Accounting? Retrieved from
Accountingverse: https://www.accountingverse.com/accounting-
basics/what-is-accounting.html

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