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Introduction to Accounting
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This lecture note will help the students to understand the definition, nature, and functions of accounting in the business industry.
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INTRODUCTION TO ACCOUNTINGWhat is 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 Institute of Accountants (AICPA), accounting is
the art of recording, classifying, and summarizing in a significant manner and
in terms of money, transactions and events which are in part at least of
financial character and interpreting the results thereof.
FUNCTIONS OF ACCOUNTING
1. IDENTIFYING – this involves selecting economic events that are relevant to
a particular business transaction
• The economic events of an organization are referred to as transactions.
2. RECORDING – this involves keeping a chronological diary of events that
are measured in pesos. The diary referred to in the definition are the
• Journals and ledgers which will be discussed in future chapters.
3. COMMUNICATING – occurs through the preparation and distribution of
financial and other accounting reports.
4. CLASSIFYING - It is the sorting or grouping of similar transactions and
events in a specific period of time.
5. SUMMARIZING - It is the process that involves grouping of various
accounts referred to the classifying process where the accounts are grouped
into assets, liabilities, owner’s equity, revenue, cost and expenses taken from
the general ledger.
6. REPORTING - It involves the preparation of financial statements such as
statement of financial position, statement of comprehensive income,
statement of owner’s equity and statement of cash flows.
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