ACCOUNTING

Nature and Purpose

Presented by: May Anne M. Arabit, CPA

 OBJECTIVES
 To define accounting as an art, a service
activity and a process.
 To state the basic purpose of Accounting
and its major functions.
 To identify the various accounting
organizations and profession.
 To discuss the different forms of
organization and classification of business
according to its activities
Presented by: May Anne M. Arabit, CPA
 DEFINITION
 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.
 ---ASC

Presented by: May Anne M. Arabit, CPA

 DEFINITION
 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 decision

 ---AICPA

Presented by: May Anne M. Arabit, CPA

 DEFINITION
 Accounting is the process of identifying,
measuring, and communicating economic
information to permit informed judgments
and decisions by users of the information.

 ---AAA

Presented by: May Anne M. Arabit, CPA

 IMPORTANT ACTIVITIES
 Identifying – recognition and non-recognition of
“accountable” events
 Measuring – process of determining monetary
amounts at which the elements of financial
statements are to be recognized and carried in
the financial statements
 Communicating – preparing and distributing
accounting reports to potential users of
accounting information

Presented by: May Anne M. Arabit, CPA

 BASIC PURPOSE OF
ACCOUNTING
 The basic purpose of accounting is to
provide quantitative information
about a business, that is useful to
statement users particularly owners
and creditors, in making economic
decisions.

Presented by: May Anne M. Arabit, CPA

BRANCHES OF ACCOUNTING
AUDITING
BOOKKEEPING
COST ACCOUNTING
FINANCIAL ACCOUNTING
FINANCIAL MANAGEMENT
MANAGEMENT ACCOUNTING
TAXATION
GOVERNMENT ACCOUNTING
Presented by: May Anne M. Arabit, CPA
 THE ACCOUNTANCY
PROFESSION

PRIVATE PUBLIC GOVERNMENT EDUCATION /

ACCOUNTING ACCOUNTING ACCOUNTING ACADEME
• FINANCIAL • EXTERNAL • BIR • ACCOUNTING
ACCOUNTING AUDITING • COA • TAXATION
• INTERNAL • TAX SERVICES • DBM • OTHER
AUDITING • MANAGEMENT • DOF BUSINESS
• TAX • ADVISORY SUBJECTS
ACCOUNTING SERVICES
• COST
ACCOUNTING
• BUDGETING

Presented by: May Anne M. Arabit, CPA

 THE REGULATORY BODIES
OF ACCOUNTING
 Professional Regulation Commission
(PRC)
•ACPAE
 Board of Accountancy (BOA) •ACPACI
 Philippine Institute of Certified •ACPAPP
Public Accountants (PICPA) •GACPA

 Accounting Standards Council (ASC)

 Financial Reporting Standards
Council (FRSC)
Presented by: May Anne M. Arabit, CPA
 FORMS OF BUSINESS
ORGANIZATION
 Sole or Single Proprietorship
 Partnership
 Corporation

Presented by: May Anne M. Arabit, CPA

 Sole or Single Proprietorship
 ADVANTAGES
 It is easy to organize.
 The owner acquires all
the profits from his
business.
 The owner and not the
business is being taxed
Presented by: May Anne M. Arabit, CPA
 DISADVANTAGES
 Unlimited liability–
 Limited resources
 All losses are borne by
the owner
 specialization in
business management
are not present
 Partnership
 ADVANTAGES
 It is also easy to
organize
 Better management
because of the presence
or more participants
 Possibility of bigger
resources
 Tax-exempt if
professional partnership,
but subject to corporate
tax if commercial
partnerships
Presented by: May Anne M. Arabit, CPA
 DISADVANTAGES
 Conflicts or quarrels
between or among the
partners
 It lacks stability
 Unlimited liability
 All partners may be held
liable for the action of
one partner
 Corporation
 ADVANTAGES  DISADVANTAGES
 Limited Liability  Complexity in organization
and regulation.
 Power of succession
 Only the Board of Directors
 Greater source of capital and other authorized officers
can bind the corporation in
 Continuity contracts
 Shareholders have limited
access and control over
management and operations
 Possibility of double taxation

Presented by: May Anne M. Arabit, CPA

 TYPES OF BUSINESS
OPERATIONS
 Service
 Merchandising
 Manufacturing
 Financing

Presented by: May Anne M. Arabit, CPA

IN YOUR OWN POINT
OF VIEW, WHAT DOES
ACCOUNTING
MEANS?

Presented by: May Anne M. Arabit, CPA

 Big yellow worksheets; several huge
notebooks; brain-whacking theories;
gazillions of numbers; numerous account
titles; struggling calculator; statements to
finish; life-long practice; thick books to
read; rushing late night work; ugly eye
bags; unbalanced financial reports;
accuracy problems; unhealthy lifestyle;
constant lack of sleep; nosebleed exams;
heart-stopping results. Name it!
Everything is in here. People may call it
“Accounting.” But to us, we call it “LIFE”.
Presented by: May Anne M. Arabit, CPA