Evolution of AccountingAncient AccountingAs early as 8500 B.C., accounting has already existed. Archaeologists have found clay tokens as old as 8500 B.C. found in Mesopotamia which were usually cones, disks, spheres and pellets. These tokens correspond to such commodities like sheep,

. Examples of ancient civilizations keeping account records are China, Babylonia, Greece and Egypt. Like in Babylonia during 3600 B.C., payments of salaries were recorded in clay tablets.

In addition, the rulers of these civilizations keep track of labor and material costs used in building structures using accounting. A good example is the case of the Egyptian pharaohs in building their magnificent pyramids.

Middle AgesDuring the thirteenth to the fifteenth centuries, trade flourished places such as Florence, Venice and Genoa, thus, there was advancement in account keeping methods, thanks to the merchants and the bankers of such time. during the 1211 A.D., one of the systems in accounting was kept by a Florentine banker.

However, the system was primitive as the concept of equality for entries was absent. Double entry records first came out during 1340 A.D. in Genoa.

In 1494, the first systematic record keeping was formulated by Fra Luca Pacioli, a Franciscan monk and one of the most celebrated mathematicians to this day. Pacioli is considered as the father of accounting

Industrial Revolution

The industrial revolution which was characterized by great changes in working and business transactions paved way to the specialized field of accounting called cost accounting in order to meet the need for the analysis of various costs.

In addition, since there was a development of the corporate form of organization,

there was a need for a separate and independent report to assure the management's financial representations are reliable. Information Age

At present,

there have been tremendous advancements in accounting to meet the needs brought about by information technology.

Use of Computers for reducing work , faster business

The Father of AccountingLuca Pacioli:

Luca Pacioli:

Luca Pacioli was born in Sansepulcro, in Tuscany. He was probably born during 1445. His family was poor, and Pacioli's future seemed very unpromising.

Pacioli joined a Franciscan monastery in Sansepulcro and became an apprentice to a local businessman.

In 1475, Pacioli became a teacher at the University of Perugia, where he stayed for six years. He was the first lecturer to hold a chair in math at the University.After 1481, Pacioli wandered throughout Italy, and in some areas outside it, until he was called back to the University of Perugia by the Franciscans in 1486.

The year 1494 is the only date during Pacioli's life that is absolutely certain. It was during this year that the forty-nine-year-old Pacioli published his famous book Summa de arithmetica, geometria, proportioni et proportionalita (The Collected Knowledge of Arithmetic, Geometry, Proportion and Proportionality). Pacioli wrote the Summa in an attempt to redress the poor state of mathematics teaching in his time. One section in the book made Pacioli famous. The section was Particularis de Computis et Scripturis, a treatise on accounting. De Scripturis was later described by some as "a catalyst that launched the past into the future."(Luca Pacioli: Unsung Hero of the Renaissance)

Pacioli was the first person to describe double-entry accounting, also known as the Venetian method. This new system was state-of- the-art, and revolutionized economy and business. The Summa made Pacioli a celebrity and insured him a place in history, as "The Father of Accounting." The Summa was the most widely read mathematical work in all of Italy, and became one of the first books published on the Gutenberg press.

Introduction to Accounting Meaning

Need for Accounting

Internal and External Uses

Concepts , Conventions and Practices

GAAP

Chapter I

Definition of Accounting Accounting is the art of recording, classifying and 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.

Activity which deals with providing information for users for their decision making

Book keeping and AccountingBook keeping is the art of recording all those business transactions that result in transfer of money or moneys worth in books of accounts.Book Keeping may be defined as systematic and regular record of events affecting a firm with view to obtaining a clear picture of the financial state of affairs of the firm and of its performance in monetary terms over a period time.Accounting is preparation of reports based on recorded data and interpretation and communication of accounting information.

Need for Accounting

Financial information to decision makers

Yardstick of financial performance

Formulation of Policies and Budgets

Accounting ProcessStep 1 - Identification of Transaction

Step 2 - Recording of the transaction

Step 3 - Posting to Ledger

Step 4 - Preparation of Trial Balance

Step 5 - Preparation of Final Accounts

Recording of Transaction Transactions are recorded in a book called JournalWhat to record? When to record?How to record?

Classification and Summarization Classification refers to the segregation, categorisation or sorting of transactions into relevant groups

Summarizing refers to balancing of accounts and posting to trial balance

Preparation of Financial StatementsIncome Statement To ascertain the operational result of the business Balance Sheet To ascertain the financial position of the organization

INTERPRETATIONFinancial Statements are interpreted for the benefit of end users. These end users are:Share holders / Prospective investorsManagementCreditors / SuppliersLenders GovernmentEmployeesResearch groups.

Debit and Credit All the accounts are divided into three categories Real a/c - Debit what comes in, Credit what goes out Personal a/c Debit the receiver, Credit the giver Nominal a/c Debit all expenses and losses, credit all incomes and gains

Branches of AccountingFinancial Accounting deals with recording, classifying and summarizing of past events.

Cost Accounting deals with cost identification, cost classification, cost analysis, cost reduction and cost control.

Management Accounting Processing of data generated by financial and cost accounting for the purpose of managerial decision making.

TerminologyAssets They have economic value and their use gives benefits to the business.Fixed assets which give benefits spread over a long period of time.Current assets which are converted into cash within one operating cycle.Liabilities represents what the business owes to others.Capital Owners investment in business.

Accounting EquationEvery transaction has two aspects Receiving aspect Giving aspectAll the sources of funds should equal the uses of funds Sources of funds = Uses of funds Total Liabilities = Total AssetsOwners equity + Outsiders funds = Total Assets

Uses of Financial StatementsManagementShareholders, Analysts and InvestorsLendersSuppliersCustomersEmployeesGovernment and Regulatory AuthoritiesOthers: Academicians, Researchers, etc