Module 1 overview of acctg.docx - COLLEGE OF THE IMMACULATE...

COLLEGE OF THE IMMACULATE CONCEPCION
INSTITUTE OF ACCOUNTANCY AND BUSINESS
MODULE 1
Overview of Accounting
MRS. OFELIA E. HOCSON,CPA,MBA
INTRODUCTION
This module will introduce to you the definition of accounting, its basic purpose, the accounting
concepts and terminologies, the branches of accounting and the sectors involve in the practice of
accounting profession. Accounting standards shall likewise be introduced including its authoritative
status.
LEARNING OUTCOMES
At the end of the module, students should be able to:
1. Define accounting and state its basic purpose.
2. Explain the basic concepts applied in accounting.
3. State the branches of accounting and the sectors in the practice of accountancy.
Definition of Accounting
ACCOUNTING is a service activity. Its function is to provide quantitative information, primarily
financial in nature about economic entities, that is intended to be useful in making economic decisions.
( Accounting Standards Council )
ACCOUNTING is the “process of identifying, measuring and communicating economic
information to permit informed judgments and decisions by users of the information.” ( American
Association of Accountants )
Three important activities included in the definition of accounting:
1. Identifying - the process of analyzing events and transactions to determine whether or not
they will be recognized.
2. Measuring - involves assigning numbers, normally in monetary terms, to the economic
transactions and events.
3. Communicating - is the process of transforming economic data into useful accounting
information, such as financial statements and other accounting reports, for dissemination to users. It
also involves interpreting the significance of the processed information.
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P r e p a r e d b y : M R . M A R K J A Y M . G E D O C R U Z

Basic Purpose of Accounting
The basic purpose of accounting is to provide information that is useful in making economic
decisions. The financial statements are one of the sources of information used when making economic
decisions. Other sources may include current events, industry publications, internet resources,
professional advices, expert systems, etc.
Accounting Concepts
Accounting concepts refer to the principles upon which the process of accounting is based. The
term “accounting concepts” is used interchangeably with accounting assumptions and accounting
theory.
It is the organized set of concepts and related principles that explain and guide the accountant’s
action in identifying, measuring, communicating accounting information. Accounting theory comprises
the Conceptual Framework and the Philippine Financial Reporting Standards (PFRSs).
Most accounting concepts are derived from the Conceptual Framework and the Philippine
Financial Reporting Standards (PFRSs). However, some accounting concepts are implicit, meaning they
are not expressly stated in the framework or PFRSs but are generally accepted because of their long-time
use in the profession.