INTRODUCTION

Accounting information is vital to every business, whether small or big

businesses, since, it deals with money coming in and out of the business.
Accounting information is relevant for businesses for it provides the financial
structure of the business assets, liabilities, revenues and/or expenses. The purpose
of accounting is to help financial users see the true picture of the business in
financial terms. (Valencia and Roxas, 2009-2010). Accordingly, a Business has to
have a well-structured, effective and efficient system in keeping the record of
transactions. Accounting Information System consist of physical components,
including journals, ledgers, worksheets, equipment and devices to account
transaction data and further process this data to accounting information. Through
a proper accounting information system, the Business is ensured for a reliable,
accurate and timely decisions.
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 decision. (Accounting Standard Council)
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
financial character and interpreting the results thereof. (American Institute of
Certified Public Accountants)
The process of identifying, measuring, and communicating economic
information to permit informed judgments and decisions by users of the
information. (American Accounting Association)

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MANUAL BOOKKEEPING SYSTEM
Pa-Burrito Rice will exercise the manual bookkeeping system. It is because
the business is relatively small. Manual bookkeeping system works best for small
businesses and would also cost less because there is no expense for computer
equipment, software and employee training.

Bookkeeping is the initial activity or clerical part of accounting. It is

primarily concerned with procedures in the making and keeping of accounting
records. It is the how of accounting. (Valencia and Roxas, 2009-2010)

The outsource bookkeeper will be in charged for keeping the records of the
business, payroll, and tax computations. The bookkeeper will be someone who is
very knowledgeable, reliable, and credible in accounting requiring a Certification
of Certified Bookkeeper or NC3 passer. The bookkeeper will be checking and
updating the records weekly to monitor and produce necessary reports.

The financial records and books of the business will be stored inside the long
table in the Food Stand at the location of the business and will only be accessible
by the General Manager, Partners and Bookkeeper.

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Figure 3.0: The Accounting Cycle

Reversing
Entries
(Optional)

Identifying
and Analyzing
Transaction
and Events

Recording
in the
Journals

PostClosing
Trial
Balance

Posting to
the Ledger

Closing
Entries

Unadjusted
Trial
Balance

Financial
Statements

Adjusitng
Entries
Adjusted
Trial
Balance

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ACCOUNTING CYCLE
The name given to the collective process of recording and processing the
accounting events of a company. The series of steps begin when a transaction
occurs and end with its inclusion in the financial statements.(Investopedia.com).
The nine steps of the accounting cycle excluding reversing entries are:

1. Collecting and analyzing data from transactions and events.

Not all transactions and events are entered into the accounting
system. Only those that pertain to the business entity are included in the
process.
The basis of Pa-Burrito Rice would be the supporting documents that
were made from the business-related activities.

2. Putting transactions into the general journal.

Transactions are recorded in chronological order as they occur in
the General Journal (Books of Original Entry). Business transactions are
recorded using the double-entry bookkeeping system. Each transactions
are recorded in journal entries containing at least two accounts, one for
the value receive and one for the value given up or parted with (debit and
credit).
The business will be using Special journals to complement and
simplify the recording process of repetitive transactions such as sales,

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purchases, cash receipts and disbursements though the general journal will
be used to record those that cannot be entered in the special journal.
3. Posting entries to the general ledger.

The general ledger also called as Books of Final Entry is a grouping

of all accounts used in preparing the financial statements. The entries in the
General Journal with regards to the Special Journals will be posted in the
General Ledger periodically.
4. Preparing an unadjusted trial balance.

A Trial Balance is a device used to periodically test the equality of

the debits and credits. All account balances from the ledger are extracted
and arranged in the trial balance. Once that all debit and credit accounts
are added, total debits should be equal to total credits.

When errors are learnt, correcting entries are prepared to mend or

reverse their effect. Such errors came from unequal amounts in the debits
and credits, misplaced figures and transposition errors. If the trial balance is
said to be in balance or equal, this only proves that the debits and
credits in the ledger are equal in amount but it is not an assurance or
guarantee the correctness of the bookkeeping records such as double
posting or an omitted transaction.

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5. Adjusting entries appropriately.
Adjusting entries are made as an application for the accrual basis of
accounting. Every end of the accounting period may have some expenses
that have been incurred but not yet recorded or paid, some incomes have
been earned but not yet recorded or collected, items initially recorded as
assets are already used, some unearned revenues (liabilities) are already
earned, depreciations, and doubtful accounts/bad debts.

The purpose of adjusting entries is to update the accounts before they

are summarized in the financial statements.
6. Preparing an adjusted trial balance.
An adjusted trial balance is prepared after adjusting entries are made
and before the financial statements are prepared. This is to test if the debits
and credits are equal after the adjustments are made.
7. Organizing the accounts into the financial statements.

Financial Statements can now be prepared when the accounts are

already updated and equality between the debits and credits has been
tested.

Financial statements is made up of the following:

1) Statement of Comprehensive Income;
2) Statement of Changes in Equity;

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3) Statement of Financial Position;
4) Statement of Cash Flows; and
5) Notes to Financial Statements.
8. Closing the books.
Income Statement accounts are closed to prepare the system for the
next accounting period. Nominal or Temporary Accounts include Revenues,
Expenses are closed to Summary or Income Summary Account and drawing
accounts are closed to appropriate capital account for which these accounts
are measured periodically.
Statement of Financial Position accounts (known as real or permanent
accounts) are not closed.
9. Preparing a post-closing trial balance to check the accounts.

The last step of the Accounting Cycle is to prepare a post-closing trial

balance. This is to test the equality of debits and credits after the closing entries
are made. The post-closing trial balance contains the real or permanent
accounts only since the nominal or temporary accounts are closed.
10. Reversing entries (Optional)

Reversing entries are optional in the accounting cycle because it does not
change the amount reported in the financial statements. Reversing entries are
journal entries made at the beginning of the next accounting period and are

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exactly the reverse of some adjusting entries to facilitate a smooth and more
consistent recording process.
In this phase, the adjusting entries are made for Accruals (whether accrued
expenses or income), Prepayments (under the expense method), and
Precollections (under the income method) are simply reversed.
CHART OF ACCOUNTS
ASSETS
Current Assets:
100
101
102
103

Cash
Raw Materials
Prepaid Rent
Stall Supplies

Non-current Assets:
104
Kitchen Equipment
105
Accumulated Depreciation - Kitchen Equipment
106
Furniture and Fixtures
107
Accumulated Depreciation - Furniture and Fixture
LIABILITIES
Current Liabilities
200
201
202
203
204

SSS Premium Payable

PhilHealth Payable
HDMF Payable
Income Tax Payable
VAT Payable

PARTNERS CAPITAL
300
301
302
303

Garcia, Capital
Dawal, Capital
Murao, Capital
Sambrano, Capital

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PARTNERS DRAWINGS
400
401
402
403

Garcia, Drawings
Dawal, Drawings
Murao, Drawings
Sambrano, Drawings

INCOME AND EXPENSE ACCOUNT

Income:
500

Sales

Expense:
600
601
602
603
604
605
606
607
608
609
610
611
612

Cost of Sales
Salaries and Wages Expense
SSS Contributions
PhilHealth Contributions
HDMF Contributions
Taxes and Licenses
Rent Expense
Registration Fees
Documentary Stamp Tax
Depreciation Expense - Kitchen Equipment
Depreciation Expense - Furniture and Fixtures
Miscellaneous Expense
13th Month Pay

DESCRIPTION OF ACCOUNTS
ASSETS (normal balance: debit)
CURRENT ASSETS
Cash (100) Normally consist of coins and currencies on hand, money orders and
some checks from customers.
Debit: To record cash investments of partners and cash sales revenue.
Credit: To record withdrawals, purchases made on cash, payment of
expenses and other cash disbursements.

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Raw Materials (101) Composed of materials stored which are to be processed
yet.
Debit: To record acquisition of raw materials.
Credit: To record raw materials put into process.
Prepaid Rent (102) Advance payment of Rent.
Debit: To record advance payment
Credit: To adjust Prepaid Rent
Stall Supplies (103) These are supplies unused as of the balance sheet date.
Included are general supplies used in the general administration of the business.
Debit: To record purchase of stall supplies.
Credit: To adjust stall supplies account.
NON-CURRENT ASSETS
Fixed Assets: Properties and Equipments
Kitchen Equipment (104) This account is used to record the cost or appraised
value of kitchen equipment acquired or purchased.
Debit: To record purchase of kitchen equipment.
Credit: To record sale and disposition of kitchen equipment.

Accumulated Depreciation - Kitchen Equipment (105) Is a contra asset account

representing usage of kitchen equipment or expired cost of the asset up to the
present.
Debit: To close account upon disposal of the kitchen equipment.
Credit: To record depreciation expense of kitchen equipment for the year.

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Furniture and Fixtures (106) Includes tables and chairs.
Debit: To record purchase of furniture and fixtures.
Credit: To record sale or disposal of the furniture and fixtures.
Accumulated Depreciation-Furniture and Fixtures (107) Is a contra asset account
representing usage of Furniture and Fixtures or expired cost of the asset up to the
present.
Debit: To close account upon disposal of the Furniture and Fixtures.
Credit: To record depreciation expense of Furniture and Fixtures for the
year.
LIABILITIES (normal balance: credit)
CURRENT LIABILITIES
SSS Contribution Payable (200) Unpaid contribution of the employer and
employee to the Social Security Systems fund.
Debit: To record remittance of SSS contributions payable.
Credit: To record unpaid SSS contribution payable.
PhilHealth Contributions Payable (201) Unpaid contribution of the employer and
employee to the Phil Health plan.
Debit: To record remittance of Phil Health contributions payable.
Credit: To record unpaid Phil Health contributions payable.
HDMF Contributions Payable (202) Unpaid contribution of the employer and
employee to the PAG-IBIG Fund.
Debit: To record remittance of PAG-IBIG contributions payable.
Credit: To record unpaid PAG-IBIG contributions payable.
Income Tax Payable (203) Income taxes due to the government.

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Debit: To record remittance of Income Tax Payable.
Credit: To record unpaid Income Tax Payable.
VAT Payable (204) An account to record VAT payable of the business.
Debit: To record remittance of VAT payable of the business.
Credit: To record unpaid VAT payable of the business.
PARTNERS CAPITAL (normal balance: credit)
Partners Capital Represents the total investment of each partner.
Debit: To record retirement of one partner.
Credit: To record initial/additional investment of the partners.
PARTNERS WITHDRAWAL (normal balance: debit)
Partners withdrawal Represents cash or other assets taken by the partner for
personal use.
Debit: To record withdrawal made by the partners.
Credit: To close withdrawal account to capital.
INCOME (normal balance: credit)
Sales (500) Represents revenue arising from rendering of services and sales of
products.
Debit: To adjust sales for the current year.
Credit: To record the sales.
EXPENSES (normal balance: debit)
Cost of Sale (600) Represents the cost of preparing the foods sold.
Debit: To record cost of goods sold.
Credit: To adjust cost of sales account.

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Salaries and Wages Expense (601) Refers to the compensation or remuneration
in whatever form given to employees for the services they render to the firm.
Debit: To record salaries expense.
Credit: To adjust salaries expense account.
SSS Contribution Expense (602) Employers contribution to the SSS fund.
Debit: To record SSS contribution expense.
Credit: To adjust SSS contribution expense account.
PhilHealth Contribution Expense (603) Employers contribution to Phil Health plan.
Debit: To record Phil Health contribution expense.
Credit: To adjust Phil Health contribution expense account.
HDMF Contribution Expense (604) Employers contribution to the PAG-IBIG fund.
Debit: To record PAG-IBIG contribution expense.
Credit: To adjust PAG-IBIG contribution expense account.
Taxes and Licenses (605) - Refers to business taxes (other than income tax),
licenses, and other fees due to the government.
Debit: To record taxes and licenses expense.
Credit: To adjust taxes and licenses expense.
Rent Expense (606) - Refers to charges on the right to occupy shop or office space
or enjoy the use of other properties or assets.
Debit: To record payment to rent expense.
Credit: To adjust rent expense account.
Registration Fees (607) - Represents the cost incurred to register the business.
Debit: To record registration fees.
Credit: To adjust registration fees.

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Documentary Stamp Tax (608) - Represents payment of documentary stamps.
Debit: To record documentary stamp tax.
Credit: To adjust documentary stamp tax account.
Depreciation Expense Kitchen Equipment (609) - Represents the depreciation of
office equipment for the year.
Debit: To record depreciation expense of kitchen equipment.
Credit: To adjust depreciation expense - kitchen account.
Depreciation Expense-Furniture and Fixtures (610) - Represents the depreciation
of furniture and fixtures for the year.
Debit: To record depreciation expense of furniture and fixtures.
Credit: To adjust depreciation expense- furniture and fixtures account.
Miscellaneous Expense (611) - Refers to expenses not included in the
classifications above.
Debit: To record miscellaneous expense.
Credit: To adjust miscellaneous expense account.
13th Month Pay Expense (612) 1/12 of the basic salary of an employee within a
calendar year.
Debit: To record 13th Month Pay Expense.
Credit: To adjust 13th Month Pay Expense account.

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BUSINESS FORMS
GENERAL LEDGER, known also as Book of last entry, it is a collection of the group of
accounts that supports the value items shown in the major financial statements.
Figure 3.1: General Ledger

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PURCHASE REQUISITION, a form used to request supplies or merchandise or

a certain item that falls below a predetermined minimum quantity or when
it is seen that additional quantities should be ordered.
Figure 3.2: Purchase Requisition

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CASH RECEIPTS JOURNAL, a form used to record all transactions that

increase the amount of cash of the business.
Figure 3.3: Cash Receipts Journal

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PAYROLL REGISTER, a form with many columns that contains and

summarizes payment informations. (Amount of money paid to the
employees less the deductions.)
Figure 3.4: Payroll Register

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MAIN TRANSACTION CYCLES
A transaction cycle is an intertwining set of business transactions. Most
business transactions can be aggregated into somewhat small number of
transaction cycles related to the sale of goods, payments to suppliers, payments
of salaries, and payments to lenders/creditors.
The transaction cycles of the business includes:
1. Revenue Cycle
2. Expenditure Cycle
3. Payroll Cycle

REVENUE CYCLE
This cycle includes the transactions relating to the sales of goods and
services to customers and any expenses related to those revenues. Revenues can
only be generated once the conversion cycle is complete; unfinished goods or
services are not reported in the revenue cycle until the completion of the previous
cycle.

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Table 5.0: Narrative Accounting Procedure - Revenue/Receipt from Sales

Steps

Personnel involved

Customer

Procedure

Indicate the chosen variety of

the

product

Crew/Cashier,

to

the

then

Service

pay

the

indicated amount afterwards.

2

Service Crew/Cashier

Collects the payment and count

the cash, if payment exceeds the
indicated

amount,

give

the

change and store the cash in the

cashiers drawer.
3

Service Crew/Cashier

Give the ordered variety of the

product to the customer.

Service Crew/Cashier

Bookkeeper

Record the sale in Sales journal.

Update the records in the book/s.

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Figure 3.5: Revenue Cycle Flowchart

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EXPENDITURE CYCLE
Based on the projections from the financial cycle, businesses begin
spending their budget on materials needed for inventory. Goods may be raw
materials for manufacturing, food products for a restaurant, tools for repair
personnel or vehicles for a delivery service.

Table 5.1: Narrative Accounting Procedure - Expenditure/Disbursement for

Purchase from Suppliers
Steps

Personnel involved

Procedure

Service Crew/Cashier

Check inventory of raw materials if

sufficient for daily sales, if not sufficient,
Service Crew/Cashier will inform the
General

Manager

of

the

deficit

quantity of particular raw material(s)

through purchase requisition.
2

General Manager

Inspect the purchase requisition, then

approve the said form. After approving
the Purchase requisition form, General
Manager will give the purchase order
including

estimated

cash

to

the

assigned partner to purchase the raw

materials.

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3

Partner/s

Purchase

the

raw

materials

from

Purchase order received. Partner/s will

deliver the raw materials along with the
Official Receipt to General Manager.
4

General Manager

Receive the raw materials ordered with

the Official Receipt from the assigned
partner. The official receipt will be
compiled along in the cashiers drawer.
After

checking

the

purchased

materials, store perishable goods in the

refrigerator

and

for

non-perishable

goods will be stored in the storage

provided.
5

Bookkeeper

Update the book/s.

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Figure 3.6: Expenditure Cycle Flowchart

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PAYROLL CYCLE
Payroll cycle is the length of time between payrolls. Pa-Burrito Rice pays its
employees every 15th and 30th of the month, this is a monthly payroll cycle.

The bookkeeper will update the records weekly which will include the
working days and tardiness of the employees. The bookkeeper will also consider
employee benefits that are authorized deductions such as SSS, HDMF, and Phil
Health.

The manager, on the other end, would then approve the payroll sheet
given to him by the bookkeeper. The manager, will then disburse cash as
indicated to the payroll sheet.
Table 5.2: Narrative Accounting Procedure - Payroll Cycle for employees
Steps

Personnel involved

Procedure

Service Crews/Cashiers

The employees will log-in

in the log book as their
daily time records.

General Manager

The

general

manager

must add new or revise

existing employee data
before running payroll.

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She

must

create

an

employee profile payroll.

The

profile

includes

personal information and

payment details.
3

Bookkeeper

The

bookkeeper

calculate

employees'

work time for payment

purposes

using

company's

method

the
of

timekeeping.
4

Bookkeeper

The responsible person

verifies the employee's
hours. The bookkeeper
calculates

the

net

wages, the benefit and

deduction

of

the

employees.
5

General Manager

The

general

checks

the

manager
pay

slip

amounts to confirm all

the information is correct
once payroll is set.

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Figure 3.7: Payroll Cycle Flowchart