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HISTORY OF ACCOUNTING (Luca Pacioli) widely believed to be the FORERUNNER of modern

bookkeeping practice."
GLIMPSE OF THE PAST
1. Historical records show that the beginnings of record -Thus, it can be said that LUCA PACIOLI systematized record
keeping or storing information dates back some 76000 years keeping through the DOUBLE-ENTRY BOOKKEEPING
ago in the Blombos caves of Africa SYSTEM.

2. Accounting in Mesopotamia, circa 3500 B.C. "BASIC ACCOUNTING"


-produced some of the oldest known records of commerce
(5000 years before the appearance of double entry) "FORMS" OF BUSINESS ORGANIZATION (PART 1)

3. Accounting in Ancient Egypt, China, Greece and Rome. 1. SINGLE/SOLE PROPRIETORSHIP is a business owned by
only ONE INDIVIDUAL.
4. Medieval Europe (13th Century)
- The introduction of double-entry bookkeeping. 2.PARTNERSHIP is an association of "TWO or MORE"
DEBIT is Latin for "he owes" persons who bind themselves to contribute money, property or
CREDIT is Latin for "he trusts" industry(services) to a common fund, with the intention of
dividing the profits among themselves.
*The MESSARI (Italian: Treasurer's) accounts of the city of
Genoa (1340) - is the oldest discovered record of a complete 3. CORPORATION is an artifical being(not natural, like human
double-entry system. being) created by opearation of LAW, having the rights of
This contain DEBITS and CREDITS in bilateral form. SUCCESSION, and the POWERS AND ATTRIBUTES
expressly authorized by law or incident to its existence.
5. LUCA PACIOLI and DOUBLE-ENTRY BOOKKEEPING
SYSTEM ~~~~~~~~~~~~~~~~~~~~~~~~~~

Luca Pacioli's "SUMMA DE ARITHMETICA, GEOMETRIA, "TYPES" OF BUSINESS


PROPORTIONI ET PROPORTIONALITA"
4.SERVICE BUSINESS. This business renders services to
-published in VENICE in 1494 included a 27-page, 36 short customers or clients for a fee.
chapters on bookkeeping. (Sale of SERVICES)

-BOOKS OF ACCOUNT DESIGNED BY LUCA PACIOLI 5. MERCHANDISING/TRADING BUSINESS. This business


a. The MEMORANDUM, (a daybook), for the recording, in buy goods or commodities and sell them at a profit.
chronological order, of business transactions as they occured. (Sale of GOODS) (Buy=>Sell)

b. The JOURNAL was the merchant's private account book. 6. MANUFACTURING BUSINESS. This business makes
Entries consisted of a narrative debit, credit, and explanation in "finished goods" from "raw materials" or unassembled parts. It
one continuous paragraph. "produces" the goods that it sells.
(Sale of GOODS) (Buy=>"Produce"=>Sell)
c. The LEDGER - The money and date columns were almost
identical to those in modern ledgers, with entries consisting of ~~~~~~~~~~~~~~~~~~~~~~~~~~
brief paragraphs.
(DEBITS on the left side of a double page, and CREDITS on "ELEMENTS" of FS (Financial Statements)
the right)
7. INCOME/REVENUE is the gross INFLOW of economic
-TRIAL BALANCE is the end of Pacioli's accounting cycle. benefits during the period in the form of INFLOWS or
(Implications: Significance of a statement of assumptions or enhancements on assets or decrease in liabilities that result in
premises) increase in equity, other than those relating to contributions
from the owner or owners.
-DEBIT amounts from the old ledger are listed on the left side
of the balance sheet and CREDITS on the right. 8. EXPENSE is defined as the gross OUTFLOW of economic
benefits during the period in the course of ordinary activities
If the two total totals are equal, the old ledger is considered when these OUTFLOWS result in DECREASE in equity other
balanced. than those relating to distribution to owners.
~In simple terms, these are COSTS incurred to produce
If not (in balance), says Pacioli, "THAT WOULD INDICATE A income/revenue.
MISTAKE IN YOUR LEDGER, WHICH MISTAKE YOU WILL
HAVE TO LOOK FOR DILIGENTLY WITH THE INDUSTRY
AND INTELLIGENCE GOD GAVE YOU."

-The SUMMA represents the first known printed treatise on


bookkeeping; and was translated into different languages. "It is
9. ASSETS are defined as RESOURCES controlled by the Current asset, if short-term. (Also a Current Asset if the
enterprise as a result of past transactions and events and from problem is SILENT)
which future economic benefits are expected to flow to the
enterprise. Noncurrent asset, if long-term.
~In simple terms, these are PROPERTIES owned by the
business. 6. MERCHANDISE INVENTORY are goods on hand and are
available for sale.
10. LIABILITIES are defined as present OBLIGATIONS of an
enterprise arising from past transactions or events, the Current asset.
settlement of which is expected to result in an outflow from the
7. ACCRUED INCOME. Earned but not yet received/collected.
enterprise of resources embodying economic benefits.
~In simple terms, these are the financial obligations or DEBTS Current asset.
of the business.It is also described as CLAIM of the
CREDITORS on the Assets of the enterprise. 8. ADVANCES TO EMPLOYEES. Cash received by employees
to be deducted from their salaries in the future.
11. OWNER'S EQUITY/CAPITAL represents the CLAIM of the
OWNER on the Assets of the business. It is the RESIDUAL Current Asset.
INTEREST in the Assets of the business after deducting all its
liabilities. 9. PREPAID EXPENSES are expenses PAID IN ADVANCE by
the business ("Paid but not yet incurred").
~~~~~~~~~~~~~~~~~~~~~~~~~~~
Current asset.
Important: CAPITAL ACOUNT (or EQUITY ACCOUNT)
consists of the following: 10. OFFICE/STORE SUPPLIES are being used by the
a. "Owner's Capital" business like papers, pens, pencils, folders, staplers, etc.
b. "Owner's Drawing"
Current asset.
~~~~~~~~~~~~~~~~~~~~~~~~~~
11. LAND is an asset that is not subject to depreciation. It
EXAMPLES of "ASSET" Accounts appreciates (value increases) as time goes by.

1. CASH is any medium of exchange that a bank will accept at Noncurrent asset.
face value. It includes coins and currencies, checks, money
orders and bank drafts. 12. BUILDING can be acquired by PURCHASE or by means of
CONSTRUCTION. Construction costs may include materials,
Current asset. labor, overhead, permit or license, Architect fee, Excavation
cost, etc.
2. TRADING SECURITIES are debt and equity securities that
are purchased with the intent of selling them in the "near term" Noncurrent asset.
or very soon.
13. MACHINERY & EQUIPMENT includes computers, air-
Current asset. conditioning units, electric fans, freezers, refrigerators, truck,
etc.
3. ACCOUNTS RECEIVABLES are claims against debtors or
customers arising from services rendered on account and sale Noncurrent asset.
of merchandise on account.
14. FURNITURE AND FIXTURES includes tables, chairs, filing
Current asset. cabinets, etc.

4. ALLOWANCE FOR DOUBTFUL ACCOUNT relates to the Noncurrent asset.


company's receivables which might not be collected.
15. ACCUMULATED DEPRECIATION. "Total" depreciated cost
Current asset. (Contra-Asset) of a depreciable asset.

#NOTE: "CONTRA-ASSET" account is the opposite of Noncurrent asset. (Contra-asset)


"ADJUNCT" account
16. INTANGIBLE ASSET is an identifiable non-monetary asset
In layman's term, "without physical substance" or have no physical appearance
CONTRA = deducted but are expected to provide future economic benefits to the
ADJUNCT = added (Example: Freight In) company.

5. NOTES RECEIVABLES are claims supported by promissory Noncurrent asset.


note.
~~~~~~~~~~~~~~~~~~~~~~~~~~~~ ~~~~~~~~~~~~~~~~~~~~~~~~~~

"LIABILITIES" (PART 2) True or False

1. ACCOUNTS PAYABLE are amounts due to creditors for 12. The excess of INCOME over EXPENSES is called "NET
ASSETS ACQUIRED on account. (Current Liab) INCOME". True

2. NOTES PAYABLE(short-term) are amounts due to creditors 13. The excess of EXPENSES over INCOME is called "NET
"within" one year, evidenced by WRITTEN PROMISE to pay. LOSS". True
(Current Liab)
14. INCOME "increases" Owner's Equity. True
3. ACCRUED EXPENSES are amounts owed to others for
UNPAID EXPENSES. (Current Liab) 15. EXPENSE "decreases" Owner's Equity. True

4. UNEARNED INCOME is revenue collected by the business 16. ADDITIONAL INVESTMENT "increases" Owner's. True
in advance. (Received/ collected IN ADVANCE, but not yet
earned). (Current Liab) 17. OWNER's DRAWING "decreases" Owner's Equity. True

5. CURRENT PORTION OF LONG-TERM DEBT are portions ~~~~~~~~~~~~~~~~~~~~~~~~~~


of mortgage, notes, bonds and other long-term indebtedness
DEBIT OR CREDIT
which are to be paid "WITHIN ONE YEAR" from the Balance
Sheet date (or end of Reporting Period). (Current Liab) (Normal Balance)
18. INCREASE in ASSET..... DEBIT
6. NOTES PAYABLE (long-term) are amounts due to creditors
19. INCREASE in LIAB..... CREDIT
"beyond" one year, evidenced by WRITTEN PROMISE to pay.
20. INCREASE in OE..... CREDIT
(Noncurrent Liab)
21. INCREASE in INCOME..... CREDIT
7. BONDS PAYABLE is a liability owed by a company to obtain 22. INCREASE in EXPENSE..... DEBIT
substantial sums of money from lenders to finance the 23. INCREASE in OWNER'S DRAWING..... DEBIT
acquisition of equipment and other needed assets. (Noncurrent
~~~~~~~~~~~~~~~~~~~~~~~~
Liab)
24. DECREASE in ASSET..... CREDIT
8. MORTGAGED PAYABLE. Long-term debt of the business
25. DECREASE in LIAB..... DEBIT
for which the business entity has PLEDGED certain assets as
26. DECREASE in OE..... DEBIT
SECURITY to the creditor. In the event that the debt payments
27. DEREASE in INCOME..... DEBIT
are not made, the creditor can foreclose or cause the
28. DECREASE in EXPENSE..... CREDIT
mortgaged asset TO BE SOLD to enable the entity to settle the
29. DECREASE in OWNER'S DRAWING..... CREDIT
claim. (Noncurrent Liab)
30. What is the "NORMAL BALANCE" of Cash, Trading
~~~~~~~~~~~~~~~~~~~~~~~~~~
Securities, Accounts Receivables, Notes Receivables, Accrued
"OWNER'S EQUITY" Income, Supplies, Prepaid Expense, Land, Building, Machinery
& Equipment, Furniture & Fixtures..... DEBIT
9. CAPITAL. This account is used to record the "ORIGINAL
and ADDITIONAL INVESTMENTS" of the owner of the 31. What is the "NORMAL BALANCE" of Accounts Payable,
business entity. It is increased by the amount of PROFIT Notes Payable, Accrued Expense, Unearned Income, Bonds
earned during the year or is decreased by a LOSS. Payable, Mortgage Payable..... CREDIT

#NOTE: This account is also used to record the "PERMANENT 32. What is the "NORMAL BALANCE" of Owner's Capital,
withdrawal" of the owner. Revenue or Income..... CREDIT
(PERMANENT withdrawal means withdrawal of INVESTED
33. What is the "NORMAL BALANCE" of Owner's Drawing,
capital)
Expense..... DEBIT
10. DRAWINGS/TEMPORARY WITHDRAWALS. Charged to
34. What is the "NORMAL BALANCE" of Allowance for
this account are cash or other assets withdrawn by the owner
Doubtful Accounts, Accumulated Depreciation..... CREDIT
from the business for personal use (represented by the owner's
share in profit) ~~~~~~~~~~~~~~~~~~~~~~~~~~~
11. INCOME SUMMARY. It is a temporary account used at the Definitions, Classifications and Examples of Accounts
end of the accounting period to close income and
expenses.'This account shows the profit or loss for the period I.
before closing to the capital account. (Future topic)
-REAL accounts (or PERMANENT accounts) Sales an account used to summarize sale of goods of a
trade or merchandising business. This includes cash sales and
The real accounts are sales on account.
Assets
Liabilities and Service Income the earning derived from service rendered
Owners Equity. by a servicing business to its customers. This includes cash
and on account service.
Real accounts are reported in the Statement of Financial
Position(or "BALANCE SHEET"). They are not "closed" at the Professional Fees the earning derived from services
end of accounting period. rendered by a professional or professional servicing firm which
could be in cash or in collectibles to its clients.
"Balance Sheet" (future topic)
"Closing Entries" (future topic) Interest Income the earning representing the time value of
money derived from promissory notes received by the
---------------------------------------------------------------
business, whether in cash or collectibles in future.
-NOMINAL accounts (or TEMPORARY accounts)
Rent Income the income earned from allowing others to
use property or facility of the business.
The nominal accounts are
Income/revenues
Gain on Sales of other Assets the income derived from the
Expenses and
sales of assets used in the business operation. There is a gain
Owners Drawing. on sale if the proceeds exceed the book value or cost of
disposed asset. Examples are gain on equipment, gain on sale
Nominal Accounts are those that comprise the elements of the investments, gain on sale of land, etc.
Statement of Comprehensive Income(or INCOME
STATEMENT + OCI) the revenue and expenses accounts. Others

These accounts are called temporary because they are ---------------------------------------------------------------


"closed" or put to zero balance at the end of the accounting
The EXPENSES Account
period. Owners Drawing (not an income statement account) is
also closed or put to zero balance.
Expenses are cost incurred in conducting the business
activities. Expense accounts have normal DEBIT balances.
"Income Statement" (future topic)
Some common expense accounts are as follows:
"OCI" -Other Comprehensive Income (disregard, higher
accounting topic)
Cost of Sales the value of merchandise sold
"Closing Entries" (future topic)
Supplies Expense the amount of supplies consumed or
---------------------------------------------------------------
used by the business during the period. Examples: used in
SUMMARY: papers, inks, ballpoint pens, etc.
REAL accounts (or PERMANENT accounts)
Salaries and Wages Expenses the amount paid to service
-Assets
rendered by the employees in the operation of the business
-Liabilities
-Owners Equity
Insurance Expense the amount of insurance policy incurred
NOMINAL accounts (or TEMPORARY accounts) during the current period. Examples: premiums on building
-Income/revenues insurance, life insurance, plant insurance, etc.
-Expenses and
Taxes and Licenses Expenses the cost of local as well as
-Owners Drawing national taxes that are incurred and required to be paid in
connect with the conduct of business.
---------------------------------------------------------------
Examples:cost to acquire mayors permit, registration cost of
II. the building, percentage tax on sales, etc.

The REVENUE Accounts Others

Revenue represents the earnings of the business from sales of "Estimated Expense"
goods or service rendered.
Doubtful Account Expenses the estimated amount of losses
Revenue accounts have normal CREDIT balance. Below are the uncollectible accounts arising from credit sales of the
some common revenue accounts.
current period. This is also called the debt expense or "CHARACTERS" :)
uncollectible account expense. a. BUSINESS = "Ikaw"
b. ASSET = Pag-aari "ng business"
Depreciation Expense represents the current periodic cost c. LIABILITY = Utang "ng business" sa iba (Ex. Bank)
for using depreciable plant assets. In accordance with the d. OWNER'S EQUITY = "Utang" "ng business" sa may-ari
systemic cost of depreciable asset should be allocated as (owner)
expense over its useful life.
.....................................
Others
EXAMPLE:
---------------------------------------------------------------
BUSINESS => "SM"
SUMMARY:
Revenue OWNER => "Henry Sy" (nag-invest ng P40M)
-Sales (Assume: Sole Proprietor siya, nag-iisang Owner)
-Service Income
-Professional Fees CREDITOR: "Bank" (nagpautang ng P60M para
-Interest Income makapagpatayo ng Building at makapag-operate ang SM)
-Rent Income
....................................
-Gain on Sales of other Assets
-Others
Naisipan ni Henry Sy na magtayo ng business at ang pangalan
ay SM. Ang ginawa niya ay nag-invest siya ng P40Million.
Expenses
Kulang pa ito kaya nangutang din ang Business sa Bank ng
-Cost of Sales
P60Million.
-Supplies Expense
-Salaries and Wages Expenses
..................................
-Insurance Expense
-Taxes and Licenses Expenses OWNER's EQUITY (or CAPITAL) - P40M
-Doubtful Account Expenses
-Depreciation Expense UNAWAIN
-Others SM = may sariling pagkatao (Artificial Being)
Henry Sy = may sarili ding pagkatao (Human Being)
BASIC ACCOUNTING EQUATION"
A = L + OE DAPAT HIWALAY SILA

Sole Proprietorship ...............................


(Assets = Liabilities + Owner's Equity)
Henry Sy, nag-invest sa SM businesss niya ng P40M
Partnership
Assets = Liabilities + Partner's Equity) Ano ba ang CAPITAL?
In layman's term, ito ay parang "UTANG NI SM". Nakatanggap
Corporation si SM ng P40M kasi "nangutang" siya ng pera galing Kay
Assets = Liabilities + Shareholder's Equity) Henry Sy.
(Accounting Term: INITIAL INVESTMENT)
~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Ang utang ay binabayaran? Kaya everytime kumukuha ng pera
TOPIC: Basic Accounting Equation (Posted May 28, 11:12am) si Henry Sy galing sa SM, nababawan na din ang utang ni SM.
(Accounting Term: WITHDRAWAL)
TOPIC: Assets (Posted May 29, 6:58pm)
#DeeperAnalysis
TODAY's TOPIC:
Ang "INVESTMENT" at "WITHDRAWAL" ay point of view ng
~Capital(with Income & Expense)
OWNER.
~Liabilities
INVESTMENT: dagdag puhunan
~~~~~~~~~~~~~~~~~~~~~~~~~~~
WITHDRAWAL: bawi ng puhunan
*Owner ang gumagawa nito!
#Review
Kung lalaliman mo ang Analysis, nasa point of view talaga tayo
"BASIC ACCOUNTING EQUATION
ng Business(SM).
Assets = Liabilities + Owner's Equity
-"UTANG ni SM" ang mga investments ni Henry Sy kasi
P100 = P60 + P40
ibabalik din ni SM yan kay Henry Sy.
Ito yung sinasabi namin dati na, IKAW si BUSINESS(SM). At B. EXPENSE = Cost or Gastos
parang pinautang ka lang ng sarili mo.
(kasi ang mag-ari ng SM ay si Henry Sy din naman) STORY 2:
Dahil nagtatrabaho si "Alma" sa Business mo, kailangan mo
..................................... siyang swelduhan. Ang "binayad" mo kay Alma ay P70.

NOTE: (SM's Point of View) QUESTION:


Tumataas/Nadadagdagan ang CAPITAL (Utang ni SM kay Ano ang tawag sa P70?
Henry Sy)
-everytime nag-iinvest si Henry Sy ANSWER:
(Initial Investment) *EXPENSE = P70 (EXPENSE = Cost or Gastos)
(Additional Investment)
-everytime kumukita ang SM (Net Income) #SUMMARY
INCOME: P100
*Net income means, (EXPENSE): P70
Revenue/Income/Gains > Expenses/Losses
(Mas malaki ang kita kaysa mga gastusin) = NET INCOME: P30

..................................... ~~~~~~~~~~~~~~~~~~~~~~~~~~~~

Bumababa/Nababawasan ang CAPITAL (Utang ni SM kay LIABILITY (P60M)


Henry Sy)
Balik tayo dito:
-everytime nagwi-withdraw si Henry Sy
Naisipan ni Henry Sy na magtayo ng business at ang pangalan
(Withdrawal)
ay SM. So ang ginawa niya ay, nag-invest siya ng P40Million.
(Drawings)
Kulang pa ito kaya nangutang din sa Bank ng P60Million.
everytime nalulugi ang SM (Net Loss)
Yung P60M (utang sa Bank), yan po yung example ng
*Net loss means,
LIABILITY.
Revenue/Income/Gains < Expenses/Losses
(Mas maliit ang kita kaysa mga gastusin) ...............................................
................................. Classification of LIABILITIES
NOTE THIS FORMULAS: ~Current Liabilities
1. Revenue(or Income) - Expenses = Net Income or (Net Loss) babayaran within 1 year (1 year o less)
2 Beginning Capital + Additional Investment - Permanent
Withdrawal + Net Income (or - Net Loss) - Drawings = Ending ~Noncurrent Liabilities
Capital babayaran lampas 1 year (more than 1 year)
3. Beginning Capital + Additional Investment - Permanent
Withdrawal + Revenue(or Income) - Expenses -Drawings = --------------------------
Ending Capital
#CurrentLiabilities
~~~~~~~~~~~~~~~~~~~~~~~~~~~
A. Accounts Payable
REVENUE(or Income) vs EXPENSE ACCOUNTS = Utang
PAYABLE = Babayaran pa (hindi pa bayad)
A. INCOME = Earnings or Kita'
ACCOUNTS PAYABLE = "Utang" na "Babayaran pa"
STORY 1:
Ang Business mo ay "Salon". May isa kang empleyado, si QUESTION:
"Alma". Anong ASSETS ang pwedeng bilhin, pero utang pa(Accounts
Payable)?
Nang mag-open ang Salon mo, may pumasok na isang
customer at nagpa-haircut. ANSWER:
-Merchandise Inventory
Nang matapos ang haircut, nakakolekta ang "Business" mo ng -Supplies
P100.
-Land
QUESTION: -Building
Ano ang tawag sa P100? -Machinery and Equipment

ANSWER:
*INCOME = P100 (INCOME = Earnings or Kita')
B. Notes Payable (SHORT-term) G. Mortgage Payable
NOTES = Utang "na may kasulatan" (Promissory Note) MORTGAGE: Utang na may SANLA
PAYABLE = Babayaran pa (hindi pa bayad) PAYABLE: Babayaran pa (hindi pa bayad)

TANDAAN: STORY:
Pag binayaran ang utang na NOTES PAYABLE, may "dagdag- Bumili ka ng LAND. Utang(Mortgage Payable)
bayad" na "INTEREST" (Interest Expense) *nakaSANLA ang Land

QUESTION: Pag hindi ka nakabayad ng Utang(Mortgage Payable),


Anong ASSETS ang pwedeng bilhin(or pwedeng ibebenta yung LAND para magkapera. At yung pera ang
matanggap),.....pero utang(Notes Payable)? gagamitin para mabayaran yung Utang mo(Mortgage
Payable).
ANSWER:
-CASH****************** "DEBIT and CREDIT"
-Merchandise Inventory
-Supplies ~~~~~~~~~~~~~~~~~~~~~~~~~~

-Land ASSETS:
-Building Cash, Accounts Receivable, Prepaid Rent, Prepaid Insurance,
-Machinery and Equipment Office Supplies.
Office Building, Office Equipment, Furniture and Fixture.
C. Accrued "_______" Expense
ACCRUED: Hindi pa Bayad LIABILITIES:
EXPENSE: Gastusin Accounts Payable, Mortgage Payable

ACCRUED EXPENSE = "Hindi pa bayad" na "Gastusin" CAPITAL (Owner's Equity):


De Asis Capital, De Asis Drawing
EXAMPLE:
-MERALCO Bill REVENUES:
(Hindi ka pa bayad... sa gastusin(electricity) na nagamit or na- Service Income
consume mo)
EXPENSES:
D. Unearned "_____" Income (Advances from Customers) Salaries and Wages Expense, Repairs and Maintenance
Expense, Taxes and Licenses Expense
UNEARNED INCOME
~nakatanggap ng CASH (Pera) ~~~~~~~~~~~~~~~~~~~~~~~~~~
~pero hind pa INCOME (Kita')
#JOURNALIZING
STORY(new)
Pumasok si customer sa Salon mo para "MAGBAYAD" ng 1. Francis "opened an account " with BPI under the Assisi
P100. Business Agency's name and deposited 850000 CASH. He
(Pero "BUKAS" pa siya magpapagupit) also "invested" his two personal COMPUTERS which he
acquired a year ago for 20000 each but with a fair market
BUSINESS (Ikaw) value of 15000 each.
~nakatanggap ng CASH (Pera)
~pero hind pa INCOME (Kasi "BUKAS" pa magpapagupit)') DEBIT: Cash 850000
DEBIT: Office Equipment 30000 (15000 x 2)
TANDAAN: CREDIT: De Asis, Capital 880000 (850000+30000)
May pagkakaiba ang UNEARNED INCOME at ADVANCES
FROM CUSTOMERS (Future Topic) .........................................

#NoncurrentLiabilities 2. PAID barangay and municipal TAXES, 3500.

E. Notes Payable (LONG-term) DEBIT: Taxes and Licenses Expense 3500


CREDIT: Cash 3500
Pareho sa (B.), pero BABAYARAN NG "HIGIT" SA ISANG
TAON (LONG-term) .........................................

F. Bonds Payable (LONG-term) 3. Bought a small office CONDOMINIUM for 500000, giving
(Future Topic) 250000 CASH and signing a MORTGAGE payable in 10 years
(pero TANDAAN na NONCURRENT LIAB siya) :) for the balance.
DEBIT: Office Building 500000 .........................................
CREDIT: Cash 250000
CREDIT: Mortgage Payable 250000 (500000-250000) 12. COLLECTED one half of the AMOUNT DUE FROM
CLIENT on #6 (see #6)
.........................................
DEBIT: Cash 10000
4. HIRED a secretary with monthly salary of 8500. CREDIT: Accounts Receivable 10000 (20000 x 1/2)

"No Entry" .........................................

......................................... 13. PAID "ONE YEAR RENT" for a special machine to be used
in business operations, 30000.
5. Bought office TABLES AND CHAIRS on CREDIT from
Mansion, Inc., 40000 DEBIT: Prepaid Rent 30000
CREDIT: Cash 30000
DEBIT: Furniture and Fixture 40000
CREDIT: Accounts Payable 40000 .........................................

......................................... 14. PAID "ONE YEAR INSURANCE" of the office


condominium, 25000.
6. BILLED a client for SERVICES rendered, 20000.
DEBIT: Prepaid Insurance 25000
DEBIT: Accounts Receivable 20000 CREDIT: Cash 25000
CREDIT: Service Income 20000
.........................................
.........................................
15. PAID one half of the SALARY of the secretary (see #4)
7. Purchases computer INK, COUPON BOND PAPER and
BALLPENS to be used in the office; terms: CASH basis, 4500. DEBIT: Salaries Expense 4250 (8500 x 1/2)
CREDIT: Cash 4250
DEBIT: Office Supplies 4500
CREDIT: Cash 4500 ~~~~~~~~~~~~~~~~~~~~~~~~

......................................... #GENRAL LEDGER Balances

8. PAID fifty percent of the amount OWED to Mansion, Inc. DEBIT BALANCE = Debits > Credits
(See #5) CREDIT BALANCE = Debits < Credits

DEBIT: Accounts Payable 20000 (40000 x 50%) Cash (All debits, minus all credits)
CREDIT: Cash 20000 = 477350 Debit Balance

......................................... Accounts Receivable


= 10000 Debit balance
9. Francis "WITHDREW" "CASH" of 50000 and two reams of
BOND PAPER worth 1000 for personal use. Prepaid Rent
= 30000 Debit balance
DEBIT: De Asis, Drawing 51000 (50000 + 1000)
CREDIT: Cash 50000 Prepaid Insurance
CREDIT: Office Supplies 1000 =25000 Debit balance

......................................... Office Supplies


= 3500 Debit balance
10. PAID 400 for the REPAIR of one of the computers
Office Building
DEBIT: Repairs and Maintenance Expense 400 = 500000 Debit balance
CREDIT: Cash 400
Office Equipment
......................................... =30000 Debit balance

11. RECEIVED 5000 as payment for the SERVICES rendered Furniture and Fixture
to one of their clients. =40000 Debit balance

DEBIT: Cash 5000 Accounts Payable


CREDIT: Service Income 5000 =20000 Credit balance
Mortgage Payable ASSET: 500000(Office Building) - 250000(Cash)
=250000 Credit balance LIABILITIES: 250000(Mortgage Payable)
CAPITAL: 0
De Asis Capital
=880000 Credit balance A=L+C
250000= 250000 + 0
De Asis Drawing
= 51000 Debit balance .........................................

Service Income 4. HIRED a secretary with monthly salary of 8500.


= 25000 Credit balance
A=L+C
Salaries and Wages Expense 0= 0 + 0
= 4250 Debit balance
.........................................
Repairs and Maintenance Expense
= 400 Debit balance 5. Bought office TABLES AND CHAIRS on CREDIT from
Mansion, Inc., 40000
Taxes and Licenses Expense
= 3500 Debit balance ASSET: 40000(Furniture and Fixture)
LIABILITIES: 40000(Accounts Payable)
~~~~~~~~~~~~~~~~~~~~~~~~~~~~ CAPITAL: 0

#TRIAL BALANCE A=L+C


(same balances from General Ledger) 40000= 40000 + 0

Total DEBITS: 1,175,000 .........................................


Total CREDITS: 1,175,000
6. BILLED a client for SERVICES rendered, 20000.
DEBIT and CREDIT" (Balancing)
ASSET: 20000(Accounts Receivable)
~~~~~~~~~~~~~~~~~~~~~~~~~~ LIABILITIES: 0
CAPITAL: 20000(Service Income)
1. Francis "opened an account " with BPI under the Assisi
Business Agency's name and deposited 850000 CASH. He A=L+C
also "invested" his two personal COMPUTERS which he 20000 = 0 + 20000
acquired a year ago for 20000 each but with a fair market
value of 15000 each. .........................................

ASSET: 850000(Cash) + 30000(Office Equipment) 7. Purchases computer INK, COUPON BOND PAPER and
LIABILITIES: 0 BALLPENS to be used in the office; terms: CASH basis, 4500.
CAPITAL: 880000(De Asis, Capital)
ASSET: 4500(Office Supplies) - 4500(Cash)
A=L+C LIABILITIES: 0
880000 = 0 + 880000 CAPITAL: 0

......................................... A=L+C
0=0+0
2. PAID barangay and municipal TAXES, 3500.
.........................................
ASSET: -3500(Cash)
LIABILITIES: 0 8. PAID fifty percent of the amount OWED to Mansion, Inc.
CAPITAL: -3500(Taxes and Licenses Expense) (See #5)

A=L+C ASSET: -20000(Cash)


-3500 = 0 + (-3500) LIABILITIES: -20000(Accounts Payable)
CAPITAL: 0
.........................................
A=L+C
3. Bought a small office CONDOMINIUM for 500000, giving -20000= -20000 + 0
250000 CASH and signing a MORTGAGE payable in 10 years
for the balance. .........................................
9. Francis "WITHDREW" "CASH" of 50000 and two reams of ASSET: 25000(Prepaid Insurance) - 25000(Cash)
BOND PAPER worth 1000 for personal use. LIABILITIES: 0
CAPITAL: 0
ASSET: -50000(Cash) -1000(Office Supplies)
LIABILITIES: 0 A=L+C
CAPITAL: -51000(De Asis, Drawing) 0=0+0

A=L+C .........................................
-51000 = 0 + (-51000)
15. PAID one half of the SALARY of the secretary (see #4)
.........................................
ASSET: -4250(Cash)
10. PAID 400 for the REPAIR of one of the computers LIABILITIES: 0
CAPITAL: -4250(Salaries Expense)
ASSET: -400(Cash)
LIABILITIES: 0 A=L+C
CAPITAL: -400(Repairs and Maintenance Expense) 0=0+0

A=L+C ~~~~~~~~~~~~~~~~~~~~~~~~~~
-400= 0 + (-400)
#NOTE
......................................... Increase in CAPITAL
-Revenue/Income/Gains
11. RECEIVED 5000 as payment for the SERVICES rendered
to one of their clients. Decrease in CAPITAL
-Expenses/Losses/Drawings/Withdrawals
ASSET: 5000(Cash)
LIABILITIES: 0 ~~~~~~~~~~~~~~~~~~~~~~~~~~
CAPITAL: 5000(Service Income)
ASSETS:
A=L+C Cash, Accounts Receivable, Prepaid Rent, Prepaid Insurance,
5000= 0 + 5000 Office Supplies.
Office Building, Office Equipment, Furniture and Fixture.
.........................................
LIABILITIES:
12. COLLECTED one half of the AMOUNT DUE FROM Accounts Payable, Mortgage Payable
CLIENT on #6 (see #6)
CAPITAL (Owner's Equity):
ASSET: 10000(Cash) - 10000(Accounts Receivable) De Asis Capital, De Asis Drawing
LIABILITIES: 0
CAPITAL: 0 REVENUES:
Service Income
A=L+C
0=0+0 EXPENSES:
Salaries and Wages Expense, Repairs and Maintenance
......................................... Expense, Taxes and Licenses Expense

13. PAID "ONE YEAR RENT" for a special machine to be used FABM 2
in business operations, 30000.
"STATEMENT OF CASHFLOWS"
ASSET: 30000(Prepaid Rent) - 30000(Cash)
LIABILITIES: 0 ~~~~~~~~~~~~~~~~~~~~~~
CAPITAL: 0
A.
A=L+C 1. Operating Activities
0=0+0 2. Investing Activities
3. Financing Activities
.........................................
~~~~~~~~~~~~~~~~~~~~~~
14. PAID "ONE YEAR INSURANCE" of the office
condominium, 25000. B.
Current Assets
Noncurrent Assets
Current Liabilities 2. Interest paid = OPERATING
Noncurrent Liabilities 3. Dividends received = OPERATING
Equity 4. Dividends paid = FINANCING

Income ALTERNATIVE:
Expenses 1. Interest received = INVESTING
2. Interest paid = FINANCING
~~~~~~~~~~~~~~~~~~~~~~ 3. Dividends received = INVESTING
4. Dividends paid = OPERATING
C.
OPERATING ACTIVITIES ~~~~~~~~~~~~~~~~~~~~~~
*Current assets (except loans "to")
*Current liabilities (except loans "from") POSITIVE Cashflow (Receipts > Payments)
*Income = net cashflow "PROVIDED BY"....
*Expenses
NEGATIVE Cashflow (Receipts < Payments)
INVESTING ACTIVITIES = net cashflow "USED IN"....
*Noncurrent assets
*Loans "to" (Receivable) - whether current or noncurrent ~~~~~~~~~~~~~~~~~~~~~~

FINANCING ACTIVITIES Net cashflow provided by(used in) Operating Activities


*Noncurrent liabilities + Net cashflow provided by(used in) Investing Activities
*Equity + Net cashflow provided by(used in) Financing Activities
*Loans "from" (Liability) -whether current or noncurrent = Net Increase (Decrease) in cash
Add: Beginning Cash Balance
NOTE: = Ending Cash Balance
"NONCASH" transactions are NOT included.
"DEBIT AND CREDIT"
~~~~~~~~~~~~~~~~~~~~~~
SERVICE & MERCHANDISING
D. OPERATING ACTIVITIES
*Direct Method or ~~~~~~~~~~~~~~~~~~~~~~
*Indirect Method
SERVICE (Typical Journal Entries)
INVESTING ACTIVITIES
*Direct Method 1. INITIAL Investment by the owner (new business).

FINANCING ACTIVITIES DEBIT: Assets (Ex. Cash, Supplies, Land, Building, Machinery,
*Direct Method Equipment, Furniture & Fixtures, etc)

~~~~~~~~~~~~~~~~~~~~~~ CREDIT: Owner's Equity (Ex. Valix, Capital)

E. 2. INITIAL Investment by the owner (took over a business of


DIRECT Method: another person).
+ Collections or Receipts
- Payments or Disbursements DEBIT: Assets (Ex. Cash, Accounts Receivable, , Notes
Receivable, Supplies, Land, Building, Machinery, Equipment,
INDIRECT Method: Furniture & Fixtures, etc)
Net income
+ Noncash expenses/losses (depreciation, amortization, Loss CREDIT: Liabilities (Ex. Accounts Payable, Notes Payable,
on sale, etc) Mortgage Payable, Bonds Payable, etc)
- Noncash revenue/gains (gain on sale, etc)
CREDIT: Owner's Equity (Ex. Valix, Capital)
- Increase in current assets (except cash, loan to)
+ Decrease in current assets (except cash, loan to) ...................................
+ Increase in current liabilities (excepts loan from)
- Decrease in current liabilities (except loan from) 3. ADDITIONAL Investment

~~~~~~~~~~~~~~~~~~~~~~ -same #1-

F. Other Notes ...................................

BENCHMARK: 4. PERMANENT withdrawal of "assets" by the owner.


1. Interest received = OPERATING
DEBIT: Owner's Equity (Ex. Valix, Capital) CREDIT: Cash

CREDIT: Assets (Ex. Cash, Supplies, Land, Building, 12. Payment of Mortgage Payable
Machinery, Equipment, Furniture & Fixtures, etc)
DEBIT: Mortgage Payable
5. TEMPORARY withdrawal of "assets" by the owner.
CREDIT: Cash
DEBIT: Owner's Drawing (Ex. Valix, Drawing)
~~~~~~~~~~~~~~~~~~~~~~
CREDIT: Assets (Ex. Cash, Supplies, Land, Building,
Machinery, Equipment, Furniture & Fixtures, etc) 13. Expenses paid.

~~~~~~~~~~~~~~~~~~~~~~ DEBIT: _____ Expense (Ex. Salaries Expense, Rent Expense,


Utilities Expense, etc)
6. Purchase of "assets" by paying "cash".
CREDIT: Cash
DEBIT: Assets (Ex. Supplies, Prepaid Rent, Prepaid _____ ,
Land, Building, Machinery, Equipment, Furniture & Fixtures, ...................................
etc)
14. Expenses incurred but not yet paid.
CREDIT: Cash
DEBIT: _____ Expense (Ex. Salaries Expense, Rent Expense,
................................... Utilities Expense, etc)

7. Purchase of "assets" "on account". CREDIT: _____ Payable (Ex. Salaries Payable, Rent Payable,
Utilities Payable, etc)
DEBIT: Assets (Ex. Supplies, Land, Building, Machinery,
Equipment, Furniture & Fixtures, etc) 15. Payment of #12

CREDIT: Accounts payable DEBIT: _____ Payable (Ex. Salaries Payable, Rent Payable,
Utilities Payable, etc)
8. Purchase of "assets" by "issuing a note".
CREDIT: Cash
DEBIT: Assets (Ex. Supplies, Land, Building, Machinery,
Equipment, Furniture & Fixtures, etc) ~~~~~~~~~~~~~~~~~~~~~~

CREDIT: Notes payable 16. Rendered services for cash.

9. Purchase of "assets" by signing a Mortgage Payable". DEBIT: Cash

DEBIT: Assets (Ex. Land, Building, Machinery, Equipment, CREDIT: Service Income (or Service Revenue)
Furniture & Fixtures, etc)
..................................
CREDIT: Mortgage payable
17. Rendered services "on account".
...................................
DEBIT: Accounts Receivable
10. Payment of Accounts Payable.
CREDIT: Service Income (or Service Revenue)
DEBIT: Accounts Payable
18. Rendered services by receiving a promissory note.
CREDIT: Cash
DEBIT: Notes Receivable
8. Payment of Notes Payable (nonintetest bearing)
CREDIT: Service Income (or Service Revenue)
DEBIT: Notes Payable
..................................
CREDIT: Cash
19. Collection of Accounts Receivable.
11. Payment of Notes Payable (intetest bearing)
DEBIT: Cash
DEBIT: Notes Payable
CREDIT: Accounts Receivable
DEBIT: Interest Expense
20. Collection of Notes Receivable (noninterest bearing)
DEBIT: Cash DEBIT: Accounts Payable

CREDIT: Notes Receivable CREDIT: PURCHASE RETURNS and ALLOWANCES

21. Collection of Notes Receivable (interest bearing) .........................................

DEBIT: Cash 5. Partial payment

CREDIT: Notes Receivable DEBIT: Accounts Payable

CREDIT: Interest Income CREDIT: Cash

~~~~~~~~~~~~~~~~~~~~~~~~ .........................................

"DEBIT AND CREDIT" 6. Full Payment (Paid on the 30th day)

MERCHANDISING DEBIT: Accounts Payable

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ CREDIT: Cash

(Typical Journal Entries) "OR"

A. PERIODIC INVENTORY SYSTEM 6. Full Payment (Paid within 10 days)

1. Initial Investment of Merchandise DEBIT: Accounts Payable

DEBIT: Merchandise Inventory CREDIT: Cash

CREDIT: Valix, Capital CREDIT: Purchase Discount

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
"BUYER"
SELLER
1. Purchase of "merchandise" by paying "cash".
1. Sale of "merchandise" for "cash".
(Term: COD: Cash on delivery)
(Term: COD:Cash on delivery)
DEBIT: PURCHASES
DEBIT: Cash
CREDIT: Cash
CREDIT: SALES
.........................................
.........................................
2. Returned merchandise (#1)
2. Returned merchandise (#1 above)
DEBIT: Cash
DEBIT: SALES RETURNS and ALLOWANCES
CREDIT: PURCHASE RETURNS and ALLOWANCES
CREDIT: Cash
.........................................
.........................................
3. Purchase of "merchandise" "on account" (on credit)
3. Sale of "merchandise" "on account" (on credit)
Term: 2/10, n/30 (2% cash discount if paid within 10 days.
Credit term: 30 days) Term: 2/10, n/30 (2% cash discount if collected within 10 days.
Credit term: 30 days)
DEBIT: PURCHASES
DEBIT: Accounts Receivable
CREDIT: Accounts Payable
CREDIT: SALES
.........................................
.........................................
4. Returned merchandise (#3)
4. Returned merchandise (#3 above)
DEBIT: SALES RETURNS and ALLOWANCES *"Na kay BUSINESS ang mga
ininvest/contributions/capital/puhunan ni Owner.
CREDIT: Accounts Receivable ~parang "Utang" ni BUSINESS yung puhunan dahil may
"obligation" siyang ibalik yan sa may-ari/owner.
.........................................
Again, our POINT of VIEW is the "Business" (not the owner po)
5. Partial collection
~~~~~~~~~~~~~~~~~~~~~~~
DEBIT: Cash
#START
CREDIT: Accounts Receivable
~~~~~~~~~~~~~~~~~~~~~~~
.........................................
ASSETS:
6. Full Collection (Collected on the 30th day)
A. Current Assets:
DEBIT: Cash -Cash
-Trading Securities (Marketable Securities) (Fair value through
CREDIT: Accounts Receivable
Profit or Loss) (Short-term Investment)
"OR" -Accounts Receivable
-Allowance for Doubtful Accounts (Allowance for Bad debts)
4. Full Payment (Paid within 10 days) -Notes Receivable
-Merchandise Inventory***
DEBIT: Cash -Accrued "_____" Income
-Prepaid Expenses
DEBIT: Sales Discount a. (Supplies/Office Supplies/Store Supplies)
b. (Prepaid Rent, Prepaid Salaries, etc.)-ang keyword ay
CREDIT: Accounts Receivable "PREPAID"
-Advances "TO" Employess (Advances to Suppliers***)
-Other "current" assets***
PAALALA: "Mahaba"
B. Noncurrent Assets
(BAWAL basahin ng mga taong ayaw magka-IDEA sa
-Land
Accounting) :) -Building
-Machinery and Equipment
PAALALA: Learning Accounting takes time. Kailangan ng -Furniture & Fixtures
Patience, Sipag, Tiyaga (at Dasal na rin) :) -Accumulated Depreciation
-Intangible Assets***
~~~~~~~~~~~~~~~~~~~~
-Other "noncurrent" assets ***
Topic: "ASSETS"
~~~~~~~~~~~~~~~~~~~~~~
~~~~~~~~~~~~~~~~~~~~
Ang ASSET ay nahahati sa dalawang classifications.
1. "Current" Assets
#REVIEW
2. "Noncurrent" Assets
Assets = Liabilities + Owner's Equity
CURRENT = SHORT-TERM (generally, "1 year or less").
CHARACTERS" :)
a. BUSINESS = "Ikaw" Again, "1 year or less". :)
b. ASSET = Pag-aari "ng business"
c. LIABILITY = Utang "ng business" sa iba (Ex. Bank) **NONCURRENT = LONG-TERM (generally, "more than 1
d. OWNER'S EQUITY = "Utang" "ng business" sa may-ari year")
(owner) Again, "more than 1 year" :)

Magkaiba/hiwalay ang "Business" at "Owner" ("Entity" *Siyempre, pag sinabing "general", may exception. Ibig
Concept) sabihin, pwedeng hindi masunod yung guide na "1 YEAR" (sa
1. Business = Artificial being (our POINT OF VIEW) future natin pag-uusapan)
2. Owner = Human being
#ANO BA ANG MGA HALIMBAWA NG "CURRENT ASSETS"?
Tinawag po naming "Utang" ang Owner's Equity/Capital dahil
SAGOT:
ang" point of view natin ay si "Business" (not the owner)
Current Assets: May experience ka dati na laging "kalahati" lang kung
-Cash magbayad itong kaibigan mo (Mabait ka lang talaga kaya lagi
-Trading Securities (Marketable Securities) (Fair value through mo siyang pinapautang).
Profit or Loss) (Short-term Investment) TAKE NOTE: Hindi pa siya nagbabayad sa inutang niyang
-Accounts Receivable P100. Pero iaanticipate mo na yung hindi niya mababayaran.
-Allowance for Doubtful Accounts (Allowance for Bad debts) Ang tawag dito ay "Allowance for Doubtful Accounts".
-Notes Receivable Iaanticipate or ire-record mo nang "Allowance for Doubtful
-Merchandise Inventory*** Accounts" yung kalahati na P50 (P100/2=P50)
-Accrued "_____" Income
-Prepaid Expenses *Simple Math lang ang accounting di ba? pa divide-divide ka
a. (Supplies/Office Supplies/Store Supplies) lang. :)
b. (Prepaid Rent, Prepaid Salaries, etc.)-ang keyword ay
"PREPAID" SUMMARY:
-Advances "TO" Employess (Advances to Suppliers***) Pautang (Accounts Receivable-AR) P100
-Other "current" assets*** Anticipated na di babayaran (Allowance for Doubtful Accounts-
ADA) P50
.....................................
P100(AR)-P50(ADA)
"CASH" = P50 (ito na lang ang sa tingin mong makokolekta mo sa
future). In Accouting, "NRV or Net Realizable Value" ang tawag
A-L+OE dito.
100=60+40
~~~~~~~~~~~~~~~~~~~~~~
Si Business(Ikaw) ay may P100 ngayon
(P60, utang sa bank) Sa puntong ito, dapat ay naunawaan" na natin ang
(P40, utang sa owner) -CASH
-ACCOUNTS RECEIVABLE
Ano ang tawag sa P100? -ALLOWANCE FOR DOUBTFUL ACCOUNTS
Yan po ay CASH.
CASH = P100 ~~~~~~~~~~~~~~~~~~~~~~
*"CURRENT asset" siya, kasi pwede mo gastusin "anytime" (1
year or less) ADDITIONAL INFO:
*Paano kung ang "line of business" mo ay "Sale of SERVICES"
~~~~~~~~~~~~~~~~~~~~~~~~~ (Ex. Salon) or "Sale of GOODS" (Ex. Buy & Sell ng Damit)?

"ACCOUNTS RECEIVABLE" -Pag SALE OF SERVICES, ang binigay mo ay "SERBISYO"


Ang pwedeng mo naman matanggap ay
ASSUME: Ang "line of busines" mo ay "pagpapautang" *CASH (kung nakolekta ang bayad)
*ACCOUNTS RECEIVABLE (kung di pa nakolekta)
Ngayon, si Business ay nilapitan ng isang kaibigan. Ang sabi #ServiceBusiness
niya sayo ay.. "Business, pwedeng "PAUTANG"?
-Pag SALE OF GOODS, ang binigay mo ay "PANINDA"
Dahil may P100 Cash ka, ang sabi mo ay " Sige, pauutangin (Damit)
kita. Matatanggap:
*CASH
At yun ang nangyari. Inabot mo ang P100 sa kanya at walang *ACCOUNTS RECEIVABLE
natira sa iyo. #MerchandisingBusiness

Tanong: Magkano na ang asset mo? Zero o P100 pa rin? ~~~~~~~~~~~~~~~~~~~~~

Sagot: P100 pa rin. "TRADING SECURITIES" (Marketable Securities) (Fair value


Oo, nawala yung P100 kaya parang walang asset. through Profit or Loss) (Short-term Investment)
Pero nagkaroon ka naman ng "PAUTANG". Ang pautang ay
hindi nahahawakan (hindi tangible) pero asset mo pa rin siya. Si Business(IKAW) ay may P100 ngayon
Ang tawag sa PAUTANG na yan ay "ACCOUNTS Ang P100 ay ININVEST.
RECEIVABLE". Receivable kasi may "mare-receive" kang Pag sinabing ininvest, parang "PAUTANG" din yan.
bayad o pera. Ipapahawak mo muna sa iba yung pera mo para kumita or
#Realization: Kahit pala wala sayo or hindi mo hawak, pwede madagdagan (Take note: pwede rin na mabawasan)
pa rin maging ASSET.
In Accounting, YES!!!.. Pwede ka mag-invest(or magpautang) sa dalawang ito.
~DEBT Securities (dito, pwede madagdagan ang pera mo ng
"ALLOWANCE FOR DOUBFUL ACCOUNTS" tinatawag na "INTEREST")
~EQUITY Securities (dito, pwede madagdagan ang pera mo Paano kung nagtext ako at nabawasan ng Piso?
ng tinatawag na "DIVIDEND") ~Ang PREPAID EXPENSE mo ay P99 na lang (P100-P1)

Example: In short, ang PREPAID EXPENSE ang yung amount ng load


Nag-invest ka ng P100. So nawalan ka ng P100. na "HINDI MO PA NAGAGAMIT".

After ng ilang buwan, binawi mo na yung pera at naging P120. ~Ganun din pag bumili ka ng ballpen, pencil, or yung mga
nabibiling "SUPPLIES" sa NATIONAL BOOKSTORE, "Prepaid
Paki compute. Magkano po ang sobra? Expense" din ang tawag dun.
P120-P100=P20
~~~~~~~~~~~~~~~~~~~~~~
Ang tawag po sa sobrang P20 ay INTEREST(pag debt
security) or DIVIDEND(pag equity security) "ADVANCES TO EMPLOYEES"
*Simple Illustration lang po ito :)
P100, pinautang sa empleyado
(Wag muna sa komplikado)
Ang tawag: ADVANCES TO EMPLOYEES
Kailan siya naging TRADING SECURITIES?
~~~~~~~~~~~~~~~~~~~~~~~
Yun ay nung time na nag-invest ka.
Nag-invest ka at nawalan ka ng pera. Pero nagkaroon ka "NOTES RECEIVABLE"
PAUTANG. Yung pautang ang TRADING SECURITIES.
P100, pinautang pero may kasulatan (PROMISSORY NOTE)-
Sounds familiar? YES! at kumikita ng "INTEREST.
Para siyang "ACCOUNTS RECEIVABLES" na pautang. Ang tawag: Notes Receivable
Ang pinagkaiba lang po nila, ang TRADING SECURITES ay ~~~~~~~~~~~~~~~~~~~~~~~~
kumikita ng INTEREST / DIVIDENDS.
"ACCRUED INCOME"
~~~~~~~~~~~~~~~~~~~~~~~~~~
Nagpapaupa(Rent) ka ng kwarto(Ikaw yung may-ari).
"MERCHANDISE INVENTORY" Ang paupa mo ay P100 per month.
Si Business (IKAW), ay may P100. Walang ka pang natatanggap na pera kahit magkano(Advance
Pinambili mo ng "DAMIT (assuming ang business mo ay "BUY man or Deposit)
& SELL") para ibenta sa mas mahal na halaga.
Lumipas ang isang buwan. May kinita ka nang P100 para sa
BUY: Damit P100 isang buwang upa.
SELL: P120 Pero hindi mo pa natatanggap yung pera.
Kumita ka na, Pero hindi pa natatanggap yung pera.
P120-P100=P20.
Kumita ka ng P20. Ang tawag: ACCRUED INCOME
(Earned but not yet received)
Ano ang tawag dun sa DAMIT na binibenta mo?
Kumita na, hindi pa natatanggap yung pera
*Answer: MERCHANDISE INVENTORY
*Ito po ay isang uri din ng RECEIVABLE (Parang ACCOUNTS
~~~~~~~~~~~~~~~~~~~~~~~
RECEIVABLE) dahil may "mare-receive" kang pera.
"PREAPAID EXPENSE"
~~~~~~~~~~~~~~~~~~~~~~
Si Business (IKAW), ay may P100.
#NEXT TOPIC
Pumunta ka sa 7eleven at pinambili mo ng LOAD.
Ang next topic ay NONCURRENT ASSETS.
Globe or SMART? (ikaw na po mamili :) )
Ano ba ang examples ng Noncurrent Assets
Nung mga oras na inabot mo yung bayad sa cashier, nawalan
ka ng P100 Cash. Pero nagkaroon naman ng P100 load ang Answer:
celllphone mo. PROPERTY, PLANT AND EQUIPMENT or PPE (or FIXED
ASSET)
Ano yung tawag sa P100 load.
-Land
*Answer: Prepaid Expense
-Building
PREPAID EXPENSE: -Machinery and Equipment
~PAID but not yet incurred. -Furniture & Fixtures
"Bayad na" pero "di pa nagagamit" -Accumulated Depreciation(Building)
-Accumulated Depreciation(Machinery & Equipment Example:
-Accumulated Depreciation(Furniture & Fixtures) Bumili ka ng Land(Lupain) sa probinsya niyo for P100.
After 10 years, ang value ay naging P500.
(Take note: walang Accumulated Depreciation-Land) Tumaas yung value.
From P100, naging P500. Tumaas, nag-APPRECIATE.
OTHERS:
-Intangible Assets*** Kaya ang LAND ay isang klase ng PPE nag-aAPPRECIATE.
-Other "noncurrent" assets ***
#2
Ang sabi natin sa previous tutorial, ang Noncurrent Asset ay #ANO naman yung mga PPE na nagde-DEPRECIATE?
Long-term.
(DEPRECIATE= means lumiliit ang value habang tumatagal)
**NONCURRENT = LONG-TERM (generally, "more than 1
year") Answer:
-Building (alam niyo na ito)
Kaya siya "Long-term" kasi -Machinery and Equipment (alam niyo na ito)
-matagal ang buhay niya and/or -Furniture & Fixtures (Ex. Table, Chair, Cabinet, etc)
-matagal mo siya pwedeng magamit or mapakinabangan
Ano naman ang "ACCUMULATED DEPRECIATION"?
#1 LAND Example na lang natin yung BUILDING ng school niyo.
Ito ang "FAVORITE asset" ko kasi ang ganda ng meaning niya. Kunwari, 10 years ang buhay niya.

L-A-N-D BUILDING:
Cost: P100
L-ove (of GOD) Life: 10 years
A-lways "Appreciate" And
N-ever P100 / 10 years = P10* (Depreciation or pagliit ng value)
D-epreciate :)
End of:
You: Yan ba talaga ang meaning ng Land? Year 1 100-10*=90 (remaining value)
Year 2 90-10*=80
Me: Sa ACCOUNTING, siyempre hindi. :) Year 3 80-10*=70
Pinapaalala lang namin sayo na wag mong kalimutan si God. Year 4 70-10*=60
Alam mo ba na alam ni God lahat ng sakripisyo at paghihirap Year 5 60-10*=50
mo? Year 6 50-10*=40
Year 7 40-10*=30
Kami ay naniniwala na lahat ng nangyayari sayo, good or bad, Year 8 30-10*=20
ay nakadisenyo. Disenyo na kailangan mong pagdaanan para Year 9 20-10*=10
"makumpleto" ka. Year 10 10-10*=0 (remaining value)

Example: I hope, nasundan niyo.


Alam mo yung "PUZZLE" di ba?
Nilalaro ko ito nung bata ako. Pinagdidikit-dikit ko yung mga Kung napansin mo, naubos yung value sa Year 10(naging
piraso para may mabuo na magandang larawan. zero).
Kaya ang tawag na sa BUILDING ay "FULLY DEPRECIATED".
Ganun din si God sayo. Yung mga piraso ay ang magaganda Or simply, wala nang value.
at di magagandang nangyayari sa buhay mo. Na kailangan
mong maranasan, para sa dulo ay maging "magandang Question:
larawan" ka. :) Nasaan yung "Accumulated Depreciation".

Answer:
#TEKA-TEKA, mabalik nga tayo sa Accounting :) :) :)
Ito yung naipon or "na-aacumulate" na pagbaba ng value
APPRECIATE? DEPRECIATE? Ano yun?
*Hindi namin ipapaliwang ang susunod(kasi ang gusto namin
ay kayo ang mag-ANALYZE)
APPRECIATE:
~Ito ba yung pag may ginawa kang mabuti sa kaibigan mo,
End of
tapos na-APPRECIATE niya?
YEAR 1 Accumulated Depreciation = 10
Ay hindi po. :)
(P100-90)
Appreciate(Appreciation) means "increase in value".
YEAR 2 Accumulated Depreciation = 20
(100-80) or (10+10)
YEAR 3 Accumulated Depreciation = 30 Business:
(100-70) or (10+10+10) A = P100 (Pera/Asset)
L = P60 (Utang sa Bank)
YEAR 4 Accumulated Depreciation = 40 OE = P40 (Utang sa Owner)
(100-60) or (10+10+10+10)
In simple words, ang Pera(P100) ng Business (ASSET):
YEAR 5 Accumulated Depreciation = 50
YEAR 6 Accumulated Depreciation = 60 ~ay galing sa utang sa Bank P60 (LIABILITY), at galing sa
YEAR 7 Accumulated Depreciation = 70 utang sa Owner P40 (OWNER'S EQUITY)
YEAR 8 Accumulated Depreciation = 80
YEAR 9 Accumulated Depreciation = 90 A = L + OE
YEAR 10 Accumulated Depreciation = 100 P100 = P60 + P40

~~~~~~~~~~~~~~~~~~~~~~~ #REMINDER
~In Form, parang IISA lang ang "Business" at "Owner"
"INTANGIBLE ASSETS" ~Pero in Substance, IKAW lang si " BUSINESS" (at "parang"
pinautang ka lang ng sarili mo)
Examples:
1. Patent (inventions) ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
2.Copyright (Books, musical composition)
3.Trademark(Logo) "DEBIT AND CREDIT"
4. Franchise (Jollibee, Mcdo, Starbucks, 7eleven, etc)
5. Others 1. Bumili ka ng Laptop at nagbayad ka ng P50000

~~~~~~~~~~~~~~~~~~~~ DEBIT: Laptop 50000


CREDIT: Cash 50000
BASIC ACCOUNTING EQUATION"
Nagkaroon ka ng Laptop, kaya DEBIT
A = L + OE
Nawalan ka naman ng Cash, kaya CREDIT
Assets = Liabilities + Owner's Equity
NOTE: (ASSET)
P100 = P60 + P40
DEBIT: pag "nagkakaroon" ka ng Asset(or bagay)
"CHARACTERS" :) CREDIT: pag "nawawalan" ka ng Asset (or bagay)
a. BUSINESS = "Ikaw"
..............................................
b. ASSET = Pag-aari "ng business"
c. LIABILITY = Utang "ng business" sa iba (Ex. Bank)
2. Bumili ka ng Laptop pero utang, P50,000
d. OWNER'S EQUITY = "Utang" "ng business" sa may-ari
(owner) DEBIT: Laptop 50000
CREDIT: Accounts Payable 50000
#CommonMistake
"Ang "Business" at ang "Owner" ng business ay IISA.. Nagkaroon ka ng Laptop, kaya DEBIT
Nagkaroon ka ng utang(Accounts Payable), kaya CREDIT
*MALI po yan. Para maintindihan natin ang Accounting
Equation (A=L+OE), ang una nating dapat isipin ay magkaiba NOTE: (LIABILITY or UTANG)
po sila. Magkaiba ang "BUSINESS" at "OWNER" CREDIT: pag "nagkakaroon" ka ng utang
DEBIT: pag "nawawalan" ka ng utang
#HALIMBAWA
BUSINESS(Ikaw) = Buy & Sell ng damit #IMPORTANT
**Please notice, baliktad ang ASSET at LIABILITY
~kung ikaw si BUSINESS, kailangan mo ng "pera" pambili ng
(ASSET)
damit.
DEBIT: pag "nagkakaroon" ka ng Asset(or bagay)
CREDIT: pag "nawawalan" ka ng Asset (or bagay)
#QUESTION
Saan manggagaling ang pera?
(LIABILITY)
CREDIT: pag "nagkakaroon" ka ng utang
Answer:
DEBIT: pag "nawawalan" ka ng utang
a. Mangungutang sa iba (Ex. Bank) P60
b. Mangungutang sa may-ari or owner P40
..............................................
P60 + P40 = P100
3. Binayaran mo na ang utang mo..
Ang pera na ngayon ni "Business" ay P100
DEBIT: Accounts Payable 50000 Equities = Capital + Revenue - Expenses -
CREDIT: Cash 50000 Drawings(Withdrawal)

Nawala na ang utang mo(Accounts Payable), kaya DEBIT. Increase in Equity


Nawalan ka din ng Cash, kaya CREDIT. Tumaas ang Equity mo dahil mas malaki ang kita(revenue) mo
kaysa sa gastos(expenses). Ang tawag dito ay "Net Income".
*Yehey, wala ka nang utang. :) Pwede rin tumaas ang Equity pag nagdadagdag ka ng
capital(pera o gamit) sa business mo.
..............................................
Decrease in Equity
4. Ginamit mo yung Laptop sa business mong Accounting Bumaba ang Equity mo dahil mas malaki ang
Tutorial. Kumita ka ng P20,000 pero "pautang". gastos(expenses) mo kaysa sa revenue or kita. Ang tawag dito
ay "Net Loss".
DEBIT Accounts Receivable 20,000
Pwede rin bumaba ang Equity pag n
CREDIT Service Income 20,000
kumukuha ka ng capital(pera o gamit) sa business mo.
Nagkaroon ka ng "pautang"(Asset siya kasi makokolekta mo Withdrawals.
siya), kaya DEBIT
Normal Balances:
Nagkaroon ka din ng kita o income, kaya CREDIT.
DEBIT (DEAL)
NOTE: (INCOME or KITA)
D-ividends (Draws)
CREDIT: pag "nagkakaroon" ka ng income.
E-xpenses
.............................................. A-sset
L-osses
5. Nakolekta mo na yung pautang mo sa tinuruan mong
estudyante P20,000. CREDIT (GIRLS)
G-ains
DEBIT Cash 20000 I-ncome
CREDIT Accounts Receivable 20000 R-evenues
L-iabilities
Nagkaroon ka ng Cash, kaya DEBIT S-tockholder's (or Owner's) Equity
Nawalan ka ng pautang(Accounts Recevable), kaya CREDIT
"ADJUSTING ENTRIES" (AE) - Part 1
...............................................
~~~~~~~~~~~~~~~~~~~~
6. Nagbayad ka ng P10,000 sa inuupahan mong lugar para sa
tutorial. NOTE: We encourage you to MEMORIZE the "Adjusting
Entries" (AE) below, so that the focus of succeeding tutorials
DEBIT Expense 10000 will be on "Computations, Understanding & Analysis" only.
CREDIT Cash 10000
#BeReady
Nagkaroon ka ng gastos(expense), kaya DEBIT #3 & #4 are confusing.
Nawalan ka din ng cash, kaya CREDIT.
~~~~~~~~~~~~~~~~~~~~
NOTE: (EXPENSE or GASTOS)
DEBIT: pag "nagkakaroon" ka ng gastusin #START

~~~~~~~~~~~~~~~~~~~~~~~~~~~ 7 Adjusting Entries

Increase in Asset ACCRUALS (1,2)


Nagkaroon ka ng asset kasi pwedeng 1. Accrued Expense
-nanggaling sa inutang mo 2. Accrued Income
-nag invest ka ng pera/gamit sa business mo
-galing sa serbisyo mo at kumita ka DEFERRALS (3,4)
3. Prepaid Expense
Decrease in Asset -"Asset" method
Nawalan ka ng asset kasi pwedeng -"Expense" method
-nagbayad ka ng utang 4. Unearned Income (or Deferred Income)
-binawi mo yung capital mo sa business (withdrawal) -"Liability" method
-may mga gastusin o expenses ka sa business mo -"Income" method
5. Depreciation b. INCOME Method
6. Doubtful Accounts
7. Merchandise Inventory, end (future topic for Merchandising Original Entry:
Business) Debit: Cash
Credit: _____ income
~~~~~~~~~~~~~~~~~~~~
AE:
ACCRUALS Debit: _____ income
Credit: Unearned _____
1. Accrued Expense (unearned portion)

AE: ................................
Debit: _____ expense
Credit: _____ payable 5. Depreciation

2. Accrued Income AE:


Debit: Depreciation expense - _____
AE: Credit: Accumulated depreciation - _____
Debit: _____ receivable
Credit: _____ income ................................

................................ 6. Doubtful Accounts

DEFERRALS AE:
Debit: Doubtful accounts expense
3. Prepaid Expense Credit: Allowance for doubtful accounts

a. ASSET Method 7. Merchandise Inventory, end (future topic)

Original Entry: ~~~~~~~~~~~~~~~~~~~~


Debit: Prepaid _____
Credit: Cash

AE: "ACCRUALS"
Debit: _____ expense
Credit: Prepaid _____ ~~~~~~~~~~~~~~~~~~~~~~~
(used portion)
ACCRUALS vs DEFERRALS
b. EXPENSE Method
-ACCRUALS ("no" cash involved)
Original Entry: -DEFERRALS ("with" cash involved)
Debit: _____ expense
Credit: Cash ~~~~~~~~~~~~~~~~~~~~~~~

AE: GUIDE:
Debit: Prepaid _____
Credit: _____ expense ~~~~~~~~~~~~~~~~~~~~~~~
(unused portion)
ACCRUALS
................................ 1. ACCRUED EXPENSE
- "Incurred", but "not yet paid"
4. Unearned Income (or Deferred Income)
Incurred
a. LIABILITY Method Not yet paid

Original Entry: Expense (Incurred) (used)


Debit: Cash Payable (Not yet paid) (no cash involved)
Credit: Unearned _____
................................
AE:
Debit: Unearned _____ EXAMPLE: Unpaid rent (Lessee = "nangungupahan")
Credit: _____ income Debit: _____ Expense (Incurred)
(earned portion) Credit: _____ Payable (Not yet paid)
Debit: Rent expense -paid, not yet incurred
Credit: Rent payable
D. Unearned income
~~~~~~~~~~~~~~~~~~~~~~~ NOTE: Point of view of GLOBE

2. ACCRUED INCOME Globe Card (cash RECEIVED IN ADVANCE by GLOBE, "upon


- "Not yet received/collected", but "already earned" sale of the loadcard") (but services are not yet
provided/served/ earned
Not yet received/collected
Already earned -received, not yet earned

Receivable: (Not yet received/collected) (no cash involved) ~~~~~~~~~~~~~~~~~~~~~~~~~~~


Income (Already earned) (earned)
#START
................................
Exercise C (PREPAID EXPENSE)
EXAMPLE: Uncollected rent (Lessor = owner or
"nagpapaupa") CASE A: Prepaid insurance (see picture)
=> ASSET Method
Debit: _____ Receivable (Not yet received/collected)
Credit: _____ Income (Already earned) Mar 1: Paid for 3-year insurance premium, P36,000.

Debit: Rent Receivable Original entry (March 1):


Credit: Rent Income Dr: Prepaid insurance 36000
Cr: Cash 36000
GUIDE:
Adjusting entry (December 31):
ACCRUALS: Dr: Insurance expense 10000
A. Accrued expense (incurred, not yet paid) Cr: Prepaid insurance 10000
B. Accrued income (earned, not yet paid) (used portion = 10 months)
(10 months = Mar 1 to Dec 31)
DEFERRALS:
C. Prepaid expense (not yet incurred, PAID IN ADVANCE) *36,000/3years=12,000 per year
D. Unearned income (not yet earned, 12,000 per year/12months=1,000/month
RECEIVED/COLLECTED IN ADVANCE) P1,000/month x 10months(Mar 1-Dec 31)=P10,000.

~~~~~~~~~~~~~~~~~~~~~~~~~~~ *Shortcut: 36,000 x 10/36 = P10,000

EXAMPLE: (MERALCO/ELECTRICITY BILL) ~~~~~~~~~~~~~~~~~~~~~~~~~~~

A. Accrued expense BALANCES:


(NOTE: Point of view of customer/consumer)
Prepaid Insurance:
=> Meralco Bill (already consumed/used/INCURRED 36,000(original entry) - 10,000(adjusting entry) = P26,000
electricity, but not yet paid)
Insurance expense:
B. Accrued income 10,000 (adjusting entry)
(NOTE: Point of view of Meralco)
~~~~~~~~~~~~~~~~~~~~~~~~~~
=>Meralco Bill (services are already
provided/served/EARNED, but cash is not yet *SIMPLIFIED (Let's go back to GLOBE loadcard)
received/collected) Assuming your load balance today(March 1) is 36,000.

....................................................... As of March 1:
Prepaid expense: 36,000 (load balance)
EXAMPLE: (GLOBE Prepaid Loadcard) Expense: 0

C. Prepaid expense From March 1 to Dec 31


NOTE: Point of view of customer/consumer) You use P10,000 for texting/calling/internet.

=>Globe Loadcard (PAID IN ADVANCE " by the customer, Adjusted balances


"upon purchase of the loadcard") (but not yet incurred/used for Prepaid expense: 36,000-10,000
texting/calling/internet)
=26,000 (load balance) NOTE:
Expense: 10,000 (used/consumed/incurred) Prepaid Insurance = 26000 (36000-10000)
Insurance expense = 10000
Adjustments on December 31
*Reduce Prepaid Expense(load) by P10,000 ..............................................
*Record expense of P10,000
EXPENSE METHOD (CASE B)
Debit: Expense 10000 Original Entry:
Credit: Prepaid 10000 Dr: Insurance expense 36000
Cr: Cash 360""
"ADJUSTING ENTRIES"
Adjusting Entry:
~~~~~~~~~~~~~~~~~~~~~~~ Dr: Prepaid Insurance 26000
Cr: Insurance expense 26000
Review of Proforma Entries
1. Accrued expense *Amount = "unused" portion
Dr: _____ Expense Mar 1 to Dec 31 = 10months (used portion)
Cr: _____ Payable (or Accrued _____ expense) 36 months - 10 months = 26 months (unused portion)
36,000 x 26/36 = P26,000
2. Accrued income
Dr: _____ Receivable (or Accrued _____ income) NOTE:
Cr: _____ Income Prepaid Insurance = 26000
Insurance expense = 10000 (36000-26000)
3. Prepaid expense
ASSET METHOD *Whether ASSET method or EXPENSE method, the balance of
Original Entry: Prepaid Insurance will be the same (P26,000)
Dr: Prepaid _____ (or Supplies) *Whether ASSET method or EXPENSE method, the balance of
Cr: Cash Insurance expense will be the same (P10,000)

Adjusting Entry: "ADJUSTING ENTRIES" (Unearned Income)


Dr: _____ expense
Cr: Prepaid _____ (or Supplies) ~~~~~~~~~~~~~~~~~~~~~~~

*Amount = "used" portion Review of Proforma Entries


1. Accrued expense
EXPENSE METHOD Dr: _____ Expense
Original Entry: Cr: _____ Payable (or Accrued _____ expense)
Dr: _____ expense (or Supplies expense)
Cr: Cash 2. Accrued income
Dr: _____ Receivable (or Accrued _____ income)
Adjusting Entry: Cr: _____ Income
Dr: Prepaid _____ (or Supplies)
Cr: _____ expense 3. Prepaid expense
ASSET METHOD
*Amount = "unused" portion Original Entry:
Dr: Prepaid _____ (or Supplies)
~~~~~~~~~~~~~~~~~~~~~~~~~~~~ Cr: Cash

Exercise C (March 1) =>(see pictures) Adjusting Entry:


Dr: _____ expense
ASSET METHOD (CASE A)
Cr: Prepaid _____ (or Supplies)
Original Entry:
Dr: Prepaid "Insurance" 36000 *Amount = "used" portion
Cr: Cash 36000
EXPENSE METHOD
Adjusting Entry: Original Entry:
Dr: "Insurance" expense 10000 Dr: _____ expense (or Supplies expense)
Cr: Prepaid "Insurance" 10000 Cr: Cash

*Amount = "used" portion Adjusting Entry:


Mar 1 to Dec 31 = 10months (used portion) Dr: Prepaid _____ (or Supplies)
Term = 3 years (or 36 months) Cr: _____ expense
36,000 x 10/36 = P10,000
*Amount = "unused" portion NOTE:
Unearned Advertising = 12000
4. Unearned Income (or Deferred Income) Advertising Income = 24000 (36000-12000)
LIABILITY METHOD
Original Entry: *Whether LIABILITY method or INCOME method, the balance
Dr: Cash of Unearned Advertising will be the same (P12,000)
Cr: Unearned _____ *Whether LIABILITY method or INCOME method, the balance
of Advertising Income will be the same (P24,000)
Adjusting Entry:
Dr: Unearned _____ "ACCOUNT TITLE"
Cr: _____ Income
~Accounts Receivable? Accounts Payable?...ANO YUN?
*Amount = "used/earned" portion
Yan ang tanong ko dati nung nag "Basic Accounting" ako.
INCOME METHOD
Original Entry: Tapos samahan mo pa ng
Dr: Cash ~"Prepaid Expense" (Asset ba, or Expense)
Cr: _____ Income ~"Unearned Income" (Liability ba, or Income)
~"Accrued Expense" (Liability ba, or Expense)
Adjusting Entry: ~"Accrued Income" (Asset ba, or Income)
Dr: _____ Income
Cr: Unearned _____ #NAKAKALITO
Dahil mababasa mo "EXPENSE", pero hindi naman pala
*Amount = "unused/unearned" portion expense.
Dahil mababasa mo "INCOME", pero hindi naman pala income
~~~~~~~~~~~~~~~~~~~~~~~~~~~~
#NARITO
Exercise D (May 1) =>(see pictures) Narito na po ang mga examples ng
~ASSETS, LIABILITIES, OWNER'S EQUITY
LIABILITY METHOD (CASE A)
~INCOME, and EXPENSES
Original Entry:
Dr: Cash 36000 Reminder:
Cr: Unearned "Advertising" 36000 *** means "wag muna i-focus" :)

Adjusting Entry: #ASSETS


Dr: Unearned "Advertising" 24000 -Cash
Cr: "Advertising" Income 24000 -Trading Securities (Marketable Securities) (Fair value through
Profit or Loss) (Short-term Investment)
*Amount = "used/earned" portion
-Accounts Receivable
May 1 to Dec 31 = 8months (earned portion)
-Allowance for Doubtful Accounts (Allowance for Bad debts)
Term = 1 year (or 12 months)
-Notes Receivable
36,000 x 8/12 = P24,000
-Merchandise Inventory***
-Accrued "_____" Income
NOTE:
-Prepaid Expenses
Unearned Advertising = 12000 (36000-24000)
a. (Supplies/Office Supplies/Store Supplies)
Advertising Income = 24000
b. (Prepaid Rent, Prepaid Salaries, etc.)-ang keyword ay
.............................................. "PREPAID"
-Advances "TO" Employess (Advances to Suppliers***)
INCOME METHOD (CASE B) -Other "current" assets***
Original Entry:
Dr: Cash 36000 -Land
Cr: "Advertising" Income 36000 -Building
-Machinery and Equipment
Adjusting Entry: -Furniture & Fixtures
Dr: "Advertising" Income 12000 -Accumulated Depreciation
Cr: Unearned "Advertising" 12000 -Intangible Assets***
-Other "noncurrent" assets ***
*Amount = "unused/unearned" portion
May 1 to Dec 31 = 8months (earned portion) #LIABILITIES
12 months - 8 months = 4 months (unearned portion) -Accounts Payable
36,000 x 4/12 = P12,000 -Notes Payable (short-term)
-Accrued "_______" Expense
-"______" Payable ASSETS:
-Unearned "_____" Income -Cash
-Advances "FROM" Customers -Trading Securities (Marketable Securities) (Fair value through
-Other "current" liabilities Profit or Loss) (Short-term Investment)
-Accounts Receivable
-Notes Payable (long-term) -Allowance for Doubtful Accounts (Allowance for Bad debts)
-Bonds Payable -Notes Receivable
-Mortgage Payable -Merchandise Inventory***
-Other "noncurrent" liabilities -Accrued "_____" Income
-Prepaid Expenses
#OWNER'S EQUITY a. (Supplies/Office Supplies/Store Supplies)
-"Owner's" Capital (Owner's Drawing) b. (Prepaid Rent, Prepaid Salaries, etc.)-ang keyword ay
-"Partner's" Capital*** (Partner's Drawing)*** "PREPAID"
-Shareholder's Equity*** -Advances "TO" Employess (Advances to Suppliers***)
-Other "current" assets***
#INCOME (and Gains)
-Service Income -Land
-Building
-Sales***
-Machinery and Equipment
-Sales Returns and Allowances***
-Furniture & Fixtures
-Sales Discount***
-Accumulated Depreciation
Other Income -Intangible Assets***
a. -Gain on Sale -Other "noncurrent" assets ***
b. -"_____" Income (except: unearned income, and accrued
#GAME (START na tayo)
income)
Ang ASSET ay nahahati sa dalawang classifications.
#EXPENSES (& Losses) 1. "Current" Assets
2. "Noncurrent" Assets
-"_____" Expense (except: prepaid expense, and accrued
expense) CURRENT = SHORT-TERM (generally, "1 year or less").
-Loss on Sale Again, "1 year or less". :)
-Discount Lost***
**NONCURRENT = LONG-TERM (generally, "more than 1
Cost of Goods Sold*** year")
-Beginning Inventory*** Again, "more than 1 year" :)
-Purchases***
-Purchase Returns and Allowances*** *Siyempre, pag sinabing "general", may exception. Ibig
-Purchase Discount*** sabihin, pwedeng hindi masunod yung guide na "1 YEARS" (sa
-Freight In*** future natin pag-uusapan)
-Ending Inventory***
~Kung napansin mo yung "s". Congrats! Best in Spelling" ka :)
#AngDAMI :)
Ang "DAMI" ba??? at hindi pa maintindihan? #ANO BA ANG MGA HALIMBAWA NG "CURRENT ASSETS"?

Mas maiintindihan mo yan pag "kinabisado" mo muna lahat ng SAGOT:


iyan bago namin ipaliwanag. :)
Current Assets:
-Cash
"ASSETS"
-Trading Securities (Marketable Securities) (Fair value through
Hi!.. Na-MISS ko kayo. Profit or Loss) (Short-term Investment)
Tayo na't mag-aral muli ng ACCOUNTING. :) -Accounts Receivable
-Allowance for Doubtful Accounts (Allowance for Bad debts)
#SANA -Notes Receivable
Sana ay nabasa niyo muna yung AccountingTutorial (01) at -Merchandise Inventory***
(02) -Accrued "_____" Income
-Prepaid Expenses
#REVIEW a. (Supplies/Office Supplies/Store Supplies)
Assets = Liabilities + Owner's Equity b. (Prepaid Rent, Prepaid Salaries, etc.)-ang keyword ay
"PREPAID"
BUSINESS = "IKAW" -Advances "TO" Employess (Advances to Suppliers***)
-Other "current" assets***
A-L+OE #SANA
100=60+40 Sana ay nabasa niyo muna yung AccountingTutorial (01), (02)
at (03)
Si Business(Ikaw) ay may P100 ngayon
(P60, utang sa bank) #REVIEW
(P40, utang sa owner)
~sana naaalala niyo pa.:: ASSETS:
-Cash
Ano ang tawag sa P100? -Trading Securities (Marketable Securities) (Fair value through
Yan po ay CASH. Profit or Loss) (Short-term Investment)
CASH = P100 -Accounts Receivable
*"CURRENT asset" siya, kasi pwede mo gastusin "anytime" (1 -Allowance for Doubtful Accounts (Allowance for Bad debts)
year or less) -Notes Receivable
(sana may CASH din dyan ngayon sa bulsa/wallet mo) :) -Merchandise Inventory***
-Accrued "_____" Income
Scenario 1: -Prepaid Expenses
Ngayon, si Business(IKAW) ay nilapitan ng isang kaibigan. Ang a. (Supplies/Office Supplies/Store Supplies)
sabi niya sayo ay.. "Business, pwedeng "PAUTANG"? b. (Prepaid Rent, Prepaid Salaries, etc.)-ang keyword ay
"PREPAID"
Dahil may P100 Cash ka, ang sabi mo ay " Sige, pauutangin -Advances "TO" Employess (Advances to Suppliers***)
kita. -Other "current" assets***

At yun ang nangyari. Inabot mo ang P100 sa kanya at walang -Land


natira sa iyo. -Building
-Machinery and Equipment
Tanong: Magkano na ang asset mo? Zero o P100 pa rin?
-Furniture & Fixtures
Sagot: P100 pa rin. -Accumulated Depreciation
Oo, nawala yung P100 kaya parang walang asset. -Intangible Assets***
Pero nagkaroon ka naman ng "PAUTANG". Ang pautang ay -Other "noncurrent" assets ***
hindi nahahawakan (hindi tangible) pero asset mo pa rin siya.
#GAME (START na tayo)
Ang tawag sa PAUTANG na yan ay "ACCOUNTS
RECEIVABLE". Receivable kasi may "mare-receive" kang Sa puntong ito, dapat ay naunawaan" na natin ang
bayad o pera. -CASH
#Realization: Kahit pala wala sayo or hindi mo hawak, pwede -ACCOUNTS RECEIVABLE
pa rin maging ASSET. -ALLOWANCE FOR DOUBTFUL ACCOUNTS
In Accounting, YES!!!.. (kung hindi pa naunawaan, muli lang balikan ang nakaraan :) )

May experience ka dati na laging "kalahati" lang kung #SCENARIO 1


magbayad itong kaibigan mo (Mabait ka lang talaga kaya lagi Kaibigan na nangutang (tapos na tayo dito nung Tutorial # 03 )
mo siyang pinapautang). ~pero ang "line of busines" mo dapat dito ay
TAKE NOTE: Hindi pa siya nagbabayad sa inutang niyang
P100. Pero iaanticipate mo na yung hindi niya mababayaran. "pagpapautang". <3
Ang tawag dito ay "Allowance for Doubtful Accounts".
ADDITIONAL INFO: (don't focus masyado)
Iaanticipate or ire-record mo nang "Allowance for Doubtful
*Paano kung ang "line of business" mo ay "Sale of SERVICES"
Accounts" yung kalahati na P50 (P100/2=P50)
(Ex. Salon) or "Sale of GOODS" (Ex. Damit)?
*Simple Math lang ang accounting di ba? pa divide-divide ka
-Pag SERVICES, ang binigay mo ay "SERBISYO"
lang. :)
(hindi pera)
SUMMARY:
-Pag GOODS, ang binigay mo ay "PANINDA(Damit)"
Pautang (Accounts Receivable-AR) P100
(hindi pera)
Anticipated na di babayaran (Allowance for Doubtful Accounts-
ADA) P50 Magulo pa di ba? Darating tayo dyan. Wag lang masyadong
P100(AR)-P50(ADA) excited. :)
= P50 (ito na lang ang sa tingin mong makokolekta mo sa
future). In Accouting, "NRV or Net Realizable Value" ang tawag Sa ngayon, paki tandaan mo muna ang bagong terms na
dito. nabasa mo.
-Sale of SERVICES
"ASSETS" -continuation -Sale of GOODS
#SCENARIO 2 #Scenario 4
Si Business (IKAW), ay may P100. Si Business (IKAW), ay may P100.
Unlike sa Scenario 1, hindi mo pinautang yung P100 sa Unlike sa Scenario 1, 2 and 3, hindi mo pinautang yung P100
kaibigan mo. sa kaibigan mo, hindi mo rin ininvest, at hindi mo rin pinambili
ng damit.
Sa halip, ang P100 ay ININVEST mo. ( Ingat sa SCAM :) )
Pag sinabing ininvest, "PAUTANG" din yan. Ipapahawak mo Sa halip, pumunta ka sa 7eleven at pinambili mo ng LOAD.
muna sa iba yung pera mo para kumita or madagdagan (Take Globe or SMART? (ikaw na po mamili :) )
note: pwede rin na mabawasan)
Pwede ka mag-invest(or magpautang) sa dalawang ito. Nung mga oras na inabot mo yung bayad sa cute na cashier,
~DEBT Securities (dito, pwede madagdagan ang pera mo ng nawalan ka ng P100 Cash. Pero nagkaroon naman ng P100
tinatawag na "INTEREST") load ang celllphone mo.
~EQUITY Securities (dito, pwede madagdagan ang pera mo
ng tinatawag na "DIVIDEND") Ano yung tawag sa P100 load.
*Answer: Prepaid Expense
Example:
Nag-invest ka ng P100. So nawalan ka ng P100. PREPAID EXPENSE:
~PAID but not yet incurred.
After ng ilang buwan, binawi mo na yung pera at naging P120. "Bayad na" pero "di pa nagagamit"

Paki compute. Magkano po ang sobra? Paano kung nagtext ako at nabawasan ng Piso?
P120-P100=P20 (Hula ko yung iba, nag CALCU pa. Ok. Para ~Ang PREPAID EXPENSE mo ay P99 na lang (P100-P1)
SURE. :) ) In short, ang PREPAID EXPENSE ang yung amount ng load
na "HINDI MO PA NAGAGAMIT".
Ang tawag po sa sobrang P20 ay INTEREST(pag debt
security) or DIVIDEND(pag equity security) **PAANO KUNG LOAD CARD yung binili mo at hindi mo pa
*Simple Illustration lang po ito :) naloload sa cellphone?
(Wag muna sa komplikado) Answer: Prepaid expense pa rin yung LOAD CARD mo.
Kaya nga ang tawag din ay PREPAID LOAD CARD. :)
NOTE:
*Ito yung tinatawag na "TRADING SECURITIES" (DEBT ~Ganun din pag bumili ka ng ballpen, pencil, or yung mga
Securities & EQUITY Securities) nabibiling "SUPPLIES" sa NATIONAL BOOKSTORE, "Prepaid
Expense" din ang tawag dun.
Kailan siya naging TRADING SECURITIES?
Yun ay nung time na nag-invest ka. #Scenario 5
Nag-invest ka at nawalan ka ng pera. Pero naging PAUTANG. P100, pinautang sa empleyado
Yung pautang ang TRADING SECURITIES. Ang tawag: ADVANCES TO EMPLOYEES

Sounds familiar? YES! #Scenario 6


Para siyang "ACCOUNTS RECEIVABLES" na pautang. P100, pinautang pero may kasulatan (PROMISSORY NOTE)-
at kumikita ng "INTEREST.
Ang pinagkaiba lang po nila, ang TRADING SECURITES ay Ang tawag: Notes Receivable
kumikita ng INTEREST / DIVIDENDS.
#SPECIAL SCENARIO
#Scenario 3 Nagpapaupa(Rent) ka ng kwarto(Ikaw yung may-ari).
Si Business (IKAW), ay may P100. Ang paupa mo ay P100 per month.
Unlike sa Scenario 1 & 2, hindi mo pinautang yung P100 sa
kaibigan mo, at hindi mo rin ininvest. Walang ka pang natatanggap na pera kahit magkano(Advance
man or Deposit)
Sa halip, pinambili mo ng "DAMIT (assuming ang business mo
ay "BUY & SELL"), para ibenta sa mas mahal na halaga. Lumipas ang isang buwan. May kinita ka nang P100 para sa
isang buwang upa.
BUY: Damit P100 Pero hindi mo pa natatanggap yung pera.
SELL: P120 Kumita ka na, Pero hindi pa natatanggap yung pera.

P120-P100=P20. Ang tawag: ACCRUED INCOME


Kumita ka ng P20. (Earned but not yet received)
Kumita na, hindi pa natatanggap yung pera
Ano ang tawag dun sa DAMIT na binibenta mo?
*Answer: MERCHANDISE INVENTORY *Ito po ay isang uri din ng RECEIVABLE (Parang ACCOUNTS
RECEIVABLE) dahil may "mare-receive" kang pera.
"NAKAKAPAGOD PALA ITO" hehe L-ove (of GOD)
A-lways "Appreciate" And
"ASSETS" (continuation) N-ever
D-epreciate :)
CURRENT ASSETS:
-Cash
You: Yan ba talaga ang meaning ng Land?
-Trading Securities (Marketable Securities) (Fair value through
Profit or Loss) (Short-term Investment)
Me: Sa ACCOUNTING, siyempre hindi. :)
-Accounts Receivable
Pinapaalala lang namin sayo na wag mong kalimutan si God.
-Allowance for Doubtful Accounts (Allowance for Bad debts)
Alam mo ba na alam ni God lahat ng sakripisyo at paghihirap
-Notes Receivable
mo?
-Merchandise Inventory***
-Accrued "_____" Income Kami ay naniniwala na lahat ng nangyayari sayo, good or bad,
-Prepaid Expenses ay nakadisenyo. Disenyo na kailangan mong pagdaanan para
a. (Supplies/Office Supplies/Store Supplies) "makumpleto" ka.
b. (Prepaid Rent, Prepaid Salaries, etc.)-ang keyword ay
"PREPAID" Example:
-Advances "TO" Employess (Advances to Suppliers***) Alam mo yung "PUZZLE" di ba?
-Other "current" assets*** Nilalaro ko ito nung bata ako. Pinagdidikit-dikit ko yung mga
piraso para may mabuo na magandang larawan.
#DONE
Natapos na po natin ang Current Assets. Yehey. :) Ganun din si God sayo. Yung mga piraso ay ang magaganda
at di magagandang nangyayari sa buhay mo. Na kailangan
#NEXT TOPIC mong maranasan, para sa dulo ay maging "magandang
Ang next topic ay NONCURRENT ASSETS. larawan" ka. :)
Ano ba ang examples ng Noncurrent Assets
#TEKA-TEKA, mabalik nga tayo sa Accounting :) :) :)
Answer:
PROPERTY, PLANT AND EQUIPMENT or PPE (or FIXED APPRECIATE? DEPRECIATE? Ano yun?
ASSET)
APPRECIATE:
-Land
~Ito ba yung pag may ginawa kang mabuti sa kaibigan mo,
-Building
tapos na-APPRECIATE niya?
-Machinery and Equipment
Ay hindi po. :)
-Furniture & Fixtures
-Accumulated Depreciation(Building) Appreciate(Appreciation) means "increase in value".
-Accumulated Depreciation(Machinery & Equipment
-Accumulated Depreciation(Furniture & Fixtures) Example:
Bumili ka ng Land(Lupain) sa probinsya niyo for P100.
(Take note: walang Accumulated Depreciation-Land) After 10 years, ang value ay naging P500.
Tumaas yung value.
OTHERS:
From P100, naging P500. Tumaas, nag-APPRECIATE.
-Intangible Assets***
-Other "noncurrent" assets *** Kaya ang LAND ay isang klase ng PPE nag-aAPPRECIATE.
Ang sabi natin sa previous tutorial, ang Noncurrent Asset ay #2
Long-term. #ANO naman yung mga PPE na nagde-DEPRECIATE?
Recall? (DEPRECIATE= means lumiliit ang value habang tumatagal)
**NONCURRENT = LONG-TERM (generally, "more than 1
year") Answer:
-Building (alam niyo na ito)
Kaya siya "Long-term" kasi -Machinery and Equipment (alam niyo na ito)
-matagal ang buhay niya and/or -Furniture & Fixtures (Ex. Table, Chair, Cabinet, etc)
-matagal mo siya pwedeng magamit or mapakinabangan
Ano naman ang "ACCUMULATED DEPRECIATION"?
#1 LAND Example na lang natin yung BUILDING ng school niyo.
Ito ang "FAVORITE asset" ko kasi ang ganda ng meaning niya. Kunwari, 10 years ang buhay niya.
L-A-N-D BUILDING:
Cost: P100
Life: 10 years
P100 / 10 years = P10* (Depreciation or pagliit ng value) Nang matapos ang haircut, nakakolekta ang "Business" mo ng
P100.
End of:
Year 1 100-10*=90 (remaining value) QUESTION:
Year 2 90-10*=80 Ano ang tawag sa P100?
Year 3 80-10*=70
Year 4 70-10*=60 ANSWER:
Year 5 60-10*=50 *INCOME = P100 (INCOME = Earnings or Kita')
Year 6 50-10*=40
Year 7 40-10*=30 B. EXPENSE = Cost or Gastos
Year 8 30-10*=20
STORY 2:
Year 9 20-10*=10
Dahil nagtatrabaho si "Alma" sa Business mo, kailangan mo
Year 10 10-10*=0 (remaining value)
siyang swelduhan. Ang "binayad" mo kay Alma ay P70.
I hope, nasundan niyo.
QUESTION:
Kung napansin mo, naubos yung value sa Year 10(naging Ano ang tawag sa P70?
zero).
ANSWER:
Kaya ang tawag na sa BUILDING ay "FULLY DEPRECIATED".
*EXPENSE = P70 (EXPENSE = Cost or Gastos)
Or simply, wala nang value.
#SUMMARY
Question:
INCOME: P100
Nasaan yung "Accumulated Depreciation".
(EXPENSE): P70
Answer:
= NET PROFIT: P30 ( New term ito. Pakitandaan :) )
Ito yung naipon or "na-aacumulate" na pagbaba ng value
#BREAK
*Hindi namin ipapaliwang ang susunod(kasi ang gusto namin
Pahinga konti. Tapos na natin ang INCOME and EXPENSE.
ay kayo ang mag-ANALYZE)
YEHEY :)
End of
~~~~~~~~~~~~~~~~~~~~~~~~~~~~
YEAR 1 Accumulated Depreciation =P10
#START
(P100-90)
II. LIABILITY
YEAR 2 Accumulated Depreciation =P20
(100-80) or (10+10) Classification of LIABILITIES
YEAR 3 Accumulated Depreciation =P30 ~Current Liabilities
(100-70) or (10+10+10) babayaran within 1 year (1 year o less)
YEAR 4 Accumulated Depreciation =P40 ~Noncurrent Liabilities
(100-60) or (10+10+10+10) babayaran lampas 1 year (more than 1 year)
YEAR 5 Accumulated Depreciation =P50 Ganito po mga "ENGLISH" sa ACCOUNTING:
YEAR 6 Accumulated Depreciation =P60
YEAR 7 Accumulated Depreciation =P70 (1 year o less) :)
YEAR 8 Accumulated Depreciation =P80 (more than 1 year) :)
YEAR 9 Accumulated Depreciation =P90
--------------------------
YEAR 10 Accumulated Depreciation =P100
#CurrentLiabilities
(I.) "INCOME vs EXPENSE"....... (II.) "LIABILITY"
A. Accounts Payable
I. INCOME vs EXPENSE
ACCOUNTS = Utang
PAYABLE = Babayaran pa (hindi pa bayad)
A. INCOME = Earnings or Kita'
ACCOUNTS PAYABLE = "Utang" na "Babayaran pa"
STORY 1:
Ang Business mo ay "Salon". May isa kang empleyado, si
QUESTION:
"Alma".
Anong ASSETS ang pwedeng bilhin, pero utang pa(Accounts
Payable)?
Nang mag-open ang Salon mo, may pumasok na isang
customer at nagpa-haircut.
ANSWER: Pareho sa (B.), pero BABAYARAN NG "HIGIT" SA ISANG
-Merchandise Inventory TAON (LONG-term)
-Supplies
F. Bonds Payable (LONG-term)
-Land (Future Topic)
-Building (pero TANDAAN na NONCURRENT LIAB siya) :)
-Machinery and Equipment
G. Mortgage Payable
B. Notes Payable (SHORT-term) MORTGAGE: Utang na may SANLA
NOTES = Utang "na may kasulatan" (Promissory Note) PAYABLE: Babayaran pa (hindi pa bayad)
PAYABLE = Babayaran pa (hindi pa bayad)
STORY:
TANDAAN: Bumili ka ng LAND. Utang(Mortgage Payable)
Pag binayaran ang utang na NOTES PAYABLE, may "dagdag- *nakaSANLA ang Land
bayad" na "INTEREST" (Future Topic)
Pag hindi ka nakabayad ng Utang(Mortgage Payable),
QUESTION: ibebenta yung LAND para magkapera. At yung pera ang
Anong ASSETS ang pwedeng bilhin(or pwedeng gagamitin para mabayaran yung Utang mo(Mortgage
matanggap),.....pero utang(Notes Payable)? Payable).

ANSWER: "OWNER's EQUITY" or "OWNER's CAPITAL"


-CASH******************
-Merchandise Inventory #REMINDER
-Supplies Magkaiba ang "BUSINESS", at "OWNER"
(be careful sa "point of view")
-Land
-Building ~~~~~~~~~~~~~~~~~~~~~
-Machinery and Equipment
#START
C. Accrued "_______" Expense A = L + OE
ACCRUED: Hindi pa Bayad 100 = 60 + 40
EXPENSE: Gastusin
Si Business(IKAW) ay may P100 Cash
ACCRUED EXPENSE = "Hindi pa bayad" na "Gastusin"
P60, utang/nanggaling sa iba(Ex. Bank).
EXAMPLE: P40, utang/nanggaling sa "owner"
-MERALCO Bill
(Hindi ka pa bayad... sa gastusin(electricity) na nagamit or na- (sana naaalala mo pa yan from previous tutorials) :)
consume mo)
~~~~~~~~~~~~~~~~~~~~~
D. Unearned "_____" Income (Advances from Customers)
I.
UNEARNED INCOME Income: P100
~nakatanggap ng CASH (Pera) (Expense): P70
~pero hind pa INCOME (Kita')
*Net Profit P30 (P100-P70) -kumita ang business :)
STORY(new)
Pumasok si customer sa Salon mo para "MAGBAYAD" ng KAPAG "KUMIKITA" ANG BUSINESS, TATAAS ang "OE"
P100.
(Pero "BUKAS" pa siya magpapagupit) (sana naaalala mo pa yan from previous tutorials) :)

BUSINESS (Ikaw) #ASSUME:


~nakatanggap ng CASH (Pera) Income: P70
~pero hind pa INCOME (Kasi "BUKAS" pa magpapagupit)') (Expense): P100

TANDAAN: *Net Loss (P30) (P70-P100) -nalugi ang business :(


May pagkakaiba ang UNEARNED INCOME at ADVANCES
FROM CUSTOMERS (Future Topic) PAG "NALULUGI" ANG BUSINESS, BABABA ang "OE"

#NoncurrentLiabilities ~~~~~~~~~~~~~~~~~~~~~

E. Notes Payable (LONG-term)


II. Mag-focus sa "=" sign
#ASSUME (Independent)
Nakatanggap ulit si Business ng P40 (Cash) galing sa "owner" Pag nasa LEFT ng "=" , DEBIT
Pag nasa RIGHT ng "=" , CREDIT
ACCOUNTING TERM:
~"Additional Investment" (by the owner) So,
A(Debit) = L(Credit) + OE(Credit)
Cash: nadagdagan ng P10
Owner's Equity: nadagdagan ng P10 TANDAAN
ASSET: Debit
Old: LIABILITY: Credit
A = L + OE OWNER's EQUITY: Credit :)
100 = 60 + 40
*INCOME: Credit :)
New: ("Analyze" and "Compute" on your own) *EXPENSE: Debit :(
A = L + OE
P110 = 60 + 50 *OWNER's DRAWING: Debit :(

NOTE: "Additional Investment" increases Owner's Equity. See Tutorial (03d)

~~~~~~~~~~~~~~~~~~~~~ *"INCOME & OE" are friends (kaya pareho silang CREDIT)
:)
III. *"EXPENSE & OE" are enemies (kaya magkaiba) :(
#ASSUME (Independent)
Binalik ni Business yung P10 Cash kay "owner" OWNER's DRAWING & OE are enemies (kaya magkaiba) :(

ACCOUNTING TERM: ~~~~~~~~~~~~~~~~~~~~~~~~~


~"Owner's drawing" (withdrawa by the owner)
Pag alam mo na ang dapat "TANDAAN" sa taas, saka mo po
Old: basahin and "additiona notes".
A = L + OE
100 = 60 + 40 #INCREASE or nadagdagan

New: ("Analyze" and "Compute" on your own) Additional NOTES:


A = L + OE INCREASE in ASSET = DEBIT
P90 = 60 + 30 INCREASE in LIAB = CREDIT
INCREASE in OE = CREDIT
NOTE: "Owner's Drawing" decreases Owner's Equity. INCREASE in INCOME = CREDIT (friend of OE)
INCREASE in EXPENSE = DEBIT (enemy of OE)
~~~~~~~~~~~~~~~~~~~~~ INCREASE in OWNER'S DRAWING = DEBIT (enemy of OE)

#SUMMARY Keyword: INCREASE


INCOME "increases" OE
EXPENSE "decreases" OE ~~~~~~~~~~~~~~~~~~~~~~~~
ADDITIONAL INVESTMENT "increases" OE
OWNER's DRAWING "decreases" OE #DECREASE or nabawasan

#STRATEGY Pag "DECREASE" naman, opposite lang.


(WAG mo nang kabisaduhin ito. BALIKTARIN lang po ang mga
~Know(memorize) the "TERMS/TERMINOLOGIES" sagot mo kanina)
~Understand later (ibibigay ang "explanation" after)
DECREASE in ASSET = CREDIT
~~~~~~~~~~~~~~~~~~~~~~~~~~ DECREASE in LIAB = DEBIT
DECREASE in OE = DEBIT
#START DEREASE in INCOME = DEBIT(friend ni OE)
DECREASE in EXPENSE = CREDIT (enemy ni OE)
NOTES for: DECREASE in OWNER'S DRAWING = CREDIT (enemy of
1. "Rules on DEBIT and CREDIT" OE)
ASSETS = LIABLITIES + OWNER's EQUITY Keyword: DECREASE
A = L + OE
~~~~~~~~~~~~~~~~~~~~~~~~~~
#NORMALbalance ng Asset, Liabilities, OE, Income, Expense
#SUMMARY https://m.facebook.com/TheAccountant.Tutorial/photos/a.7112
Kung nalilito, paki TANDAAN lang muna ito: 58305656378.1073741825.264268673688679/127207840624
ASSET: Debit 1029/?type=3&source=48
LIAB: Credit
OE: Credit ---------------------------------------------------------------

SUMMARY:
Income: Credit (friend of OE) :)
REAL accounts (or PERMANENT accounts)
Expense: Debit (enemy) :( -Assets
Owner's Drawing: Debit (enemy) :( -Liabilities
-Owners Equity
~~~~~~~~~~~~~~~~~~~~~~~~~~~~
NOMINAL accounts (or TEMPORARY accounts)
Definitions, Classifications and Examples of Accounts -Income/revenues
-Expenses and
I.
-Owners Drawing
-REAL accounts (or PERMANENT accounts)
---------------------------------------------------------------
The real accounts are
Assets II.
Liabilities and
Owners Equity. The REVENUE Accounts

Real accounts are reported in the Statement of Financial Revenue represents the earnings of the business from sales of
Position(or "BALANCE SHEET"). They are not "closed" at the goods or service rendered.
end of accounting period.
Revenue accounts have normal CREDIT balance. Below are
"Balance Sheet" (future topic) some common revenue accounts.
"Closing Entries" (future topic)
Sales an account used to summarize sale of goods of a
Accounting Tutorial 02 trade or merchandising business. This includes cash sales and
(ACCOUNT TITLE) sales on account.
https://m.facebook.com/TheAccountant.Tutorial/photos/a.7112
58305656378.1073741825.264268673688679/127207840624 Service Income the earning derived from service rendered
1029/?type=3&source=48 by a servicing business to its customers. This includes cash
and on account service.
---------------------------------------------------------------
Professional Fees the earning derived from services
-NOMINAL accounts (or TEMPORARY accounts) rendered by a professional or professional servicing firm which
could be in cash or in collectibles to its clients.
The nominal accounts are
Income/revenues
Interest Income the earning representing the time value of
Expenses and
money derived from promissory notes received by the
business, whether in cash or collectibles in future.
Owners Drawing.

Nominal Accounts are those that comprise the elements of the Rent Income the income earned from allowing others to
Statement of Comprehensive Income(or INCOME use property or facility of the business.
STATEMENT + OCI) the revenue and expenses accounts.
Gain on Sales of other Assets the income derived from the
These accounts are called temporary because they are sales of assets used in the business operation. There is a gain
"closed" or put to zero balance at the end of the accounting on sale if the proceeds exceed the book value or cost of
period. Owners Drawing (not an income statement account) is disposed asset. Examples are gain on equipment, gain on sale
also closed or put to zero balance. investments, gain on sale of land, etc.

"Income Statement" (future topic) Others


"OCI" -Other Comprehensive Income (disregard, higher
---------------------------------------------------------------
accounting topic)
"Closing Entries" (future topic)
The EXPENSES Account
Accounting Tutorial 02
(ACCOUNT TITLE)
Expenses are cost incurred in conducting the business ---------------------------------------------------------------
activities. Expense accounts have normal DEBIT balances.
Some common expense accounts are as follows: TOPICS tomorrow

Cost of Sales the value of merchandise sold Example of BUSINESS TRANSACTIONS:


1. Increase in Asset, Decrease in another Asset
Supplies Expense the amount of supplies consumed or
used by the business during the period. Examples: used in 2. Increase in Asset, Increase in Liability
papers, inks, ballpoint pens, etc. -Decrease in Liability, Decrease in Asset
-Increase in Liability, Decrease in another Liability
Salaries and Wages Expenses the amount paid to service -Decrease in Liability, Increase in Owner's Equity
rendered by the employees in the operation of the business
3. Increase in Asset, Increase in Owner's Equity
Insurance Expense the amount of insurance policy incurred -Decrease in Owner's Equity, Decrease in Asset
during the current period. Examples: premiums on building
"OTHERS"
insurance, life insurance, plant insurance, etc.
Increase in Asset, Increase in Income
Taxes and Licenses Expenses the cost of local as well as Increase in Expense, Increase in Liability
national taxes that are incurred and required to be paid in Increase in Expense, Decrease in Asset
connect with the conduct of business. Increase in Asset, Decrease in Expense
Decrease in Liability, Increase in Income
Examples:cost to acquire mayors permit, registration cost of Decrease in Income, Increase in Liability
the building, percentage tax on sales, etc.

Others

"Estimated Expense"

Doubtful Account Expenses the estimated amount of losses


the uncollectible accounts arising from credit sales of the
current period. This is also called the debt expense or
uncollectible account expense.

Depreciation Expense represents the current periodic cost


for using depreciable plant assets. In accordance with the
systemic cost of depreciable asset should be allocated as
expense over its useful life.

Others

---------------------------------------------------------------

SUMMARY:
Revenue
-Sales
-Service Income
-Professional Fees
-Interest Income
-Rent Income
-Gain on Sales of other Assets
-Others

Expenses
-Cost of Sales
-Supplies Expense
-Salaries and Wages Expenses
-Insurance Expense
-Taxes and Licenses Expenses
-Doubtful Account Expenses
-Depreciation Expense
-Others