Basic Concepts and Procedures 18th Edition Author: Zenaida Vera Cruz – Manuel
( Book is available at UPHSL Supply Center)
WHO CARES ABOUT ACCOUNTING?
On a Personal Level
Whether you are a student, housewife, or worker, you will always be confronted with financial problems. Balancing your daily expenditures against your limited earnings or resources (money) is a difficult feat. Accounting will help you as you need to prepare budget. On a Professional Level
And then a few years from now you will be graduating from college and regardless of your profession (lawyer, doctor, banker, entrepreneur, chef, manager) you will need answers to the following questions that will have a financial impact in your professional life, such as: Entrepreneur: Should I set up an Internet Shop or a Water Refilling Station? Investor: Should I buy Jollibee shares or Ayala bonds?
Bank Manager: Should I approve the cash loan of Mr. Ben Chan for P1,000,000? Financial Manager: How many units of Product A should our firm sell to breakeven? Marketing Manager: Should our firm spend P3,000,000 to promote this new product? Supplier of Flour: Should I grant Mr. King a monthly credit line of P2,000,000? Accounting will prepare reports and provide you with relevant information so you will be able to answer these questions and help you make sound decisions
ON A BUSINESS LEVEL
Although Accounting is vital to one’s daily activities, the impact of accounting is more felt in the filed of business from the small neighbourhood bakery to a multi-national food company corporation. The baker has many financial problems. It needs to answer the following questions: How much capital do I need? How much and what are the tools and equipment needed? How much materials (flour, milk, sugar and yeast) should be bought? What is a reasonable price to sell the breads and pastries considering the processing and operating costs to be incurred?
In business be it simple or complicated would to like to know whether they succeeded or failed by asking the following questions: Did our business make any profit? Did our assets or resources grow (specially the cash)? What money has come in and what has gone out? Are we ready to expand? Did the owner or investors earn a good return on the money they invested? Were the creditors (bank or supplier) paid on time? All the businesses, from the simple to the most complicated, have one thing in common: they need financial information before making decisions. This is where Accounting comes in as it plays a vital role in tracking down the activities and resources of the business, preparing reports and providing you with relevant information concerning financial position, financial performance, and changes in monetary resources.
HOW HAS ACCOUNTING DEVELOPED?
The earliest accounting system was found as early as 2000 BC in the cities of Babylonia, Greece, Egypt and in 3500 BC in Assyria. It consisted of records of taxes imposed by the king and collected from the people by the tax collectors. Likewise, when pyramids were being constructed in Egypt, the Pharaoh The first accounting book was written by Cotrugli in Naples but the modern day double entry bookkeeping could be traced from the book prepared in 1494 by an Italian mathematician, Fr. Luca Pacioli, entitled Summa de Arithmetica, Geometria, Proportioniet Proportionalita. One section of this book made him famous , Particularis de Computis et Scripturis. Modern bookkeeping has evolved from Pacioli’s “Model of Venice” which he developed to help the Italian merchandise in their trade practice and this has earned form him the title of Father of Accounting.
WHAT IS BUSINESS?
A business is simply defined as an economic activity of buying and selling in order to obtain profit. It can be defined...