CHARMAINE M.

CRUZ

BSE 1-2 M/TH

E-214 1:30-3:00 PM NOVEMBER 9, 2015

ASSIGNMENT NO. 1
Accounting definition
According to American Institute of Certified Public Accountants (AICPA)

The art of recording, classifying, summarizing, systematically, in

terms of money, transactions and events, which are parts at least, of
a financial character, and interpreting the results, thereof.
American Accounting Association (AAA) has defined accounting

The process of identifying, measuring and communicating

economic information to permit informed judgements and decisions
by users of the information.
In the words of Smith and Ashburne

Accounting is the science of recording and classifying business

transactions and events, primarily of a financial character, and the
art of making significant summaries, analysis and interpretation of
those transactions and events and communicating the results to
persons who must make decisions or form judgement.

I.

Assets
Things of value owned and rights of the business.

Examples
o
o
o
o
o
o
o
o
o
o

Cash
Accounts receivable
Notes receivable
Merchandise inventory
Supplies
Prepaid expenses
Cash on hand
Delivery equipment
Furniture and fixtures
Land

II.

Liabilities

Are equities of the creditors, or debts of the business. They can be

short-term or long-term.
Examples
o
o
o
o
o

Accounts payable
Notes payable
Salaries payable
Taxes payable
Interest payable

CHARMAINE M. CRUZ

BSE 1-2 M/TH

E-214 1:30-3:00 PM NOVEMBER 9, 2015

III.

Capital
Represents the equity of the owner, or the right of the owner on the
assets of the business.

Examples
o cash
IV.

Drawing
Any amount withdraw from business for personal use.

Examples
o

Journal entry
Account

Debit

Drawings account

Credit
200

Cash
Total:

V.

200
200

200

Revenues
Is the inflow of assets resulting from the sale of goods or rendering
of services to customers.

Examples
o
o
o
o
o

Sales revenue
Service revenue
Interest revenue
Rent revenue
Interest income

VI.

Expenses
Are cost incurred to produce revenue.

Examples
o
o
o
o
o
o
o
o
o
o

Office expense
Communication expense
Supplies expense
Interest expense
Salaries and wages expense
Insurance expense
Advertising expense
Utilities expense
Rent expense
Labor and welfare expense

Format for owners equity

o Is the summary of changes in capital of business entity as of a
specific period of time.

CHARMAINE M. CRUZ

BSE 1-2 M/TH

E-214 1:30-3:00 PM NOVEMBER 9, 2015

Business name
Statement of owners equity
For the period ended (Date)
st

Capital, 1 July 2008.............__________________

Net income for the month.__________________
Net loss for the year___________________
Withdrawals..___________________
Decrease in capital..___________________
Capital, 30th June, 2009__________________

Format for balance sheet

o Sometimes called the statement of financial position, is the list of
assets, liabilities, and capital of a business entity as of a specific
date.

Business name
Balance sheet
For the period ended (Date)

Assets
Current assets

Liabilities
Current liabilities

Cash balance ___________

Accounts payable__________

Bills receivable..___________

Commercial paper_________

Prepaid expenses ___________

Total current liabilities:

Inventories..___________
Total current assets:

Non-current assets

non-current liabilities

Buildings____________

long-term notes.___________

Accumulated depreciation..______________

mortgage._____________

Total non-current assets:

Total non-current liabilities:

Format for income statement

o Sometimes called the earnings statement, is the summary of the
revenue and expenses of business entity as of a specific period of
time.

CHARMAINE M. CRUZ

BSE 1-2 M/TH

E-214 1:30-3:00 PM NOVEMBER 9, 2015

Business name
Income statement
For the period ended (Date)

Revenues:
Net sales.._____________

Total revenues: .._______________

Expenses:
Salaries_____________
Office supplies... _____________
Utilities _____________
Rent expense _____________
Depreciation expense_____________
Miscellaneous expenses..._____________
Interest expenses..._____________
Insurance expenses____________
Feed expense__________
Salaries expense..____________

Total expenses: ___________

Net income: ...____________

Debit +

Credit

Debit -

To increase office equipment

To decrease accounts payable

To increase/record rent expense

To decrease salaries payable

To record/increase loss from fire

To decrease interest payable

To increase /record advertising expense

To decrease rent income

To increase/record accounts receivable

To decrease professional fees

To record/increase cash on hand

To decrease commission income

To increase the supplies expense

To decrease interest income

To record communication expense

To decrease mortgage payable

To increase prepaid expenses

To decrease notes receivable

To increase/record cash in bank

To decrease taxes payable

Debit

Credit +

Debit

Credit

Credit -

To record/increase service revenue

To decrease cash

To increase rent payable

To decrease delivery equipment

To increase rent payable

To decrease rent expense

To increase accumulated depreciation

To decrease supplies

To increase sales

To decrease prepaid expenses

To increase rent income

To decrease accounts receivable

To increase royalty income

To decrease repairs expenses

To increase service revenue

To decrease income tax

To increase/record notes payable

To decrease advertising expense

To increase salaries payable

To decrease cost of sales