Module 1: Intro to Accounting

Question 1

What are the three ancient civilizations that used accounting?

Answer 1

• Accounting dates back to period of ancient Greece, China and Egypt as it was used to keep track of the cost of labor and materials in building

Question 2

Who is the friend of Leonardo Davinci who published the first known double-entry bookkeeping and what is the title of this?

Answer 2

• Luca Pacioli, Suma de Arithmetica, Geometria, Proportioni et Proportionalite

Question 3

What led to the development of accounting from managers’ mere hunches to sophisticated systems?

Answer 3

Industrial Revolution

Question 4

What is accounting?

Answer 4

Recording, classifying and summarizing in a significant manner in terms of of money, transactions and events which are in part of atleast a financial character and interpreting the results thereof (AICPA)

• Recording, classifying, and summarizing money, transactions and events that will be be interpreted financially

Question 5

What are the 5 natures of accounting?

Answer 5

1. An Art: involves behavioral knowledge such as creativity and skill to achieve objectives
2. Service Activity: collects, processes, and communicates financial information for any entity
3. A Process: follows steps such as collection, recording, classification, summarization, finalization and reporting
4. An Information System: recognized and characterized as a means to store information
5. A Means and Not an End: accounting itself is not an objective, it helps achieve a specific objective.

Question 6

Why do we need accounting?

Answer 6

1. Understand the business
2. Help decision making
3. Measure business performance
4. Keep the business organized
5. Legal requirement
6. Year end reports
7. Investments, loan and sale of the business

Question 7

What are the fields of accounting?

Answer 7

1. Private/Managerial Accounting - accounting for internal users
2. Public/Financial Accounting - general purpose financial statememts for external users
3. Tax Accounting - tax matters, such as tax computations and tax returns
4. Government Accounting - accounting revenues and expenditures of government offices
5. Internal/External Auditing - Internal: review of business operations; External: review of financial statements
6. Academe/Education - instruction of accounting methods
7. Cost Accounting - Reporting costs associated with production
8. Accounting Research - development and discovery of relevant accounting concepts and practices

Question 8

Who is a Certified Public Accountant?

Answer 8

• Someone who provides accounting services for a fee

Question 9

What is managerial accounting?

Answer 9

• Accounting performed for a business in an industry

Question 10

What is Financial Accounting?

Answer 10

• Accounting that creates and provides Financial Statements (FS)
• Convey Financial Information through FS (Income Statement, Statement of Financial Position, Statement of Cash Flow)
• Give investors and creditors prediction of future risk and potential return of investments

Question 11

Differences of Financial vs Managerial Accounting?

Answer 11

1. Audience - FA: external; MA: internal
2. Application - FA: public use; MA: business use (management and staff)
3. Structure - FA: flexible in terms of rules and conventions; MA: follows the Generally Accepted Accounting Principles (GAAP) of the Philippine Financial Reporting Standards (PFRS)