Accounting

* relevant in all walks of life

* is the system that measures business activities, processes that information into
reports and communicates the results to decision-makers
*quantifies business communication
*language of business
*accountants = scorekeepers of business

Evolution of Accounting
Accounting History is the study of the evolution in accounting thought,
practices and institutions in response to changes in the environment and
societal needs.

1. Primitive Accounting
- The origin of keeping accounts traced back to 8500 B.C. the date
archeologists have established for certain clay tokens found in Mesopotamia
- Tokens represented commodities,
- often sealed in clay balls called bullae
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First bills of

lading
- symbols impressed on wet clay tablets replaced the tokens
- First traces of Accounting Systems: Babylonia Greece Egypt Assyria (2000
B.C. 3500 B.C.)
- used by Pharaoh for collecting taxes
- used clay tablets carves the records regarding their
business

2. Middle Ages
11th 14th century used quipu
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knotted cords of different lengths and colors

Double-entry bookkeeping is the outcome of continued efforts to meet the

changing necessities of trade
Oswald Spengler wrote The Decline of the West (1928)

States that the invention of double-entry bookkeeping was

the decisive event in the European economic history

The Florentine Approach

- Business was conducted on logic of friendship, but friendship in turn

was instrumental, as well as emotional.
- Earliest evidence of double-entry book keeping: Florence France
evidenced by the bank of ledger fragments of 1211 (transcribed in 1887 by
Pietro Santini)
- was first witnessed in the ledgers of Renieri (or Rinieri) Fini & Brothers (1296
1305) and Giovanni Farolfi & Company (1299 1300)
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Was a firm of Florentine merchants whose head

office was at Nimes in Languedoc, in the kingdom of France
- Details include the use of debits and credits and duality of entries
- oldest known existing examples of double-entry system
- Amatino Manucci
- partner in Giovanni Farolfi & Company
- inventor of Double-entry bookkeeping
- five books : general ledger, 2 merchandise ledger, expenses
ledger and cash book

The Method of Venice

Luca Pacioli
- Franciscan friar/monk
- Father of double-entry accounting
- mathematician
- 1494 Summa de Arithmetica, Geometria, Proportioni et Propotionalita
- Everything about Arithmetic, Geometry, Proportions and
Proportionality
- includes Particularis de Computis et Scripturis or Details of
Calculation and Recording
- stated that the purpose of bookkeeping was to give the trader without delay
information as to his assets and liabilities
bookkeeping :
Geothe (famous German poet and dramatist) one of the finest discoveries of
human intellect

Werner Sombart (economist-sociologist) double-entry bookkeeping is born of

the same sprit as the system of Galileo and Newton

Savary and Napoleonic Commercial Code

French Civil code established under Napoleon Bonaparte

on March 21, 1804

adopted in 1807
Jacques Savary
- principal author of the French Commercial Code of 1673 (Code
Savary)
- inventory valuation at the lower-of-cost-or-market
17th Century Nicolas Petri
- first person to group similar transactions in a separate record and
enter the monthly totals in the journal, rather than recording all transactions
seriatim
1769 Benjamin Workman published the earliest known American accounting
textbook The American Accountant
Eugen Schmalenbach (1873-1955)
- German academic and economist
- wrote The Model Chart of Accounts
- laid the foundation for all the subsequent developments in uniform
accounting in Germany
- basis for corresponding efforts in other European countries
* The Philippines Bureau of Internal Revenue (BIR) was created through the
passage of Reorganization Act No. 1189 dated July 2, 1904
*On August 1,1904 BIR was formally organized and made operational under the
Secretary of Finance
IT
Dan Brinklin and Bob Frankston wrote VisiCalc for the Apple II
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The earliest systemized form of accounting regulation developed in continental

Europe, starting in France in 1673
Legal requirement for business to keep accounting records was first introduced
in the Ordonnance de Commerce of 1673 put through by Jean-Baptise Colbert
during the reign of Louis XIV and the Napoleonic Commercial Code of 1807
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important business app for pc

1st e-spreadsheet most

Four Pillars of ASEAN Economic Community

1.
2.
3.
4.

Single Market and production base

Competitive Economic Region
Equitable Economic Development
Integration into the global economy

Fundamental Business Model

1. First, the investors provide the required capital for the business.
2. The cash can be:
- Converted into another type of asset that will be used in the business
- Spent on operating costs such as salaries, rentals and utilities
3. The combination of business resources provides the basis for producing the
products or services.
4. The sale or service generates an asset called a receivable. This asset once
collected will produce a cash inflow for the business.
5. If theres an existing debt from banks, the cash inflow from collections will be
used to provide the debt providers with interest on their loans to the
company. Any profit after tax can continue to be reinvested in the cycle or
paid out to the owners as a return on their investments.

Types of Business
1. Service Business (hotels, schools, airlines, travel agencies, barber shop,
salons)
2. Merchandising Business (buy and sell, retailers, sari-sari store, bookstore)
3. Manufacturing Business (from raw materials to new and finished products)
Forms of Business Organizations
1. Sole Proprietorship one owner only one person who gets the profit
2. Partnership 2 or more proprietors has unlimited personal liability
All members of the

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partnership are liable or has the

responsibility in all debts of the company and personal things can
included as a payment
3. Corporation consists of stockholders
Ang pagmamayari nila ay nakabase sa

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kanilang shares of stock

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Managed by Board of Directors
Limited liability (personal belongings are safe and the
investments are only at stake)
Should re-apply every 50 years
Larger legal and tax requirements

Micro enterprises employ not more than nine workers.

Small enterprises employ 10 99 workers. (- 15 m)
Medium enterprises employ 100 199 workers. (15 m 100 m)

Activities in Business Organizations

1. Financing Activities are the methods an organizations uses to obtain
other financial resources from financial markets and how it manages these
resources
- repaying the creditors and paying a return to the owners are also financing
activities
2. Investing Activities - include buying land, equipment, buildings and other
resources that are needed in the operation of the business, and selling these
resources when they are no longer needed
3. Operating Activities involve the use of resources to design, produce,
distribute market goods and services
Efficient business is one that provides goods and services at low costs
relative to their selling prices.

Effective business is one that is successful in providing goods and services

demanded by customers.

Paciolis Double-entry Bookkeeping and its Evolution

* There are 36 short chapters on bookkeeping
*states that every merchant needs three essential things:
1. Sufficient Cash or Credit
2. A Good Bookkeeper
3. An Accounting System to View the Business Affairs at a Glance
*discusses 3 books
1. Memorandum where all transactions are recorded
2. Journal merchants private book, entries are in chronological order and in
narrative form
3. Ledger alphabetical listing of all businesss accounts along with the
running balance of each particular account

Fundamental Concepts
1. Entity Concept the most basic concept in accounting
- is an organization or a section of an organization that
stands apart from other organization and individuals as a separate economic
unit
- each entity should be evaluated separately
2. Periodicity Concept - allows the users to obtain timely information to serve as
a basis on making decisions about future activities
3. Stable Monetary Unit Concept the Philippine Peso is a reasonable unit of
measure and that its purchasing power is relatively stable

Criteria for General Acceptance of an Accounting Principle

GAAP generally accepted accounting principles
1. Relevance a principle has this to extent that it results in information that is
meaningful and useful to those who need to know something about a certain
organization
2. Objectivity a principle has this to the extent that the resulting information is
not influenced by the personal bias or judgement of those who furnish it. It
connotes reliability and trustworthiness.
3. Feasibility can be implemented without undue complexity or cost

Basic Principles (HEROMAC)

Historical Cost
Expense Recognition Principle
Revenue Recognition Cost
Objectivity Principle
Materiality
Adequate Disclosure
Consistency Principle

Scope of Practice (Sec. 4)/ Scope :

Practice of Public Accountancy
Practice in Commerce and Industry
Practice in Education/Academe
Practice in Government

Qualifications of Members of the Professional Regulatory Board (Sec. 6)

1. Must be a natural-born and a resident of the Philippines
2. Must be duly registered CPA with at least 10 yrs. of work experience in any
scope of practice of accountancy
3. Must be a good moral character and must not have been convicted of crimes
involving moral turpitude
4. Must not have any pecuniary interest directly or indirectly in any school,
college, university or institution conferring academic degree necessary for
admission to the practice of accountancy or where review classes in
preparation for licensure examination are being offered or conducted
5. Must not be a Director or Officer of the Accredited National Professional
Organization of CPAs (APO) at the time of his appointment
Qualifications of Applicants for Examinations (Sec. 14)
1.
2.
3.
4.

Is a Filipino Citizen
Is of a good moral character
Is a holder of the degree of BSA
Has not been convicted of any criminal offense involving moral turpitude

Documents:
1.
2.
3.
4.
5.
6.

Birth Certificate
Marriage Certificate
Diploma
Baccalaureate Transcript of Records
NBI
Other documents that the Board of Accountancy may require

Scope of Examinations (Sec. 15)

1.
2.
3.
4.
5.
6.
7.

Theory of Accounts
Business Law and Taxation
Management Services
Auditing Theory
Auditing Problems
Practical Accounting Problems I
Practical Accounting Problems II

Knowledge
1.
2.
3.
4.

General Knowledge
Organizational and Business Knowledge
Information Technology Knowledge
Accounting Knowledge

Skills
1. Intellectual
2. Interpersonal
3. Communication
Values
1. Professional Ethics
2. Moral Values
Ethics is concerned with right and wrong and how conduct should be judged to be
good or bad
Ethical Dilemma is a situation in which there is no obvious right or wrong decision
but rather a right or right answer
ED :
1.
2.
3.
4.
5.
6.

White Collar Crime

Whistle blowing
Conflicts of interest
Fiduciary responsibilities
Sexual harassment
Discrimination