ORIENTATION & ACCOUNTING BASICS

Week 1

COURSE OVERVIEWA. Course No.: IT200B. Course Title: Accounting Information SystemC. No. of Units: 3 unitsD. Semester Offered: 1st SemesterE. Lecturer: Mylene S. CaballeroF. Consultation Hours: Tuesday 12:30 – 2:30G. Linkage with Subsequent Courses: This course is not a

prerequisite to any of the major subjects of the BSIT program.H. Schedule:

A. IT3B – 8:00 – 11:00am lab. – Tues.B. IT3B – 4:10 – 5:40pm lec. – Tues. & Thurs.C. IT3A – 1:00 – 4:30pm lab. – Tues.D. 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 Ballada2. Basic Accounting by Edwin G. Valencia &

Gregorio F. Roxas, 3rd edition 2009-20103. Fundamentals of Accounting by Rafael M.

Lopez, Jr., Millennial edition 2007-20084. Accounting Information Systems by James Hall5. 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 basics2 – The accounting equation & the double-entry system3 – Recording business transactions4 – Adjusting the accounts5 – Worksheet & financial statements6 – Completing the accounting cycle7 – Merchandising operations8 – Overview of accounting information systems9 – 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)?

To create, convert, store, exchange, protect, process, transmit, and securely retrieve and use information in its various forms:

The study, design, development, implementation, support or management of computer-based information systems.

Computer Hardware and software application

TECHNOLOGY

Method used:

Material used:

Commercial or Industrial objective:

The scientific method and material used to achieve a commercial or industrial objective.

INFORMATION Data placed in a meaningful and useful context for an end user.

Anyone who uses an information system or the information it produces.

Data

End user

in its various forms (business data, voice conversations, still images, motion pictures, multimedia presentations, and other 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.

Motive is profit.

Bridging communication through

Financial Information or Financial Statements

IT is a business.

Is the medium of communication

Why do IT needs Accounting?

Business Bridging communication through Financial

Statements

Various users (decision makers)

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)

Two-way communication

Accounting is called the language of business.

LEGAL FORMS OF BUSINESS ORGANIZATION

1.Sole Proprietorship

2.Partnership

3.Corporation

4.Cooperative

Various Users (Decision Makers)

Users of Accounting Information

INTERNAL USERS EXTERNAL USERS

MANAGEMENT GROUP

Sole proprietors, partners, board of directors or stockholders, officers, managers, supervisors

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

2. One of the first and largest applications of computers is keeping and managing business and financial records.

1. All businesses need Computers

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

2) Processes that information into reports, and

3) Communicates the results to decision-makers.

Financial information

Balance Sheet, Income Statement

through monetary value

Servicing, Merchandising, Manufacturing,

Agriculture

By means of Financial Statements

To Various users

Measures

Business activities

Processes

Accounting process through accounting

cycle

information

Reports

Communicates

Results

Of Financial Statements

Decision makers

Operating, investing & financing activities

ACTIVITIES PERFORMED BY BUSINESS ORGANIZATIONS

SERVICING

MERCHANDISING

MANUFACTURING

AGRICULTURE

Plant, sell in raw or finished form

Perform services for a fee

Raw materials into finished products

Buy & sell finished products

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 May be occasional to the business such as losses due to theft, calamity and decline in market value of inventory.

Transaction Is sourced from ordinary business activities, such as selling, purchasing and producing.

In terms of money

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

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?

NOTE: Steps 1 to 10 is the ACCOUNTING

CYCLE.

BOOKKEEPING & ACCOUNTING(are two related processes.)

BOOKKEEPER ACCOUNTANT

BOOKKEEPING & ACCOUNTING(one is useless without the other)

BOOKKEEPING(how accounting is done)

ACCOUNTING(why accounting is done)

1. Refers to the mechanical aspect. 1. Refers to the analytical and interpretative aspects of accounting.2. The process of recording

“systematically” the business transactions in a “chronological manner”.

2. Requires complete and accurate bookkeeping records necessary to the performance of its responsibility.Systematic – it follows procedures

and principles.

Chronological – the transactions are recorded in “order of the date of occurrence.

BOOKKEEPING & ACCOUNTING(one is useless without the other)

BOOKKEEPING(how accounting is done)

ACCOUNTING(why accounting is done)

3. An accounting support function. 3. Functions at a higher level or degree than bookkeeping.

4. Bookkeeper uses the accounting information system the accountant designs.

4. Accountant designs the accounting information system that the bookkeeper will use.

5. Bookkeeper is under the supervision of an accountant. 5. Accountant supervises the work

of bookkeepers.6. Alone could not arrive at the desired result of the entire accounting process.

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 BUSINESS 2 OWNER

Transactions of different entities should be accounted for together.

Keep its own record Keep its own record Keep its own record

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 FISCAL YEAR INTERIM PERIOD

When a financial report is prepared, it is importrant to indicate the date when it was prepared and the time period it covers.

A 12-month period (Jan. to Dec. 31 of the accounting period).

Composed of 12 months but starts from any month other than January.

A business period within acx accounting period (weekly, monthly, quarterly, or semi-annual)

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.

QUANTIFIABILITYASSUMPTION

PESO STABILITYASSUMPTION

With the adoption of IAS and IFRS, some accounting elements are measured at their fair market value.

Accountants use a common unit of measurement that is, money.

Accountants assume that the monetary unit retains its purhcasing power regardless of fluctuation in money value.