ACCTBA1 reviewer by mitch
ACCTBA1 (Fundamentals of Accounting)
FORMS OF BUSINESS ORGANIZATIONS
ACCORDING TO ACTIVITIES
FORM OF BUSINESS
NORMAL OPERATING SYSTEM
SERVICE
TRADING / MERCHANDISING
MANUFACTURING
*** Similarities of the 3 Normal Operating Cycles: their aim is to gain profit in the end.
ACCOUNTING
Definition:
1. It is the “language of business”
It has its own terminologies
Information are useful for decision-making
2. It is a “service activity”
3. It is an art of recording, classifying, and summarizing in significant manner and in terms of money transactions or events and interpreting the results thereof.
4 Phases of Accounting
Bookkeeping vs. Accounting
BOOKKEPING
ACCOUNTING
- Involves only the recording of economic events
- just a part of the accounting process
- involves the entire process of identifying, recording & communicating economic events
Brief History of Accounting
ANCIENT CIVILIZATIONS
• China, Babylonia, Greece and Egypt
• Rules used accounting to keep track of the cost of labor and materials in building structures (ex: Great Pyramid)
RENAISSANCE PERIOD
Luca Pacioli
• Italian Renaissance mathematician
• close friend of Leonardo da Vinci
• contemporary of Christopher Columbus
• wrote Summa de Arithmetica, Geometria, Proportioni et Proportionalite (Everything About Arithmetic, Geometry, and Proportion) – published in Venice, Italy on November 1494 - contained the principles of mathematics and incidentally a set of accounting procedures
• described a system to ensure that financial information was recorded efficiently & accurately
INDUSTRIAL AGE (19th Century)
• emergence of large entities
• separation of owners from the managers of business took place
• need to report the financial status of the entity became more important to ensure that managers acted in accord with owner’s wishes
• transactions between entities became more complex
POST-INDUSTRIAL AGE (Information Age)
• many
FORMS OF BUSINESS ORGANIZATIONS
ACCORDING TO ACTIVITIES
FORM OF BUSINESS
NORMAL OPERATING SYSTEM
SERVICE
TRADING / MERCHANDISING
MANUFACTURING
*** Similarities of the 3 Normal Operating Cycles: their aim is to gain profit in the end.
ACCOUNTING
Definition:
1. It is the “language of business”
It has its own terminologies
Information are useful for decision-making
2. It is a “service activity”
3. It is an art of recording, classifying, and summarizing in significant manner and in terms of money transactions or events and interpreting the results thereof.
4 Phases of Accounting
Bookkeeping vs. Accounting
BOOKKEPING
ACCOUNTING
- Involves only the recording of economic events
- just a part of the accounting process
- involves the entire process of identifying, recording & communicating economic events
Brief History of Accounting
ANCIENT CIVILIZATIONS
• China, Babylonia, Greece and Egypt
• Rules used accounting to keep track of the cost of labor and materials in building structures (ex: Great Pyramid)
RENAISSANCE PERIOD
Luca Pacioli
• Italian Renaissance mathematician
• close friend of Leonardo da Vinci
• contemporary of Christopher Columbus
• wrote Summa de Arithmetica, Geometria, Proportioni et Proportionalite (Everything About Arithmetic, Geometry, and Proportion) – published in Venice, Italy on November 1494 - contained the principles of mathematics and incidentally a set of accounting procedures
• described a system to ensure that financial information was recorded efficiently & accurately
INDUSTRIAL AGE (19th Century)
• emergence of large entities
• separation of owners from the managers of business took place
• need to report the financial status of the entity became more important to ensure that managers acted in accord with owner’s wishes
• transactions between entities became more complex
POST-INDUSTRIAL AGE (Information Age)
• many