Definition The following definitions differentiates bookkeeping from accounting:

1. Bookkeeping deals primarily with the systematic method of recording and classifying financial transaction of

business. It is considered to be the procedural element of accounting as arithmetic is a procedural element of mathematics. Normally, books are set up and prepared in a manner that ensures an orderly recording and classification of business transactions. However, because of the rapid economic growth and technological changes, which necessitate the mechanization of the bookkeeping job, the demand for bookkeepers has been reduced. The bookkeeping process is now basically done through the use of computers and soft wares designed for such purpose. 2. Accounting as differentiated from bookkeeping has been authoritatively defined by the American Institute of Certified Public Accountants (AICPA), as the art of recording, classifying and summarizing in a significant manner and in terms of money, transactions and events that are, in part at least, of a financial character, and interpreting the results thereof. Accounting is also defined by the Philippine Institute of Certified Public Accountants (PICPA) as a system that measures business activities, processes given information into reports, and communicates those findings to decision-makers. The art in AICPAs definition connotes that accounting is an art of communication. Although the primary function of accounting is to supply of financial information, it also provides non-financial information. Moreover, accounting is referred to as a science in the sense that is a systematized knowledge. A growing body of accounting theories seeks to place accounting in the context of human knowledge and activity in general. Hence, an accountant is a bookkeeper and more, for he must not only be well- versed with the recording process but must also be concerned with the functions of interpretation and analysis of financial statements which require the exercise of reason, judgment and intelligence of a higher order. It is these functions that best distinguish accounting from bookkeeping. Language of Business Accounting is a special kind of language. It is often described as the language of business because it is the medium of communication between a business firm and the various parties interested in its financial activities. It is the tool, which enables firms to communicate to various interested third parties certain quantitative information about the financial activities of a business. Accounting is often utilized whenever there are business transactions. And business transactions normally involve people. One cannot engage in business without involving and affecting other persons. The activities of a business enterprise involve and affect many parties -- management, owners, short-term and long-term creditors, employees, prospective investors, the government, and even the general public. All these interested parties need to be informed about the financial affairs of a business enterprise. Accounting, therefore, serves this need of providing quantitative information, primarily financial in nature, about economic entities that is useful in making economic decisions. The principal accounting reports are the financial statements, i.e., the balance sheet, income statement and the cash flow statement. As the major end products of accounting, these statements convey to management and/or interested outsider(s) the messages about the financial activities of the business. Information needed by different parties is of three kinds:
3. The financial condition of the business, i.e., the amounts and kinds of its assets and liabilities, and the status of the

owners interest at a given point in time.

4. The results of operations, i.e., whether the business operating activities during a given period of time resulted in net

income or a loss. 5. The financing and investing activities that are responsible for the changes in the financial resources of the business, i.e., the sources and applications of fund during a given period of time. This information, furnished through accounting, are utilized by end-users as basis for reaching important decisions affecting themselves, the business enterprise, the government and other parties. History

Accounting developed as a result of the information needs of merchants in the city-states of Italy during the 1400s. In that commercial climate a monk, Luca Pacioli, a mathematician and friend of Leonardo da Vinci, published the first known description of double-entry bookkeeping entitled Summa de Arithmetica, Geometria, Proportioni et Proportionalita (Everything about Arithmetic, Geometry, and Proportion), published in Venice in November 1494. This book contained primarily principles of mathematics and incidentally set of accounting procedures. (Horngren, Harison and Robinson,1995). The pace of accounting development increased during the Industrial Revolution as the economics of developed countries began to mass-produce goods. Until that time, merchandise was priced based on managers hunches about cost but increased competition required merchants to adopt more sophisticated accounting system. In the nineteenth century, the growth of corporations, especially those in the railroad and steel industries, spurred the development of accounting. Corporate owners, were no longer necessarily the managers of their business. Managers had to create accounting systems to report to the owners how well their businesses were doing. Government played a role in leading more development in the field of accounting when it started using the income tax. Accounting supplied the concept of income. Also, government at all levels has assumed expanded roles in health, education, labor and economics planning. To ensure that the information that it uses to make decisions is reliable, the government has required strict accountability in the business community. At the beginning of the third millenium, there would still be a lot of developments in the field of accounting. The great challenge of globalization and the effects of new technologies (e.g. super computers, robotics, inter and intra-net, etc.) pose a shift in the structure and pattern in this field. More and better information are now being required and therefore, accounting, being the means used in communicating business and financial information must also evolve into a more efficient level. Internal Users Those who are directly involved in the business enterprise such as:
6. Owners. The owner provides the money/capital that the business needs to begin operations. Through the financial

reports, the owner can properly manage and monitor the business, analyzing whether or not he can expect reasonable return from his investment. 7. Management. Managers of business use accounting information to set goals for the organization, to evaluate the progress made toward those goals, and to take corrective action if necessary. External Users Those who are not directly involved in the operation of the business such as:
8. Potential investors. Investors use financial reports in evaluating what income they can reasonably expect from

their investment.
9. Creditors. Potential lenders or current creditors determine the borrowers ability to meet scheduled payments. 10. Taxing authorities. Local and national government levy taxes on individuals and businesses. The amount of

the tax is determined using accounting information. Those who are not directly involved in the operation of the business such as: Government regulation agencies. Most organizations face government regulation. For example, the Securities and Exchange Commission (SEC) requires businesses to disclose certain financial information to the public. The SEC, like many government agencies, bases its regulatory activity in part on the accounting information it receives from firms. 12. Nonprofit organizations. Nonprofit organizations, e.g., churches, most hospitals, government agencies, and colleges, which operates for purposes other than to earn a profit use accounting information in much the same way that profit-oriented businesses do. Other users. Employees and labor unions may make wage demands based on the accounting information that shows their employers reported income. Consumer groups and the general public may also be interested in the amount of income that the businesses earned. Based on Ownership
11.

There are three basic forms of business organization according to ownership. This classification is based on owner/s investing or putting capital on a business being started. Sole or single proprietorship. When only one person makes the investment. Partnership. When two or more persons agree to operate the business as co-owners under certain conditions. The persons owning this form of business are called partners. 15. Corporation. A body formed and authorized by law to act as a single person although constituted by one or more persons and legally endowed with various rights and duties. This is the more popular form of business organization today. Persons who put in capital in a corporation are called stockholders. Based on Operations or Activity
13. 14.

Business may also be classified according to business operations or activity after the necessary capital has been received from the owner or owners and the business starts its operations. The purpose for which the business has been formed will determine the nature of its activities. Service concern. Businesses engage in the rendering of services to others for a fee, like the beauty parlor, law firm, dental clinic, and medical clinic. 17. Merchandising or trading concern. Businesses that are into the buying and selling of goods or commodities like the grocery store, drug store and department store. 18. Manufacturing concern. Businesses that are engaged in the processing of products or the conversion of raw materials into finished goods that are then sold like the furniture factory and shoe factory. A trading or merchandising business differs from a manufacturing concern in that the former buys finished goods, which are ready for sale, while the latter produces or manufactured the goods that it sells.
16.

Certified Public Accountant

A Certified Public Accountant (CPA) is a professional accountant who earns his title through a combination of education, qualifying experience, and an acceptance score in the written national examination given by the Board of Accountancy. The Board of Accountancy prepares, grades and gives the results of the examination to the Professional Regulation Commission (PRC) who then issues licenses that allow qualifying examinees to practice accounting as CPAs. CPAs must also be of good moral character and must carry on their professional practices according to a code of professional conduct.

Classification
The nature of these works though relies on the position, which the accountant holds in his field. The positions in the field of accounting are generally classified into two, namely, public accounting and private accounting. 19. Public Accountants are those who serve the general public and collect professional fees for their work such as doctors and lawyers do. Their work include auditing, income tax planning and preparation and management consulting. Those public accountants who have certain professional requirements are designated as Certified Public Accountants (CPAs). 20. Private Accountants work for a single business, e.g. PLDT, Meralco, Jollibee, etc. Charitable organizations, educational institutions and government employ private accountants. Some accountants would also pursue a career in education and research

Organizations
The Philippine Institute of Certified Public Accountants (PICPA) is the national professional organization of CPAs in the country. In order to formalize the accounting standard-setting function in the Philippines, the Philippine Institute of Certified Public Accountants (PICPA) established the Accounting Standards Council (ASC). The Accounting Standards Council's main function is to establish and improve accounting standards that will be generally accepted in the Philippines (Preface to Statements of Financial Accounting Standards of ASC, 1999). The Accounting Standards Council (ASC) is the same body that formulates the Generally Accepted Accounting Principles (GAAP). These principles are the most important accounting guidelines that provide the general framework determining what information is included in financial statements and how this information is to be presented.