L1.

Introduction to Functions of Accounting

Accounting 1. Keeping systematic record of
business transactions
Accounting
2. Protecting properties of the
Accounting is the process of business
identifying, measuring, and
communicating economic 3. Communicating results to various
information to permit informed parties in or connected with the
judgement and decision by users business
of the information. 4. Meeting legal requirements
Identifying - recognition and
nonrecognition of business
activities as "accountable"
Nature of Accounting
events.
Measuring - assigning peso  Accounting is a process.
amounts to the economic
In accounting, a series of logical
transactions and events.
and organized steps are involved
Communicating - preparing and
such as identifying, recording,
distributing accounting reports to
measuring, and summarizing
possible users of accounting
financial data. After, the
information. - American
summarized results are
Accounting Association (AAA)
communicated to different parties
Accounting is the art of
or “stakeholders”.
recording, classifying and
summarizing in a significant  Accounting is an art.
manner and in terms of money,
transactions and events which It takes creativity, skill and
are in part at least of financial expertise to perform all the
character, and interpreting the accounting steps and activities.
results thereof. – American Accounting education prepares
Institute of Certified Public students for the accounting
Accountants (AICPA) career.
Accounting is a service activity.  Accounting is concerned with
Its function is to provide financial information and
quantitative information, primarily transactions.
financial in nature, about
economic entities, that is Accounting is a system in
intended to be useful in making business that is concerned with
economic decisions. – “money matters.” Hence, it
Accounting Standards Council involves a step called identifying,
(ASC) where events of the business are
identified as whether they are
 financial and material in nature or keeping accounting records
not. during the time.
 Accounting is a means, not an 14th century
end.
 Luca Pacioli became a prominent
You have read that accounting person in accounting history due
contributes to the success of to writing a book that introduced
every business. Hence, and disseminated the double-
accounting serves as a tool to entry bookkeeping.
achieve business goals rather
19th century
than being the goals themselves.
 The modern profession of
 Accounting is an information
chartered accountants originated
system
in Scotland. This became
Accounting is a repository of a possible by the granting of Queen
collection of information which Victoria of a royal charter to the
are financial in kind. These Institute of Accountants in
information are dealt with through Glasgow.
a series of steps. Period by
At present times
period, this accounting
information are summarized for  Accounting standards are
the preparation of accounting available to provide guidance to
reports or financial statements. accountants in their professional
practice.
1565-1898
History of Accounting
 Philippines’ formal accounting
4000 B.C.
records was observed during the
 The income of temples was Spanish colonization.
recorded in lower Mesopotamia.
1913
1000 B.C.
 During the American colonization,
 Phoenicians created an alphabet the first income tax law in the
with accounting to help them in Philippines was enforced.
their trades with the ancient
1915
Egyptians and avoid being
cheated.  Vicente F. Fabella became the
first Filipino CPA where he
500 B.C.
passed at the state of Wisconsin,
 The invention of the first bead USA.
and wire abacus by the Egyptians
who were already making and
1923 from the USA accounting
standards known as Statement of
 R.A. 3105 was created, the first
Financial Accounting Standards
Accountancy Law in the
(SFAS).
Philippines, along with the
formation of the Board of 2004
Accountancy (BOA).
 The Professional Regulation
1929 Commission (PRC) established
the Financial Reporting Standard
 The Philippine Institute of
Council (FRSC) replacing the
Certified Public Accountants
ASC.
(PICPA) was formed. William W.
 The R.A. no. 9298 was passed,
Larkin became the holder of the
known as the Philippine
CPA certificate no. 1 and became
Accountancy Act of 2004.
the first president of PICPA.
2005
1967
 The Philippines became fully
 R.A. 5166 was enacted to
compliant with the IFRS.
standardized the Philippine
accounting education and
regulation of the accounting
profession.
1975
 The Accountancy Law was
revised under Presidential
Decree no. 692 where part of the
change was foreigners were
disallowed to take the board
exam unless there are exception
to the rule.
1981
 PICPA formed the Accounting
Standards Council (ASC) to
create and enhance the
accounting standards generally
accepted in the Philippines.
1997
 The Philippines opted to move
towards International Accounting
Standards (IAS) and withdraw