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Typology: Summaries
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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 Standard Council, 1983
A SERVICE ACTIVITY: Accountants gives accounting service. QUANTITATIVE INFORMATION , PRIMARILY FINANCIAL IN NATURE- Quantitative means number or “how much?” or financial in nature. ECONOMIC ENTITIES are organizations that uses or controls economic or scarce resources to achieve ECONOMIC DECISIONS- because of the information given, the owner of the business can now be able to make better decisions.
Is an information system that measures, process, and communicate financial information about an identifiable economic entity. Financial Accounting Standards Board, 1978
Is the process of identifying, measuring, and communicating economic information to permit informed judgement and decisions by users of the information. The American Institute of Certified Accountant (AICPA), 1953
Is the art of recording, classifying, and summarizing in a significant manner and in terms of money, transaction and events which are in part at least, of a financial character, and interpreting the result thereof. The American Institute of Certified Accountant (AICPA), 1953
To provide quantitative information about economic entities intended to be useful ni making economic decision.
Types of information provided by accounting:
Accounting enjoys a remarkable heritage. The history of accounting is as old as civilization. The seeds of accounting were most likely first sown in Babylonia and Egypt around 4000 B.C. who recorded transactions of payment of wages and taxes on clay tablets. Historical evidences reveal that Egyptians used some form of accounting for their treasuries where gold and other valuables were kept. The in charge of treasuries had to send day wise reports to their superiors known as Wazirs (the prime minister and from there month wise reports were sent to kings. Babylonia, known as the city of commerce, used accounting for business to uncover losses taken place due to frauds and lack of efficiency. In Greece, accounting was used for apportioning the revenues received among treasuries, maintaining total receipts, total payments and balance of government financial transactions. Romans used memorandum or daybook where in receipts and payments were recorded and wherefrom, they were posted to ledgers on monthly basis. (700B.C t o 400 A.D). China used sophisticated form of government accounting as early as 2000 B.C. Accounting practices in India could be traced back to a period when twenty-three centuries ago, Kautilya, a minister in Chandragupta's kingdom wrote a book named Arthashasthra, which also described how accounting records had to be maintained.
Systematic method of recording transactions, main purpose P/L &B/S, useful to creditors, banks, financial institutions, etc, accurate picture of financial position
Evaluating cost, cost calculation by considering all factors of both manufacturing& administration, goal price fixation, cost control, pinpoints wastages, leakages
Better administration, efficient decision making via MIS, CVP & BEP analysis, etc., profit enhancement, secrecy of records, useful to creditors, shareholders
auditor inspects & certifies the A/Cs for accuracy, internal audit by the co. employee also performed
Preparation & filing of tax returns, compliance of laws, tax reports preparation, reduction of taxes in legal way, verification, considering different aspects of taxes,
Keeping records of funds of NPOs, separate funds maintained for separate works for assurance of usage
Keeping records for central & state govt. for allocations &utilization of various budgets to ensure proper usage
Calculates damages or settling disputes in legal matters, investigations carried out, also called legal accounting
Accounting & evaluation of a third party's business & property maintained under the care of another person.
Meaning, Differences, and Bookkeeper vs Accountant In the financial world, the often-repeated most commonly used words are bookkeeping and accounting. These terms are though very common but are of utmost importance in the financial stream. In an accounting cycle, we could see that every transaction goes through a process of identifying, recording, classifying, summarizing, analyzing, interpreting, and communicating all the monetary transactions. Bookkeeping deals with identifying and recording all such transactions as and when it happens usually. Whereas the rest of the functions and processes are done as part of accounting. So, now as we have a basic understanding of both terms, let us see Bookkeeping vs Accounting in detail.
Bookkeeping is simple to understand. As mentioned above, it is a systematic process of identifying and recording financial transactions in the books of accounts. Certainly, it helps the business to record the day-to- day transactions in chronological order for easy accessibility and understanding. It also serves as a base for preparing financial statements. So bookkeeping process is at the entry-level and has a limited scope till the recording.
Accounting, on the other hand, is the next level of bookkeeping. It is a systematic process of recording, classifying, analyzing, interpreting, summarizing, and communicating the entire financial transaction. It is a vast term as it includes bookkeeping, or we can say that bookkeeping si a part of the overall accounting process. Moreover, it helps in determining the financial status and strength of the business. Because ti includes analysis and interpretation, besides recording. And this process is crucial for every business. Further, it requires special skills
Both bookkeeping and accounting are interrelated. Accounting needs to rely on bookkeeping as it provides basic information for carrying accounting process. Moreover, accounting activity can only start when the bookkeeping work is over. Bookkeeping is a narrow concept and is a part of accounting. On the other hand, accounting is of much more importance to management as they rely on information from accounting rather than bookkeeping. So, we can say that both of them have their importance in business but accounting is more important.
As applied in the Philippines Philippine financial reporting standards (PFR S) Philippine accounting standard (PAS) Adopted from international financial reporting standards (IFR S) & international accounting standards (IAS)
Partnership
Anything owned or possessed by the business which is capable of being expressed in terms of money or processing momentary value Resource that a business owns that are expected to provide some future economic benefit to the business.
SUB-CATEGORIES OF LIABILITIES
Debts or obligation that are expected to paid or liquidated by the use of current assets within 12 months.
Long term debts or obligation that will become due and payable after one year from statement or financial position date WHAT ARE LIABILITIES? o What a company OWES o These are economic obligation or debts payable to an individual or organization or organization outside of the business. WHAT IS OWNER’S EQUITY? Also called CAPITAL for PROPRIETOR SHIP This represent the claim of an owner of a business over the assets of the business after the claims of the creditors have been satisfied Excess of asset over liabilities COMPOSE OF: CAPITAL and WITHDRAWAL