Accounting as a service activity

• To provide qualitative information, primarily

financial in nature, about economic activities,
that is intended to be useful in decision making.
Qualitative Characteristics of Financial
Information
• Relevance
• Faithful Representation
What makes the information relevant?
• Predictive Value- when it is used to confirm
or correct decision-maker’s earlier expectations
• Confirmatory Value- when it is used to make
decisions of, for instance, future cash flows or
income.
Faithful representation
• Completeness
• Neutrality
• Freedom from error
Types of Business
• Service- Selling people’s time
• Merchandising- Buying or selling of products
• Manufacturing- Designing products,
aggregating components and assembling
finished products
Forms of Business organization
• Sole Proprietorship
• Partnership
• Corporation
Activities in Business Organization
• Financing Activities
• Investing Activities
• Operating Activities
Financing Activities
• Methods an organization uses to obtain financial
resources from financial markets and how it
manages these resources.
Investing Activities
• Involve the selection and management including
disposal and replacement of long-term resources
that will be used to develop, produce and sell
goods and services.
Operating Activities
• Involves the use of resources to design, produce,
distribute, and market goods and services.
Elements of Financial Statements
• Statement of Financial Position
• Statement of Financial Performance
• Statement of Changes in Owner’s Equity
• Cash Flow Statement
• Notes to Financial Statement
Financial Position
• Asset
• Liability
• Owner’s Equity
Asset
• Resource controlled by an enterprise as a result
of past events and from which future economic
benefits are expected to flow to the enterprise.
• Assets includes cash, cash equivalents, notes
receivable, accounts receivable, inventories,
prepaid expenses, property plant and
equipment, investments, intangible assets and
other assets.
Liability
• Present obligation of the enterprise arising from
past events, the settlement of which is expected
to result in an outflow from the enterprise of
resources embodying economic benefits.
• Liabilities include notes payable, accounts
payable, accrued liabilities, unearned revenues,
mortgage payable, bonds payable and other
debts of the enterprise.
Equity
• Residual interest in the assets of the enterprise
after deducting all its liabilities.
Financial Performance
• Income
• Expenses
• Losses
Income
• Increases in economic benefits during the
accounting period in the form of inflows or
enhancements of assets or decreases of liabilities
that result in increases in equity.
• Revenue arises in the course of ordinary
activities of an enterprise.
• Gains represent items that meet the definition of
income and ,may, or may not, arise in the
course of ordinary activities of an enterprise.
Expenses
• Decreases in economic benefits during the
accounting period in the form of outflows or
depletions of assets or incurrences of liabilities
that result in decreases in equity.
Losses
• Items that meet the definition of expense and
may, or may not, arise kin the course of ordinary
activities of an enterprise.
• Decreases in the economic benefits and such are
no different in nature from other expenses.
The Accounting Equation

ASSETS = LIABILITIES + OWNER’S EQUITY