ABM-11 Fundamentals of Accountancy and Business Management PDF

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11ABM – Specialized SubjectFirst Quarter – Module 1Fundamentals of Accountancy,Business and Management 1Fundamentals of Accountancy, Business and Management 1 – Grade 11 Alternative Delivery Mode Quarter 1 – Module 1: Accounting Definition First Edition, 2020Republic Act 8293, section 176 states tha...

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11 ABM – Specialized Subject First Quarter – Module 1

Fundamentals of Accountancy, Business and Management 1

Fundamentals of Accountancy, Business and Management 1 – Grade 11 Alternative Delivery Mode Quarter 1 – Module 1: Accounting Definition First Edition, 2020 Republic Act 8293, section 176 states that: No copyright shall subsist in any work of the Government of the Philippines. However, prior approval of the government agency or office wherein the work is created shall be necessary for exploitation of such work for profit. Such agency or office may, among other things, impose as a condition the payment of royalties. Borrowed materials (i.e., songs, stories, poems, pictures, photos, brand names, trademarks, etc.) included in this module are owned by their respective copyright holders. Every effort has been exerted to locate and seek permission to use these materials from their respective copyright owners. The publisher and authors do not represent nor claim ownership over them. Published by the Department of Education Secretary: Leonor Magtolis Briones Undersecretary: Diosdado M. San Antonio Development Team of the Module Writers:

Manuel L. Hermosa, EdD Ma. Cristina A. Labay, MM Ellaine I. Dela Cruz, DBA Jupiter Q. Whiteside, MBA

Isabel A. Gumaru, DBA Farida F. Tallud, DBM Clarabelle V. Dalimit, DEM Mark Vincent B. Emit, PhD

Editors:

Remylinda T. Soriano, EPS

Angelita Z. Modesto, PSDS

Illustrator:

Writers

Layout Artist: Writers Management Team : Malcolm S. Garma, Regional Director Name of Regional Director Genia V. Santos, CLMD Chief Name of CLMD Chief Dennis M. Mendoza, Regional EPS In Charge of LRMS Maria Magdalena M. Lim, CESO V, Schools Division Superintendent Aida H. Rondilla, CID Chief Lucky S. Carpio, EPS In Charge of LRMS Division ADM Coordinator Name of Division ADM Coordinator Printed in the Philippines by ________________________ Department of Education – National Capital Region Office Address: ____________________________________________ ____________________________________________ Telefax: ____________________________________________ E-mail Address: ____________________________________________

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Introductory Message For the facilitator: Welcome to the Fundamentals of Accountancy, Business and Management 1. Alternative Delivery Mode (ADM) Module on Accounting Definition, Nature and History. This module was collaboratively designed, developed and reviewed by educators both from public and private institutions to assist you, the teacher or facilitator in helping the learners meet the standards set by the K to 12 Curriculum while overcoming their personal, social, and economic constraints in schooling. This learning resource hopes to engage the learners into guided and independent learning activities at their own pace and time. Furthermore, this also aims to help learners acquire the needed 21st century skills while taking into consideration their needs and circumstances. In addition to the material in the main text, you will also see this box in the body of the module:

Notes to the Teacher This contains helpful tips or strategies that will help you in guiding the learners.

As a facilitator you are expected to orient the learners on how to use this module. You also need to keep track of the learners' progress while allowing them to manage their own learning. Furthermore, you are expected to encourage and assist the learners as they do the tasks included in the module. For the learner: Welcome to Fundamentals of Accountancy, Business and Management 1 Alternative Delivery Mode (ADM) Module on Accounting Definition, Natures and History

The hand is one of the most symbolized parts of the human body. It is often used to depict skill, action and purpose. Through our hands we may learn, create and accomplish. Hence, the hand in this learning resource signifies that you as a learner is capable and empowered to successfully achieve the relevant competencies and skills at your own pace and time. Your academic success lies in your own hands! This module was designed to provide you with fun and meaningful opportunities for guided and independent learning at your own pace and time. You will be enabled to process the contents of the learning resource while being an active learner.

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This module has the following parts and corresponding icons:

What I Need to Know

This will give you an idea of the skills or competencies you are expected to learn in the module.

What I Know

This part includes an activity that aims to check what you already know about the lesson to take. If you get all the answers correct (100%), you may decide to skip this module.

What’s In

This is a brief drill or review to help you link the current lesson with the previous one.

What’s New

In this portion, the new lesson will be introduced to you in various ways such as a story, a song, a poem, a problem opener, an activity or a situation.

What is It

This section provides a brief discussion of the lesson. This aims to help you discover and understand new concepts and skills.

What’s More

This comprises activities for independent practice to solidify your understanding and skills of the topic. You may check the answers to the exercises using the Answer Key at the end of the module.

What I Have Learned

This includes questions or blank sentences/ paragraphs to be filled into process what you have learned from the lesson.

What I Can Do

This section provides an activity which will help you transfer your new knowledge or skill into real life situations or concerns.

Assessment

This is a task which aims to evaluate your level of mastery in achieving the learning competency.

Additional Activities

In this portion, another activity will be given to you to enrich your knowledge or skill of the lesson learned. This also tends retention of learned concepts.

Answer Key

This contains answers to all activities in the module.

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At the end of this module you will also find: References

This is a list of all sources used in developing this module.

The following are some reminders in using this module: 1. Use the module with care. Do not put unnecessary mark/s on any part of the module. Use a separate sheet of paper in answering the exercises. 2. Don’t forget to answer What I Know before moving on to the other activities included in the module. 3. Read the instructions carefully before doing each task. 4. Observe honesty and integrity in doing the tasks and checking your answers. 5. Finish the task at hand before proceeding to the next. 6. Return this module to your teacher/facilitator once you are through with it. If you encounter any difficulty in answering the tasks in this module, do not hesitate to consult your teacher or facilitator. Always bear in mind that you are not alone. We hope that through this material, you will experience meaningful learning and gain deep understanding of the relevant competencies. You can do it!

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This module was written for you to accomplish at home. It was carefully designed so that you can work at your own pace and allow self-discovery of the concept through activities that you will perform. Activities were also selected to allow independent learning which also aims to develop students’ reading comprehension skills through understanding written texts. After going through the module, you are expected to: 1. define accounting; 2. describe the nature of accounting; and 3. narrate the history/origin of accounting.

I. Fill in the blanks and identify the following terms. 1) Accounting is often referred to as a ____________________ because it is fundamental to communication of financial information. 2) _______________________ are those that affect the assets, liabilities, equity, income and expense of a ________________________. 3) As a practical art, accounting requires the use of creative skills and ________________ . 4) The early history of ________________ cannot be traced with much accuracy. 5) _______________________ is the initial activity or clerical part of accounting. • Source: Ferrer R.C. et.al. (2017). Fundamentals of Accountancy, Business and Management part 1, Bandolin Enterprise, (Publishing and Printing) Bakekang Sur, Baguio City

II. TRUE or FALSE Instruction: Before each statement, write TRUE if the statement is correct or FALSE if the statement is incorrect. _______________ 1) Sociological and psychological matters are within the scope of accounting. _______________ 2) Account is the basic storage of information in accounting. _______________ 3) Accounting is a process with the basic purpose of providing information about economic systems intended to be useful in making economic decisions.

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______________ 4) Accounting is a process of identifying, recording and communicating economic information that is useful in making economic decisions. _______________ 5) Accountable events are those that affect the assets, liabilities, equity, income and expenses of a business. • Source: Ferrer R.C. et.al. (2017). Fundamentals of Accountancy, Business and Management part 1, Bandolin Enterprise, (Publishing and Printing) Bakekang Sur, Baguio City

III. MULTIPLE CHOICE Instruction: Choose the letter corresponding to the correct answer for each of the questions provided below. 1. Which of the following is not an appropriate description of accounting? a. Accounting is an information system. b. Accounting is an exact science rather that an art. c. Accounting is the language of business. d. Accounting is a service activity. 2. Which of the following accounting processes comes first ahead of the others? a. Interpreting b. Recording c. Communicating d. Identifying 3. The types of information provided by accounting is/are a. Quantitative information b. Qualitative information c. Financial Information d. All the above 4. This is a process of identifying, recording and communicating economic information that is useful in making economic decisions. a. Accounting b, Bookkeeping c. Auditing d. Marketing 5. This essential element of the definition of accounting is the recognition of business activities as accountable events. a. Measuring b. Identifying c. Communicating d. Reporting • Source: Ferrer R.C. et.al. (2017). Fundamentals of Accountancy, Business and Management part 1, Bandolin Enterprise, (Publishing and Printing) Bakekang Sur, Baguio City

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MODULE 1

Accounting Definition, Nature and History

“Direct Deliver, Inc”

(https://www.accountingcoach.com/accounting-basics/explanation)

Joe has researched his idea and has prepared a business plan that documents the viability of his new business. Joe has also met with an attorney to discuss the form of business he should use. Given his specific situation, they concluded that a corporation will be best. Joe decides that the name for his corporation will be Direct Delivery, Inc. The attorney also advises Joe on the various permits and government identification numbers that will be needed for the new corporation. Joe is a hard worker and a smart man, but admits he is not comfortable with matters of accounting. He assumes he will use some accounting software but wants to meet with a professional accountant before making his selection. He asks his banker to recommend a professional accountant who is also skilled in explaining accounting to someone without an accounting background. Joe wants to understand the financial statements and wants to keep on top of his new business. His banker recommends Marilyn, an accountant who has helped many of the bank's small business customers. At his first meeting with Marilyn, Joe asks her for an overview of accounting, financial statements, and the need for accounting software. Based on Joe's business plan, Marilyn sees that there will likely be thousands of transactions each year. She states that accounting software will allow for the electronic recording, storing, and retrieval of those many transactions. Accounting software will permit Joe to generate the financial statements and other reports that he will need for running his business. Joe seems puzzled by the term transaction, so Marilyn gives him five examples of transactions that Direct Delivery, Inc. will need to record: 1. Joe will no doubt start his business by putting some of his own personal money into it. In effect, he is buying shares of Direct Delivery's common stock. 2. Direct Delivery will need to buy a sturdy, dependable delivery vehicle. 3. The business will begin earning fees and billing clients for delivering their parcels. 4. The business will be collecting the fees that were earned.

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5. The business will incur expenses in operating the business, such as a salary for Joe, expenses associated with the delivery vehicle, advertising, etc. With thousands of such transactions each year, Joe is smart to start using accounting software right from the beginning. Accounting software will generate sales invoices and accounting entries simultaneously, prepare statements for customers with no additional work, write checks, automatically update accounting records, etc. By getting into the habit of entering all the day's business transactions into his computer, Joe will be rewarded with fast and easy access to the specific information he will need to make sound business decisions. Marilyn tells Joe that accounting's "transaction approach" is useful, reliable, and informative. She has worked with other small business owners who think it is enough to simply "know" their company made P1,300,000 during the year (based only on the fact that it owns P 1,300,000 more than it did on January 1). Those are the people who start off on the wrong foot and end up in Marilyn's office looking for financial advice. If Joe enters all Direct Delivery's transactions into his computer, good accounting software will allow Joe to print out his financial statements with a click of a button. 1. Income Statement 2. Balance Sheet 3. Statement of Cash Flows

Activity 1: The Accounting definition And it’s Nature. Materials: Think a personal transaction On your community that applied accounting process (refer to the picture, figure 1) where income statement, balance sheet and statement of cash flows happened. •Source: Andres, C.S., et al. (2016) ‖Teaching Guide for Senior High School Fundamentals of Accountancy, Business and Management 1‖ – Published by Commission on Higher Education in collaboration with the Philippine Normal University

Figure 1 Activity 2: Kindly identify the following statement _________________1. It is the process of IDENTIFYING, RECORDING, and COMMUNICATING economic events of an organization to interested users _________________ 2. It involves selecting economic events that are relevant to a business transaction. The economic events of an organization are referred to as transactions.

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_________________ 3. It involves keeping a chronological diary of events that a re measured in pesos. _________________ 4. It occurs through the preparation and distribution of financial and other accounting reports.

Let’s now focused on the definition of “Accounting as the process of IDENTIFYING, RECORDING, and COMMUNICATING economic events of an organization to interested users.” (Weygandt, J. et. al). You may now proceeds analyzing what ACCOUNTING is all about. Kindly identify the following events using IDENTIFYING, RECORDING or COMMUNICATING as an element of accounting, and kindly write your on the space provided before its number: _____________1. Joe will no doubt start his business by putting P1,500,000 of his own personal money buying shares of Direct Delivery's common stock. _____________2. Direct Delivery will need to buy a sturdy, dependable delivery vehicle in an amount of P200,000 as an additional fund and recorded. _____________3. The business will begin earning P 40,000 for delivery fees and billing clients for delivering their parcels of P 30,000 on account and recording. _____________ 4. The business will be collecting the fees that were earned. _____________ 5. The business will incur expenses in operating the business, such as a salary for Joe, expenses associated with the delivery vehicle, advertising, etc. The answers from number 1 to 5 are identifying, recording and communicating, because the situation present the universal accounting elements as: IDENTIFYING – this involves selecting economic events that are relevant to a business transaction. The economic events of an organization are referred to as transactions. RECORDING – this involves keeping a chronological diary of events that are measured in pesos. The diary referred to in the definition are the journals and ledgers. COMMUNICATING – occurs through the preparation and distribution of financial and other accounting reports. (Note: the identification, recording and communication of economic events clearly define accounting.) Likewise, 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 is a process 10

• Accounting is both an art and a discipline. • Accounting deals with financial information and transactions • Accounting is an information system Let us check: The following economic activities below and check if it provides accounting features. Kindly put a letter “Y” if the transactions conform as an accounting transaction and a letter “X” if not. _____________1. Joe earned additional P 20,000 on their share at Direct Delivery, Inc. _____________2. He bought P 4,500 office supplies. _____________3. The employee salary was due last January 15, 2018. _____________ 4. The business will be collecting the fees that were earned. _____________ 5. The business will incur expenses in operating the business, such as a rent expense, electricity expenses, water and others. _____________ 6. He had a P200,000 back up on his account. The answer in all numbers 1 – 5 are “Y”, because if present features of accounting like service activity, process, both arts and a discipline, financial information and transactions and information system, and 6 is “X‖ because it a personal transaction. Like all things, who, what, where, when and how a thing exists. Let us arrange the accounting history: Match Column A to Colum B. Column A 1 Cradle of Civilization 2 14th Century

Colum B A Beginning of Modern Accounting B Mass production and great importance of fixed assets c Development of Accounting Theory d Father of Accounting e Double-Entry Bookkeeping F Clay Tablet

3 French Revolution 4 Luca Pacioli 5 Industrial Revolution 6 19th Century Answer: 1) f 2) e 3) c 4) d

5) b

6) a

History: 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 evolution of accounting: • Cradle of Civilization - 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 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 (1760-1830)- Mass production and the gre...