Learning Activity Sheets Week 2: Applied Economics
Learning Activity Sheets Week 2: Applied Economics
Learning Activity Sheets Week 2: Applied Economics
APPLIED ECONOMICS
NATURE OF ACCOUNTING
According to Accounting Theory (http://accountingtheory.weebly.com/nature-and-scope-of-accounting.html):
“Accounting is a systematic recording of financial transactions and the presentation of the related information to
appropriate persons.” Based on this definition we can derive the following basic features of accounting:
• Accounting is a service activity. Accounting provides assistance to decision makers by providing them
financial reports that will guide them in coming up with sound decisions.
• Accounting is a process: A process refers to the method of performing any specific job step by step according
to the objectives or targets. Accounting is identified as a process, as it performs the specific task of collecting,
processing and communicating financial information. In doing so, it follows some definite steps like the
collection, recording, classification, summarization, finalization, and reporting of financial data.
• Accounting is both an art and a discipline. Accounting is the art of recording, classifying, summarizing and
finalizing financial data. The word ‘art’ refers to the way something is performed. It is behavioral knowledge
involving a certain creativity and skill to help us attain some specific objectives. Accounting is a systematic
method consisting of definite techniques and its proper application requires skill and expertise. So, by nature,
accounting is an art. And because it follows certain standards and professional ethics, it is also a discipline.
• Accounting deals with financial information and transactions: Accounting records financial transactions
and data, classifies these and finalizes their results given for a specified period of time, as needed by their
users. At every stage, from start to finish, accounting deals with financial information and financial
information only. It does not deal with non-monetary or non-financial aspects of such information.
• Accounting is an information system: Accounting is recognized and characterized as a storehouse of
information. As a service function, it collects processes and communicates financial information of any entity.
This discipline of knowledge has evolved to meet the need for financial information as required by various
interested groups
History of Accounting
Accounting is as old as civilization itself. It has evolved in response to various social and economic needs of
men. Accounting started as a simple recording of repetitive exchanges. The history of accounting is often seen as
indistinguishable from the history of finance and business.
TIMELINE EVENTS
The Cradle of Civilization Around 3600 B.C., record-keeping was already common from Mesopotamia, China
and India to Central and South America. The oldest evidence of this practice was the
“clay tablet” of Mesopotamia which dealt with commercial transactions at the time
such as listing of accounts receivable and accounts payable.
14th Century - Double-Entry The most important event in accounting history is generally considered to be the
Bookkeeping dissemination of double entry bookkeeping by Luca Pacioli (‘The Father of
Accounting’) in 14th century Italy. Pacioli was much revered in his day, and was a
friend and contemporary of Leonardo da Vinci. The Italians of the 14th to 16th
centuries are widely acknowledged as the fathers of modern accounting and were
the first to commonly use Arabic numerals, rather than Roman, for tracking business
accounts. Luca Pacioli wrote Summa de Arithmetica, the first book published that
contained a detailed chapter on double-entry bookkeeping.
French Revolution (1700s) The thorough study of accounting and development of accounting theory began
during this period. Social upheavals affecting government, finances, laws, customs
and business had greatly influenced the development of accounting.
The Industrial Revolution Mass production and the great importance of fixed assets were given attention
(1760-1830) during this period.
19th Century – The The modern, formal accounting profession emerged in Scotland in 1854 when
Beginnings of Modern Queen Victoria granted a Royal Charter to the Institute of Accountants in Glasgow,
Accounting in Europe and creating the profession of the Chartered Accountant (CA).
America
In the late 1800s, chartered accountants from Scotland and Britain came to the U.S.
to audit British investments. Some of these accountants stayed in the U.S., setting up
accounting practices and becoming the origins of several U.S. accounting firms. The
first national U.S. accounting society was set up in 1887. The American Association
of Public Accountants was the forerunner to the current American Institute of
Certified Public Accountants (AICPA)
In this period rapid changes in accounting practice and reports were made.
Accounting standards to be observed by accounting professionals were promulgated.
Notable practices such as mergers, acquisitions and growth of multinational
corporations were developed. A merger is when one company takes over all the
operations of another business entity resulting in the dissolution of another business.
Businesses expanded by acquiring other companies. These types of transactions
have challenged accounting professionals to develop new standards that will address
accounting issues related to these business combinations.
The Present - The The accounting profession in the 20th century developed around state requirements
Development of Modern for financial statement audits. Beyond the industry's self-regulation, the government
Accounting Standards and also sets accounting standards, through laws and agencies such as the Securities and
Commerce Exchange Commission (SEC). As economies worldwide continued to globalize,
accounting regulatory bodies required accounting practitioners to observe
International Accounting Standards. This is to assure transparency and reliability,
and to obtain greater confidence on accounting information used by global investors.
Nowadays, investors seek investment opportunities all over the world. To remain
competitive, businesses everywhere feel the need to operate globally. The trend now
for accounting professionals is to observe one single set of global accounting
standards in order to have greater transparency and comparability of financial data
across borders.
Exercise 2. MULTIPLE CHOICE- Choose the letter that corresponds to the correct answer. Circle the letter
that corresponds to your answer:
Exercise 3: IDENTIFICATION Identify what is asked or described in each item. Write you answer on the
space provided before the item.
_________________________1. It is the language of business.
_________________________2. Lifeblood of the government.
_________________________3. The brain of the company.
_________________________4. The required number of persons to form a cooperative.
_________________________5. The income distributed to stockholders in a corporation.
_________________________6. A 12-month period that ends on any month of the year.
_________________________7. The economic events of an organization are referred to as __________________.
_________________________8. Involves keeping a chronological diary of events that are measured in pesos.
_________________________9. Occurs through the preparation and distribution of financial and other accounting
reports.
_________________________10. It is the process of IDENTIFYING, RECORDING, and COMMUNICATING
economic events of an organization to interested users.”
_______________________11. Father of Accounting
_______________________12. S.E.C
_______________________13. AICPA
_______________________14. C.A
_______________________15. CPA
Exercise 4: Sequence the following Notable Events on the History and Development of Accounting in the
Philippines. Use the numbers 1-10 for your answers.
Answer Events
The Philippines became fully compliant with IFRS.
The Accountancy Law was revised and passed under Presential Decree No. 692.
The Philippines started transitioning form applying American accounting standards to applying IAS.
The first income tax law in the Philippines was enacted.
Until 1996, most if not all, Philippine accounting standards, called Statement of Financial Accounting
Standards (SFAS), were based on accounting standards in the USA.
In 1967, the Accountancy Law in the Philippines was revised and passed under Republic Act No. 5166.
In 1981, the Philippine Institute of Certified Public Accountants (PICPA) created the Accounting
Standards Council (ASC) to establish and improve accounting standards generally accepted in the
Philippines.
The Professional Regulation Commission (PRC) created the Financial Reporting Standard Council
(FRSC).
The FRSC was created to assist the Board of Accountancy (BOA) to carry out its powers and functions
provided under Republic Act No. 9298, The Philippine Accountancy Act of 2004.
Republic Act No. 9298 was also passed and enacted regulating the practice of Accountancy in the
Philippines, repealing for the purpose of PD No. 692.
Exercise 5: As a student, identify at least three scenarios or economic events that you encounter the definition of
accounting as to IDENTIFYING, RECORDING and COMMUNICATING. If possible, cite concrete examples in your
explanation.
Exercise 6: Directions: Based on your readings with regards to the ‘Nature of Accounting’ be able to craft 10
importance of accounting to you as a student (2), to businesses (3) , to schools (2) and to the government (3).
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
Reflection:
Complete this statement:
What I have learned from this activity
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Reference:
Fundamentals of Accountancy , Business and Management 1 Teaching Guide
Fundamentals of Accountancy , Business and Management – Rabo, Tugas and Salendrez (Vibal Publishing)
Prepared by:
BRIAN S. INCOGNITO
SHS Teacher II