Module No./Title: 1 – Introduction to 1.

Recording - This is technically called

Accounting bookkeeping. Some people confuse bookkeeping
and accounting as one and the same. However,
Introduction: bookkeeping is only a part of accounting – the
In order to appreciate and understand the recording phase. In this phase, business
financial reports of the business, one should have transactions are recorded systematically and
an understanding of how data are gathered and chronologically in the proper accounting books.
recorded. All these understandings are gained in There are two kinds of bookkeeping: the single
the study of accounting entry bookkeeping and the double entry
bookkeeping. Single entry bookkeeping does not
Objectives: To understand the definition, nature, show the two-fold effects of business
functions and history of accounting transactions. It shows only the debit or the credit
of each transaction. The double entry
Contents: bookkeeping, however, reflects the two-fold
1. Definition of Accounting effects of business transactions. It has a debit and
2. Nature of Accounting a credit.
3. Functions of Accounting in business
4. Brief history or Accounting 2. Classifying. In this phase, items are sorted and
grouped. Similar items are classified under the
INTRODUCTION TO ACCOUNTING same name. They may be classified as asset
accounts, liability accounts, capital accounts,
DEFINITION OF ACCOUNTING revenue accounts and expense accounts. This
Accounting is a process that performs a specific classification is useful to the needs of the
task in attaining some specific objectives. It management.
records business transactions and collects
information regarding it's financial which consider 3. Summarizing. After each accounting period,
as an information system that serves as a guide data recorded are summarized through the
making economic decisions. Introduction:
In order to appreciate and understand the
The Committee on Terminology of the American financial reports of the business, one should have
Institute of Accountants define accounting as, “the an understanding of how data are gathered and
art of recording, classifying, summarizing in a recorded. All these understandings are gained in
significant manner and in terms of money, the study of accounting financial statements.
transactions and events which are in part, at least, These reports are submitted to the management
of a financial character and interpreting the results at the end of each accounting period or as the
thereof.” need arises.

According to the American Institute of Certified 4. Interpreting. Usually, due to the technicality of
Public Accountants (AICPA): accounting reports, the accountant’s interpretation
Accounting is a service activity. Its function on the financial statement
is to provide quantitative information,
primarily financial in nature, about NATURE OF ACCOUNTING
economic entities that are intended to be
useful in making economic decisions, in 1. Accounting is a process. It performs the
making reasoned choices among specific task of collecting, processing and
alternative courses of action. communicating financial information and in doing
so, it follows some definite steps like collection of
As per American Accounting Association (AAA): data recording, classification, summarization,
Accounting is the process of identifying, interpretation including reporting.
measuring and communicating economic
information to permit informed judgment 2. Accounting is an art and a science. It is an art
and decision by users of the information. of recording, classifying, summarizing and
interpreting the financial data. It is a behavioral
Four Phases of Accounting knowledge involving certain creativity and skill
that may help us to attain some specific
objectives. It is also a systematic method 5. To supply information that can be used in
consisting of definite techniques and its proper accomplishing data, for managerial reports,
application requires applied skill and expertise, financial statements, strategic planning and
making accounting an art by nature. On the other decision-making.
hand, it is also a science in a way that there are
accounting principles that serve as a guide in HISTORY OF ACCOUNTING
accomplishing data and preparing reports.
Early History
3. Accounting is a means not an end. It finds out The early development of accounting dates to
the financial results and position of an entity and ancient Mesopotamia, and is closely related to
at the same time, it communicates this information developments in writing, counting and money and
to its users. The users then take their own early auditing systems by the ancient Egyptians
decisions on the basis of such information. and Babylonians dating back as early as 3300 to
Accounting is not an objective as it helps attaining 2000 BC. By the time of the Roman Empire, the
a specific objective. government had access to detailed financial
information. However, modern accounting as a
4. Accounting deals with financial information and profession has only been around since the early
transactions. It records the financial transactions 19th century.
and date after classifying the same and finalizes
their result for a definite period for conveying them
to their users. It is quantitative in nature and does Accounting Revolution
not deal with non-monetary information of When medieval Europe moved toward a monetary
non-financial aspects. economy in the 13th century, merchants
depended on bookkeeping to oversee multiple
5. Accounting is an information system. As a simultaneous transactions financed by bank
service function, it collects, processes and loans.
communicates financial information of any entity.
This discipline of knowledge has been evolved out In 1458 Benedetto Cotrugli invented the
to meet the need of financial information required double-entry accounting system, which
by different interested groups. revolutionized accounting. Double-entry
accounting is defined as any bookkeeping system
FUNCTIONS OF ACCOUNTING IN BUSINESS that involves a debit and/or credit entry for
transactions. Benedetto Cotrugli wrote Delia
Accounting is a service activity and has been Mercatura et del Mercante Perfetto (Of Trading
called the “language of business.” Accounting and the Perfect Trader), which included a brief
terms and concepts are used in statements and chapter which described many of the features of
reports submitted to interested users such as the double entry.
owners, investors, creditors, government and the
business analysts. Through the accounting data Father of Accounting
prepared, the business communicates to the Born in 1445 in Tuscany, Luca Bartolomes Pacioli
different interested parties the results of its is known today as the father of accounting and
operation and its financial condition. Aside from bookkeeping. He wrote Summa de Arithmetica,
this, the accountant’s opinion and estimation are Geometria, Proportioni et Proportionalita ("The
needed in preparing accounting data and reports. Collected Knowledge of Arithmetic, Geometry,
Proportion, and Proportionality") in 1494, which
Summarizing some of its most notable functions included a 27-page treatise on bookkeeping. His
follows: book was one of the first published using the
1. To maintain full and systematic records of historical Gutenberg press, and the included
business transactions. treatise was the first known published work on the
2. To ascertain profit or loss of the business. topic of double-entry bookkeeping. He is an Italian
3. To depict the financial position of the business. mathematician and Franciscan monk who
4. To serve as an information system that invented a system of record keeping that used a
provides reports to users and other interested memorandum, journal, and ledger, wrote many
parties about the economic activities and books on accounting.
condition of a business.
One chapter of his book, "Particularis de
Computis et Scripturis" ("Details of Calculation
and Recording"), on the topic of record keeping
and double-entry accounting, became the
reference text and teaching tool on those subjects
for the next several hundred years. The chapter
educated readers about the use of journals and
ledgers; accounting for assets, receivables,
inventories, liabilities, capital, income and
expenses; and keeping a balance sheet and an
income statement.

Artist and inventor Leonardo da Vinci was one of

Pacioli's students. Da Vinci illustrated Pacioli's
manuscript De Divina Proportione ("Of Divine
Proportion"), and Pacioli taught da Vinci the
mathematics of perspective and proportionality.

Chartered Accountants
The first professional organizations for
accountants were established in Scotland in 1854,
starting with the Edinburgh Society of
Accountants and the Glasgow Institute of
Accountants and Actuaries. The organizations
were each granted a royal charter. Members of
such organizations could call themselves
"chartered accountants." By 1880, the modern
profession of accounting was fully formed and
recognized by the Institute of Chartered
Accountants in England and Wales. This institute
created many of the systems by which
accountants practice today. The formation of the
institute occurred in large part due to the Industrial
Revolution.

As companies proliferated, the demand for

reliable accountancy shot up, and the profession
rapidly became an integral part of the business
and financial system. Organizations for chartered
accountants now have been formed all over the
world. In the U.S., the American Institute of
Certified Public Accountants was established in
1887. In the Philippines, the professional
accountancy body is called the Philippine Institute
of Certified Public Accounts (PICPA) which was
formed in 1929.