Transcript ORIENTATION & ACCOUNTING BASICS

Week 1
ORIENTATION &
ACCOUNTING BASICS
COURSE OVERVIEW
A.
B.
C.
D.
E.
F.
G.
H.
Course No.: IT200
Course Title: Accounting Information System
No. of Units: 3 units
Semester Offered: 1st Semester
Lecturer: Mylene S. Caballero
Consultation Hours: Tuesday 12:30 – 2:30
Linkage with Subsequent Courses: This course is not a
prerequisite to any of the major subjects of the BSIT program.
Schedule:
A.
B.
C.
D.
IT3B – 8:00 – 11:00am lab. – Tues.
IT3B – 4:10 – 5:40pm lec. – Tues. & Thurs.
IT3A – 1:00 – 4:30pm lab. – Tues.
IT3A – 1:00 – 4:05pm lec. – Thurs.
COURSE OVERVIEW
Course Description – This course introduces Computer
Science and Information Technology majors to the
basic accounting concepts and principles underlying
financial statements of business enterprises. This
course provides a theoretical basis for understanding
accounting and system concepts as an introduction of
Accounting Information Systems. The course contains
in-depth coverage on transaction processing systems
organized by cycles (Revenue, Expenditure,
Conversion, and Financial Cycles). The course shows
on how to use database theory and tools to build
functional accounting systems per accounting
transaction cycles.
OBJECTIVES
• Values to be integrated – This course aims
to develop the critical thinking skills of the
students as they try to portray the role of a
systems analyst particularly in accounting
information systems. They are expected
to become good development planners
equipped with the proper knowledge and
values as they try to formulate humane
decisions and solutions to real-world
issues.
TEXTBOOKS/REFERENCES
1. Basic Accounting by Win Lu Ballada
2. Basic Accounting by Edwin G. Valencia &
Gregorio F. Roxas, 3rd edition 2009-2010
3. Fundamentals of Accounting by Rafael M.
Lopez, Jr., Millennial edition 2007-2008
4. Accounting Information Systems by James
Hall
5. Building Accounting Systems Using Access
2000 by James Perry & Gary Schneider, 2001
edition
COURSE REQUIREMENTS
• Assignments
• Projects
• Exams
THE GRADING SYSTEM
CLASSROOM POLICIES
• Pray before and after the class.
COURSE OUTLINE
1 – Accounting basics
2 – The accounting equation & the double-entry system
3 – Recording business transactions
4 – Adjusting the accounts
5 – Worksheet & financial statements
6 – Completing the accounting cycle
7 – Merchandising operations
8 – Overview of accounting information systems
9 – Accounting Information Cycles – Revenue Cycle,
Expenditure Cycle, Conversion Cycle, Financial Cycle
LEARNING OBJECTIVES
• Discuss & differentiate forms of business
organizations
• Activities performed by business organizations
• Define terms use in accounting
• Explain & differentiate phases of accounting
• Differentiate the difference between
bookkeeping & accounting
• Discuss different fundamental concepts
What is an IT
(INFORMATION TECHNOLOGY)?
INFORMATION
Data
End user
Data placed in a meaningful and useful context for an
end user.
in its various forms (business data, voice conversations,
still images, motion pictures, multimedia presentations,
and other forms).
Anyone who uses an information system or the
information it produces.
TECHNOLOGY
The scientific method and material used to
achieve a commercial or industrial objective.
Method used:
The study, design, development, implementation,
support or management of computer-based
information systems.
Material used:
Computer Hardware and software application
Commercial or
Industrial objective:
To create, convert, store, exchange, protect,
process, transmit, and securely retrieve and use
information in its various forms:
What is an IT?
Information technology (IT), is "the study,
design, development, implementation, support
or management of computer-based information
systems, particularly software applications and
computer hardware to create, convert, store,
exchange, protect, process, transmit, and
securely retrieve and use information in its
various forms (business data, voice
conversations, still images, motion pictures,
multimedia presentations, and other forms) for
anyone who uses an information system or the
information it produces.
Why do IT needs Accounting?
Accounting is called the language of business.
Is the medium of
communication
Bridging
communication
through Financial
Information or
Financial Statements
Motive is
profit.
IT is a
business.
Why do IT needs Accounting?
Accounting is called the language of business.
Business
Bridging communication
through Financial
Statements
Various users
(decision makers)
Two-way communication
Legal Forms of
Business
Organizations (Sole
proprietorship,
Partnership,
Corporation,
Cooperative)
Internal user – Management Group
(own, manage & control the business
entity)
External users – Financing Group and
Public Group (do not own, manage &
control the business entity)
LEGAL FORMS OF BUSINESS
ORGANIZATION
1.Sole Proprietorship
2.Partnership
3.Corporation
4.Cooperative
Various Users (Decision Makers)
Users of Accounting Information
INTERNAL USERS
MANAGEMENT GROUP
Sole proprietors, partners, board
of directors or stockholders,
officers, managers, supervisors
EXTERNAL USERS
FINANCING GROUP
Investors, potential investors, trade
creditors or suppliers, potential
creditors, lenders or banks & other
financing institutions.
PUBLIC GROUP
Government regulatory agencies,
taxing authorities, labor unions,
employees, retirees, economic
planners, customers
ASSIGNMENTS
1. What are the
legal forms of
business
organization?
Differentiate them
and state the
name of the
owner.
2. Give at least
10 users of
Financial
Statements.
What decision
they have to
make?
Why do Accounting needs IT?
Information Technology's Role Today
1. All businesses need Computers
2. One of the first and largest applications of
computers is keeping and managing business
and financial records.
3. Large databases are managed by computer
programs.
4. All the information companies need to do
business involves the use of computers and
information technology.
What is Accounting?
Accounting is the system that measures activities,
processes that information into reports, and
communicates the results to decision-makers.
1) measures
business activities
Measures
through monetary
value
Business activities
Servicing,
Merchandising,
Manufacturing,
Agriculture
Operating, investing &
financing activities
2) Processes that
information into
reports, and
3) Communicates
the results to
decision-makers.
Processes
Communicates
Accounting process
through accounting
cycle
By means of Financial
Statements
information
Financial information
Reports
Results
Of Financial Statements
Decision makers
To Various users
Balance Sheet, Income Statement
ACTIVITIES PERFORMED BY
BUSINESS ORGANIZATIONS
SERVICING
MANUFACTURING
Perform services
for a fee
Raw materials into
finished products
MERCHANDISING
Buy & sell
finished products
AGRICULTURE
Plant, sell in raw
or finished form
WHAT IS ACCOUNTING?
Accounting is the art of recording, classifying,
summarizing in a significant manner and in terms of
money, transactions and events which are, in part at
least, of a financial character, and interpreting the
results thereof.
Art
As an art, accounting demands critical thinking and creative
skills. Accountants gather relevant data and convert them into
organized financial reports.
WHAT IS ACCOUNTING?
Accounting is the art of recording, classifying,
summarizing in a significant manner and in terms of
money, transactions and events which are, in part at
least, of a financial character, and interpreting the
results thereof.
Event
Transaction
In terms of
money
May be occasional to the business such as losses due to theft,
calamity and decline in market value of inventory.
Is sourced from ordinary business activities, such as
selling, purchasing and producing.
Before the effects of transactions can be recorded, they
must be measured and expressed in terms of a
common financial denominator---money.
Are all business events and transactions accountable?
PHASES OF ACCOUNTING
1. Identifying
transactions and
events – source
documents
2. Journalizing
transactions – the
journal
3. Posting to the
ledger – general
ledger
4. Trial balance
preparation
5. Adjusting
journal entries
6. Preparing the
worksheet
7. Preparing
financial
statements
8. Closing
entries
NOTE: Steps 1 to 10 is
the ACCOUNTING
CYCLE.
9. Post-closing
trial balance
10. Reversing
entries
Profitability – How
much is the
increase in capital
as a result of
business
operation?
Liquidity – Are there
available funds to
finance the
business
operation?
Solvency – Can the
business pay its
long-term
obligations to
others?
BOOKKEEPING & ACCOUNTING
(are two related processes.)
BOOKKEEPER
ACCOUNTANT
BOOKKEEPING & ACCOUNTING
(one is useless without the other)
BOOKKEEPING
ACCOUNTING
(how accounting is done)
(why accounting is done)
1. Refers to the mechanical aspect.
2. The process of recording
“systematically” the business
transactions in a “chronological
manner”.
Systematic – it follows procedures
and principles.
Chronological – the transactions
are recorded in “order of the date
of occurrence.
1. Refers to the analytical and
interpretative aspects of
accounting.
2. Requires complete and accurate
bookkeeping records necessary to
the performance of its
responsibility.
BOOKKEEPING & ACCOUNTING
(one is useless without the other)
BOOKKEEPING
ACCOUNTING
(how accounting is done)
(why accounting is done)
3. An accounting support function.
4. Bookkeeper uses the accounting
information system the accountant
designs.
5. Bookkeeper is under the
supervision of an accountant.
6. Alone could not arrive at the
desired result of the entire
accounting process.
3. Functions at a higher level or
degree than bookkeeping.
4. Accountant designs the
accounting information system that
the bookkeeper will use.
5. Accountant supervises the work
of bookkeepers.
6. Could not reach at this final
point without first passing through
the bookkeeping process.
Other definition of Accounting
• It 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.
• It is the process of identifying, measuring and
communicating economic information to permit
informed judgments and decisions by users of
the information.
All of the above and previous definitions touch the most important
points of accounting as:
1. Accounting is about quantitative information.
2. The information is of financial in character.
3. Usefulness of information in decision making.
ACCOUNTING CONCEPTS OR ASSUMPTIONS
•
Are important assumptions or ideas
which accountants observe in recording
business transactions in the books of
accounts.
1. Entity concept or accounting entity
concept
2. Periodicity concept or time periods
concept
3. Stable monetary unit concept or
monetary unit concepts
Accounting Entity Concept
•
•
State that accountants regard a business
enterprise as a separate and distinct entity
from the person or people who own and run it.
Business and personal transactions of the
owner should not be merged.
BUSINESS 1
Keep its own record
BUSINESS 2
Keep its own record
OWNER
Keep its own record
Transactions of different entities should be
accounted for together.
Periodicity or Time Period Concept
•
•
An entity’s life can be meaningfully subdivided
into equal time periods for reporting purposes.
This concept allow the users to obtain timely
information to serve as a basis on making
decisions about future activities.
CALENDAR YEAR
A 12-month period (Jan. to
Dec. 31 of the accounting
period).
FISCAL YEAR
Composed of 12
months but starts
from any month other
than January.
INTERIM PERIOD
A business period within
acx accounting period
(weekly, monthly,
quarterly, or semi-annual)
When a financial report is prepared, it is importrant to indicate
the date when it was prepared and the time period it covers.
Monetary or Stable Monetary Unit Concept
•
•
The Philippine peso is a reasonable unit of measure
and that its purchasing power is relatively stable. It
has the same purchasing power as any other peso at
any time.
This is the basis for ignoring the effects of inflation in
the accounting records.
QUANTIFIABILITY
ASSUMPTION
Accountants use a common
unit of measurement that is,
money.
PESO STABILITY
ASSUMPTION
Accountants assume that the
monetary unit retains its purhcasing
power regardless of fluctuation in
money value.
With the adoption of IAS and IFRS, some accounting
elements are measured at their fair market value.