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1.   Accounting provides all the financial information required by management to

      effectively run the business. It is the language of business.

2.   A business is the exchange of goods or services that results in mutual benefit for both

      parties involved. 

3.   The 3 kinds of business are the following:

      a.  Trading or Merchandising 

           Examples – Bookstores, Groceries, Hardware stores

     b  Manufacturing 

           Examples – Philippine Refining Company - manufacturer of household products

                               Unilever - manufacturer of drugs

                               Toyota - manufacturer of car

      c.  Servicing

  .        Examples – Repair Shops, Movie Houses, Educational Institutions

4.   Businesses are classified as to ownership as follows:

      a.  Sole or Single Proprietorship – a business owned and managed by only one person

            called proprietor.

      b.  Partnership – a business owned by two or more persons called partners.

      c.  Corporation – a business owned by several persons called shareholders or

                stockholders.

      d.  Cooperative – a business owned by several persons called members.

5.   Unlimited liability of the owner or partners means that if the business becomes

      bankrupt or insolvent,  the creditors can still collect from the owner or partners

      from their personal assets.

6.   A internal user refers to management while an external user refers to any other      

      interested party outside the business.

7.   The nature of accounting is information provider or communicator.

8.   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.

  9.   The four functions of accounting are, RECORDING, CLASSIFYING,

        SUMMARIZING and INTERPRETING. The interpreting function is the most

        important function in the sense that all the information provided by the accountant 

        will be meaningless if the reader or user can not understand or use them.

10.   The branches of accounting are as follows:

        a.  Financial Accounting – deals with the reporting of past activities of the business

             and is intended primarily for the external users.

        b.  Cost Accounting – deals with the determination of the cost of goods

             manufactured and sold including the determination of the profitability of the

             business and inventory valuation.

        c.  Management Accounting – deals with the provision of information which is

             useful to management.

        d.  Government Accounting – deals with the reporting of the past activities or

             transactions of the government.

        e.  Auditing – deals with the verification of the fairness of the accounting reports

             prepared by the accountant and to find out whether the reports are in accordance

             with  generally accepted accounting principles.

        f.  Taxation – deals with the correct determination of the different taxes imposed

             upon the business by the government.

11.   The principal financial statements prepared at the end of an accounting period are

        the  Income Statement, Balance Sheet, Statement of Changes in Owner’s Equity,  

        and the Statement of Cash Flows

12.    Generally accepted accounting principles are principles and accounting procedures

         which have gained wide acceptance in the business world and by the accountancy

         profession because their application will result in a fair presentation of the financial

         statements of a business. These are principles which will guide the accountants in

         the practice of accountancy.

13.   The three (3) fields of accounting are Private Accounting, Government Accounting

        and Public Accounting.