11

Senior High School

Fundamentals of Accountancy,
Business and Management 1
Quarter 1 Module 1 Part 1–
Introduction to Accounting

Writer:
JESSIE M. LANSANGAN
T-III,Porac National High School
Editors:
JANE P. VALENCIA, EdD – Math/ABM Supervisor
CHAIRMAN
MARIZ JEAN C. SANGCAP– T-III
ANGELINEA B. CAWIGAN –MT-II

SDO PAMPANGA
 What I Need to Know

This module was designed and written with you in mind. It is here to help you master
the Fundamentals of Accountancy, Business and Management 1. The scope of this
module permits it to be used in many different learning situations. The language used
recognizes the diverse vocabulary level of students. The lessons are arranged to follow
the standard sequence of the course. But the order in which you read them can be
changed to correspond with the textbook you are now using.

The module is divided into three lessons, namely:

 Lesson 1 – Definition of Accounting and its Nature
 Lesson 2 – Functions of Accounting in Business
 Lesson 3 – History/Origin of Accounting

After going through this module, you are expected to:

1. define Accounting
2. describe the nature of Accounting
3. explain the functions of accounting in business; and
4. narrate the history/origin of accounting

What I Know

Pre-Assessment

Direction: Identify what is being referred in each statement given. Refer your answer
to the list provided for the answers and write your letter choice on your answer sheet.
A.Decision making I. Owners‟ Equity
B. Accounting J. Liabilities
C. Owners Investment K. Summarizing
D. Accounting Records L. Classifying
E. Accounting system M. Interpreting
F. Business Transactions N. Recording
G. Financial statements O. Reporting
H. Assets

1. The primary reason for preparing financial reports in accounting.

___________2. The primary sources of capital of a business.
___________3. Keep track of the activities of the business and reports back its
financial position and results of operation.
___________4.A planned process for providing financial information that will be
useful to management.
___________5.An organized summaries of business financial activities.
___________6. Financial reports that summarize the financial condition and
operations of a business.
___________7. A business activity that changes assets, liabilities, or owner‟s
equity.
___________8. Things that have value, owned by the company.
___________9. The debts of the business.

1
 ___________10. The portion of business assets that completely belongs to the
owner.
___________11. Sorting and grouping similar items together rather than merely
keeping a simple diary like record of numerous events.
___________12. Deciding the meaning and importance of the information in
various reports.
___________13. Entering financial information about events affecting the
company into the accounting system.
___________14. Telling the results of the financial information.
___________15. Bringing the various items of information together to determine
the result.

Lesson
Accounting: Definition and
1 its Nature

What I Need to Know

In this lesson it introduces the basics of accounting, its definition and nature; the
basic financial statements and business transactions. It explains the functions of
accounting in the business and differentiates it from bookkeeping. It also provides
historical background and origin of accounting

What’s In

Basic knowledge in accounting can provide first-time entrepreneur that is essential for
businesses to become successful. Most of these can be found in the financial
statements.

Financial Statements are one of the most important documents in starting a business
that it helps fulfil the function of the owners and managers that the businesses should
be transparent on the performance and standing of the business and its stakeholders.
Thus, it reflects the financial standing and economic activities of the business that can
be related to transactions that affects the financial position, financial performance and
cash flows of the business.

The objective of financial statement is to provide information about the financial

position, financial performance, and cash flows of business that is useful to key
personalities who are making economic decisions. It provides information about the
business assets, liabilities, equity, income and expenses.

Notes to the Teacher

The teacher must consider the prerequisite skills
2 competency including
needed in the development of this
the schema or background knowledge which may
reinforce learning. This module will help the learners
 What’s New

Knowledge in Accounting can be used to apply in your everyday life, and for a
life-long learner needs for information and intellectual stimulation that can
affects real life situation.

Word Hunt
In the given word hunt activity below, kindly search and encircle the words or
terms related to accounting that will define the word accounting and its nature.

M E Q U I T Y P R O F I T D S
O B O O K K E E P I N G B Y S
N A C C O U N T I N G A U P O
E S T A T E M E N T S G S R L
T I R E N T R R A R T H I O I
A C E M N E A M S A A T N F A
R F C E R I B S S N K T E I B
Y I O T S A E E U S E P S T I
S N R Y O M R A M A H E S C L
U A D G O R R S M C O U T A I
M N I C A S H K A T L D R P T
P C N X L G H P R I D S A I Y
R I G Y O E T L I O E E N T E
O A R T S E R U Z N R X S A R
C L A S S I F Y I N G P A L T
E W A S A V C L N S W E C I H
S O A T M N J Y G A I N T M I
S Y S T E M I N T A R S I M N
I N V E S T M E N T O E O U R
I N V E N T O R Y E R S N S E

What words and terms have you find in defining the word accounting?

_______________________________________________________________________________
_______________________________________________________________________________
As a learner, cite daily life scenario that gives illustration of accounting in your life and
how it affects you as a learner.

______________________________________________________________________________
______________________________________________________________________________

What is It

Business Transactions
Business transactions take place once a business venture starts operation. These are
the interactions between businesses and other stakeholders. Stakeholders include,
but are not limited to customers, suppliers, investors and government offices.
Business transactions have to be identified, measured, and documented through an
accounting process.

3
Accounting Defined
After explaining the definition and function of financial statements, we can bow define
accounting.

“Accounting is the process of IDENTIFYING, RECORDING, and COMMUNICATING

economic events of an organization to interested users.” (Weygandt, J. et. al)

According to American Accounting Association (AAA), accounting is the process of

identifying, measuring, and communicating economic information to permit informed
judgement and decision by users of the information.
Furthermore, the American Institute of Certified Public Accountants (AICPA) defines
accounting as the art of recording, classifying, and summarizing in a significant
manner and in terms of money, transactions and events which are in part least of
financial character, and interpreting the results.

And finally, the Accounting Standards Council (ASC) sees accounting as a service
activity that provides quantitative information primarily financial in nature, about
economic entities that is intended to be useful in making economic decisions.

Nature of Accounting
From the definitions above, we can describe the nature of accounting. Accounting is
an art which art refers to the design of how something can be performed that involves
behavioural knowledge with creativity and skill. Its nature, accounting is a systematic
that has definite techniques and proper application that require a particular skill and
expertise.

Besides, it deals with transactions that are financially in nature in which Accounting
Standards Council (ASC) requires that business transactions have to be measured in
terms of money.

Accounting is a process, a systematic series of actions directed towards a particular

outcome. It has a specific actions to perform such as identifying, measuring, and
communicating financial information with logical steps to be follow the accounting
cycle like recording, classifying, and summarizing financial transactions, and
communicating the results after.

Accounting is also an information system which is a set of interrelated components

that work together to achieve a common purpose. It is an information system that
provides reports to users about the economic activities and condition of a business.

What’s More

Activity 1 Understanding the term Accounting

A. Briefly discuss accounting.
B. Why Accounting is an art and a process? Use graphic organizer in your
answer.

Activity 2 Search and Define Me

A. Look for an example of each financial statement using the internet and describe
each in your own words.
1. Statement of Financial Position
2. Statement of Comprehensive income
3. Statement of Changes in Equity

4
 4. Statement of Cash Flow

Activity 3 Arrange and Complete Me

Arrange the letters carefully to come up with the complete definition of accounting.

(A) identifying (B) to permit informed judgment (C) and decisions, (D)
communicating economic information (E) measuring,(F) Accounting is the
process of (G) by users of the information.
___ ___ ___ ___ ___ ___ ___

(A)as art of recording (B) summarizing (C) and in terms of money (D) Accounting
(E) in a significant manner (F) classifying (G) transactions (H) and events (I)
which are in part at least of financial character (J)and interpreting the results
thereof.
___ ___ ___ ___ ___ ___ ___ ___ ___ ___

(A)Accounting function is to (B) primarily financial in nature (C) that intended to

be useful (D) provide quantitative information, (E) in making economic decision
(F) about economic entities,
___ ___ ___ ___ ___ ___

What I Have Learned

Supply the missing words or group of words based on the discussion about
introduction in accounting.

Key Points
1. Business transactions take place once a business starts ____________.
2. Stakeholders include, but not limited to, __________, __________,__________, and
___________.
3. Accounting is the process of ____________,_____________ and communicating
economic information to permit informed judgment and __________ by users of
the information.
4. Accounting is _______ and ________.
5. An information system is a __________ of __________ components that work
together to achieve a common purpose.
6. Accounting is a process, a __________ series of actions directed towards a
particular __________.
7. Its nature, accounting is a systematic that has definite ____________ and proper
application that require a particular skill and expertise.

What I Can Do

Practical Application: Basic Accounting Concepts Infographic

After you learned the necessary information about accounting, you gain knowledge on
how to apply it in your daily life routine. As a student how can you apply accounting
in your daily life activity? Make an infographic on how you deal with accounting.

5
 Assessment

Direction: Write TRUE if the statement is correct and FALSE if the statement is
incorrect.
1. Financial statements are one of the most important documents in starting your
own business.
2. Stewardship function means that the businesses should not be transparent on
the performance and standing of the business to its stakeholders.
3. Business transactions take place once a business venture starts operating.
4. The objective of financial statements is to provide information about financial
position, financial performance and cash flows of the business in making
economic decisions.
5. Accounting is the process of identifying, measuring and communicating
economic information to permit informed judgment and decisions by users of
the information.
6. The Accounting Standards Council sees accounting as a service activity.
7. Accounting is an art, refers to the design of how something can be performed.
8. Accounting provides quantitative information, secondarily financial in nature.
9. Accounting as a process, performs not specific actions such as identifying,
measuring and communicating financial information.
10. Accounting requires that business transactions have to be measured in terms
of money.
11. An information system is a set of interrelated components that work together to
achieve a uncommon purpose.
12. Stakeholders include but not limited to customers,suppliers,investors,and
government offices.
13. Accounting has definite techniques and proper application requires a particular
skill and expertise.
14. Financial statements are the outputs of the accounting process.
15. Accounting deals with transactions that are not financial in nature.

Additional Activities

Activity 4 Accounting as an Art and Process?

Compare accounting as an art and process by using Venn diagram to elaborate your
answer.

A
C
C
O
U
AS AN ART N AS PROCESS
T
I
N
G

6
Lesson
Functions of Accounting in
2 Business

What I Need to Know

In this lesson it introduces the functions of Accounting in business. It explains how

this function affects business performances.

What I Know
Direction:Write your ideas on the subject matter using the given
format below.
Direction

Function
D of B
Accounting

7
 What’s In

Accounting has a vital role in the success of the business in terms of decision making.

The most basic function of accounting in business is to record business transactions

that provide relevant financial information to the businessmen and the stakeholders.

Notes to the Teacher

This contains helpful tips or strategies that will help you in
guiding the learners.

What’s New

Tracking of all business transaction is the function of accounting.

Let’s think and organize!

In the given graphic organizer below, think a words or terms that explain the
functions of accounting to business.

Functions of
Accounting
in Business

8
Elaborate the words that you come up in the given graphic organizer?
_______________________________________________________________________________
_______________________________________________________________________________
As a learner, cite daily life instance that gives illustration of the function of accounting
in your daily life.

______________________________________________________________________________
______________________________________________________________________________

What is It

Function of Accounting in Business

The functions of accounting in business can be attributed to the three fundamental
objective of an information system that performs the following tasks.

1. To fulfill the stewardship function of the management or the owners;

2. To help interested users to come up with informed decisions; and
3. To support daily operations of the business
In this case, accounting is to be considered as the language of business. It serves as a
means of communication between business and interested users either internal or
external.

Difference between Accounting and Bookkeeping

Accounting is broader as it includes the bookkeeping function.
Bookkeeping is just confined with the recording of monetary transactions which is
part of the accounting process
Bookkeeping is responsible for the recording of financial transactions whereas
accounting is responsible for interpreting, classifying, analyzing, reporting, and
summarizing the financial documents.

What’s More

Activity 1 Understanding the Function of Accounting in

Business
Give some ideas on the function of accounting in business using graphic
organizer.

Activity 2 Assess and Learn

A. Assess your knowledge about the function of accounting in business with
the use of flow chart.

9
 What I Have Learned

Answer the following questions.

Key Points
1. What are the basic functions of accounting in business?
2. Explain the function of accounting in business and give example.

What I Can Do

Practical Application: Function of Accounting in Everyday Life

1. How the function of accounting can be applied on the part of the
students?

Assessment

Direction:Write TRUE if the statement is correct and FALSE if the statement is

incorrect.
1. Function of accounting in business is to fulfill the stewardship function of
the management.
2. Stewardship function means that the businesses should be
transparent on the performance and standing of the business to its
stakeholders.
3. Accounting is considered the language of business.
4. Accounting helps interested users come up with uninformed decisions.
5. Accounting is broader in scope than in bookkeeping.
6. Bookkeeping is just confined with the recording of monetary transactions
which is one part of the accounting process.
7. Accounting function is to support daily operations of the business.
8. Accounting serves as a means of communication in the business only.
9. The management or owners report on how well the business fares which is
a reflection of how well they manage the business
10. Interested users use the reports to make informed decisions based on the
past performance and the current financial condition of the business.
11. Financial information from accounting is used to come up with
recommendations on how to improve the operational effectiveness and
efficiency of the company.
12. Accounting facilitates the uneven flow of information in and out of the
business.
13. The purpose of accounting is to provide financial information to the
stakeholders of the business: management, investors and creditors.
14. Accounting is just confined with the recording of monetary transactions
only.
15. Every individual or a business concern is interested to identify the results
of financial transactions and their results are established through the
accounting process.

10
 Additional Activities

Activity 3 Accounting as the Language of Business?

1. Explain why accounting is considered as the language of business.

Accounting as
the Language
of Business

Lesson

3 History of Accounting

What I Need to Know

In this lesson it narrates the history or the origin of accounting. The timeline of
history and development of accounting.

What I Know
Direction:Write the term( word or phrases) to completes the thought of
each statement.

1. The origin of ________________ can be traced from the

Renaissance period.
2. Italian monk and mathematician Frater Luca Bartolomes
Pacioli wrote
_____________,3.____________4,_____________and
5._______________.
6. ______________ was born in Borgo San Selpocro.

11
 7. ________________ is the Father of Modern Accounting.

8. The first income tax lax law in the Philippines was enacted in
the year_______.

9. In the year _______, the Phillippines became fully compliant

with IFRS.

10. The Philippines started transitioning from applying American

accounting standards to applying IAS in the year ____

11. In the Philippines, the Accountancy Law was revised and

passed under Presidential Decree No.692 in the year_______.
12. In 1967, the _______________in the Philippines was revised and
passed under Republic Act No. 5166.
13. In 2001, the _____________________ succeeded the International
Accounting Standard Committee.

14. In the Philippines, The Accountancy Law was revised and

passed under _________________.
15. BOA stands for____________________.

What’s In

Accounting is as old as civilization itself. It has evolved in response to various social

and economic needs of men. Accounting started as simple recording of repetitive
exchange.

Notes to the Teacher

This contains helpful tips or strategies that will help you in
guiding the learners.

What’s New

The time of history and development of accounting that maps out general and specific
events that contributed to the accounting that we are studying today.

12
 What is It

History and Development of Accounting

Accounting is as old as civilization itself. It has evolved in response to various social
and economic needs of men. Accounting started as a simple recording of repetitive
exchanges. The history of accounting is often seen as indistinguishable from the
history of finance and business. The Cradle of Civilization Around 3600 B.C., record-
keeping was already common from Mesopotamia, China and India to Central and
South America. The oldest evidence of this practice was the “clay tablet” of
Mesopotamia which dealt with commercial transactions at the time such as listing of
accounts receivable and accounts payable. In 14th Century - Double-Entry
Bookkeeping. The most important event in accounting history is generally considered
to be the dissemination of double entry bookkeeping by Luca Pacioli („The Father of
Accounting‟) in 14th century Italy. Pacioli was much revered in his day, and was a
friend and contemporary of Leonardo da Vinci. The Italians of the 14th to 16th
centuries are widely acknowledged as the fathers of modern accounting and were the
first to commonly use Arabic numerals, rather than Roman, for tracking business
accounts. Luca Pacioli wrote Summa de Arithmetica, the first book published that
contained a detailed chapter on double-entry bookkeeping. The origin of hardcore
accounting can be traced from the Renaissance period.Italian monk and
mathematician Frater Luca Bartolomes Pacioli wrote Summa de Arithmetica,
Geometria, Proportioni et Proportonality.Pacioli was born in Borgo San Selpocro and
regarded as the Father of Modern Accounting. In the Philippines, the first income tax
lax law was enacted in the year1913. In 1967, the Accountancy Law in the Philippines
was revised and passed under Republic Act No. 5166. The Accountancy Law in the
Philippines was revised and passed under Presidential Decree No.692 in the year1975.
The Philippines started transitioning from applying American accounting standards to
appying IAS in the year1997. In the year 2005, the Phillippines became fully compliant
with IFRS.In 2001, the International Accounting Standard Board succeeded the
International Accounting Standard Committee.

BOA stands for Board of Accountancy

What’s More

Activity 1 Understanding the History of Accounting

Give some ideas on the importance of the history of accounting in business
using a graphic organizer.

Activity 2 Assess and Learn

1. Assess your knowledge about the History of Accounting in
business with the use of flow chart.

13
 What I Have Learned

Answer the question.

Key Points

1. Why is history of accounting important?Give scenario.

What I Can Do

Practical Application: History of Accounting

1. How the history of accounting affects the present accounting practices in
the business industry?

Assessment

Direction: Write TRUE if the statement is correct and FALSE if the statement is
incorrect.
1. The origin of soft accounting can be traced from the Renaissance period.
2. Italian monk and mathematician Frater Luca Bartolomes Pacioli wrote
the Summa de Arithmetica, Geometria, Proportioni et Proportionality
3. Pacioli was born in Borgo San Selpocro.
4. Frater Luca Bartolomes Pacioli is the Father of Modern Accounting
5. The first income tax lax law in the Philippines was enacted in the
year1913.
6. In the year 2005, the Phillippines became fully compliant with IFRS.
7. The Philippines started transitioning from applying American accounting
standards to applying IAS in the year 1997.
8. In the Philippines, the Accountancy Law was revised and passed under
Presidential Decree No.692 in the year1975.
9. In 1967, the Accountancy Law in the Philippines was revised and passed
under Republic Act No. 5166.
10. In 2001, the International Accounting Standard Board succeeded
the International Accounting Standard Committee.

11. In the Philippines, The Accountancy Law was revised and passed under
Presidential Decree No 692
12. BOA stands for Board of Accountancy.
13. IASB stands for International Accounting Standards Board.
14. IFRS stands for International Financial Reproting Standards.
15. IASC stands for Internationl Accounting Standard Committee

14
 Additional Activities

Activity 3 History that Counts!

1. What are the impact of Accounting History in Business Setting.

Impact of
Accounting History
in Business

15
 16
What I Know (L3)
Assessment (L3) 1. Hard Accounting Assessment (L2)
1. False 2. Summa De Arithmetica 1. True
2. True 3. Geometrica 2. True
3. True 4. Proportioni 3. True
4. True 5. Proportionality 4. False
5. True 6. Pacioli 5. True
6. True 7. Pacioli 6. True
7. True 8. 1913 7. True
8. True 9. 2005 8. False
9. True 10.1997 9. True
10. True 11. 1975 10. True
11. True 12. Accountancy Law 11. True
12. True 13. International 12. False
Accounting Standards Board
13. True 13. True
14. Presidential Decree No. 692
14. True 14. False
15. Board of Accountancy
15. True 15. True
What I Know( L1) What's More (L1) Assessment(L1)
1. A Activity 1 1. True
2. C/I 2. False
3. B Activity 2 3. True
4. E Activity3 – 4. True
5. D 5. True
6. G FAEDBCG 6. True
7. F DAFBECGHI 7. True
8. H ADBFCF 8. False
9. J 9. False
10.C/I 10.True
11.L 11.False
12.M 12.True
13.N 13.True
14.O 14.True
15.K 15.False
Answer Key
References

Tugas, Flores C., Salendres,Herminigilda E. and Rabo,Joy S,

“ Fundamentals of Accountancy, Business and
Management”p.1-12

Development Team of the Module

Writer: JESSIE M. LANSANGAN – T-III, Porac National High School, Porac

Editor: JANE P. VALENCIA, EdD – EPS – Mathematics
Reviewer: JANE P. VALENCIA, EdD – EPS – Mathematics
Illustrator:
Layout Artist:
Language Reviewer:.

Management Team

ZENIA G. MOSTOLES, EdD, CESO V, Schools Division Superintendent

LEONARDO C. CANLAS, EdD, CESE. Asst. Schools Division Superintendent
ROWENA T. QUIAMBAO, CESE, Asst. Schools Division Superintendent
CELIA R. LACNALALE, PhD, CID Chief
JANE P. VALENCIA, EdD, Education Program Supervisor, Mathematics
JUNE E. CUNANAN, Education Program Supervisor/ Language Editor
RUBY M. JIMENEZ, PhD., Education Program Supervisor, LRMDS

17