1.

He founded the Academy on the principle that students should learn to criticize and think for
themselves rather than simply accept the views of their teachers.
2. Considered as the first university.
3. The human person is composed of a body and a soul.
4. The soul is composed of 3 distinct faculties, the three levels of knowledge and desire. These 3
levels are:
5. Study of Plato’s ideal society and a study of types of individuals.
6. Needs must be met by the 3 classes of people.
7. (428-347 BCE)
8. (384-322 BCE)
9. (490-420 BCE)
10. (483-375 BCE)
11. (459-400 BCE)
12. (624-546 BCE)
13. (c. 550 BCE)
14. (585-528 BCE)
15. (c. 570-496 BCE)
16. (c. 540-c. 480 BCE)
17. (490-430 BCE)
18. (c. 570-496 BCE)
19. He was considered as the first philosopher and one of the Seven Wise Men of Greece.
20. Reduced into power, leading truth and ethics into a nihilistic attitude.
21. Everything is self-contradictory. Hence, nothing exists.
22. For him. “A person is capable of doing good because goodness is already innate in him”.
23. A person is capable of doing good because goodness is already innate in him.
24. In the physical thing, these principles are the form, which signifies the act, and the matter,
which signifies the potency or the capacity of the matter to obtain another act. This teaching is
called the _________ doctrines.
25. The human mind is a _________ or a blank sheet.
26. Since Aristotelian philosophy speaks about the proper end of things, his philosophy is
considered to be ___________.
27. The word Aristotle used that is so often translated as “happiness” is __________.

1. Resource controlled by the enterprise as a result of past events and from which future
economic benefits are expected to flow to the enterprise.

a. Asset b. Liabiity c. Income d. Equity e. Expenses

2. Is the residual interest in the assets of the enterprise after deducting all its liabilities.

b. Asset b. Liabiity c. Income d. Equity e. Expenses

3. is a present obligation of the enterprise arising from past events, the settlement of which
is expected to result in an outflow from the enterprise of resources embodying economic
benefits. It simply means, liabilities are obligations of the entity to outside parties who have
furnished resources.

c. Asset b. Liabiity c. Income d. Equity e. Expenses

4. is increases in economic benefits during the accounting period in the form of inflows or
enhancement of assets or decreases of liabilities that result in increases in equity. In
simple words, income is money the business earns from selling a product or service, or
from interest and dividends on marketable securities.

d. Asset b. Liabiity c. Income d. Equity e. Expenses

5. are decreases in economic benefit during the accounting period in the form of outflows or
depletions of assets or incurrence of liabilities that result in decrease in equity, other than
those relating to distributions to equity participants. In simple words, expenses are
expenditures that allow a company to operate. It reduces the net assets of the company.

e. Asset b. Liabiity c. Income d. Equity e. Expenses

6. Two types of income:

7. Income earned in the ordinary course of business activities of the entity. Examples:
professional fee for service companies, sales for merchandising business, interest
income, rental income etc.
8. represent other items that meet the definition of income and may or may not arise in the
course of ordinary activities of an entity. They come from other activities.
ASSETS - 2 classifications (CURRENT AND NON-CURRENT ASSETS)

CURRENT ASSETS – an asset is classified as current when:

a) It expects to realize the assets, or intends to sell or consume it, in its normal operating
cycle.
b) It holds the assets primarily for the purpose of trading
c) It expects to realize the assets within 12 months after the end of the reporting period
d) The asset is cash or a cash equivalents unless it is restricted from being exchanged or
used to settle a liability for at least 12 months after the end of the reporting period.

Cash – cash is any medium of exchange that a bank will accept for deposit at face value. It
includes bills, coins, currency, check, money orders, bank deposits and drafts.
Cash Equivalents – these are short term, highly liquid investments that are readily convertible
to known amounts of cash and which are subject to an insignificant risk of changes in value.
Notes Receivable – is a written pledge that the customer will pay the business a fix amount of
money on a certain date.
Accounts receivable – these are claims against customer arising from sale of services or
goods on credit. This type of receivables offers less security than a promissory note.
Inventories – These are assets which are (a) held for sale in the ordinary course of business
(b) in the process of production for such sale (c) in the form of materials or supplies to be
consumed in the production process or in the rendering of services.
Prepaid Expenses – these are expenses paid for by the business in advance such as prepaid
rent, prepaid insurance, prepaid advertising and office supplies.

NON-CURRENT ASSETS
Property and Equipment – these are tangible assets that are held by an enterprise for use in
the production or supply of goods or service, or for rental to others, or for administrative purposes,
and which are expected to be used during more than one period. Examples: land, building,
machinery and equipment, furniture and fixtures, motor vehicles and equipment.
Accumulated Depreciation – it is a contra asset account that contains the sum of the periodic
depreciation charges. The balance in this account is deducted from the cost of the related asset
– equipment or buildings – to obtain book value.
Intangible Assets – these are identifiable, non monetary assets without physical substance
held for use in the production or supply of goods or services. Examples: goodwill, patents,
copyrights, licenses, franchise, trademarks, brand names, secret processes, subscription lists
and non-competition agreements.

LIABILITIES
CURRENT LIABILITIES – a liability is classified as current when:
a) It expects to settle the liability in its normal operating cycle
b) It holds the liability primarily for the purpose of trading
c) The liability is due to be settled within 12 month after the end of the reporting period
d) The entity does not have an unconditional right to defer settlement of the liability for at
least 12 months after the end of the reporting period.
Accounts payable – the account represents the reverse relationship of the accounts
receivable. By accepting the goods or services, the buyer agrees to pay for them in the near
future.
Notes payable – the business entity is the maker of the note; that is, the business entity is the
party who promises to pay the other party a specified amount of money at a specified future date.
Accrued Liabilities – amounts owed to others for unpaid expenses. Examples; salaries
payable, utilities payable, interest payable and taxes payable.
Unearned Revenues – when the entity receives payment before providing customer with goods
or services, the amount received are recorded in the unearned revenue account (liability method)
Current Portion of Long-Term Debt – these are portion of mortgage notes, bonds and other
long term indebtedness which are to be paid within 1 year from the balance sheet date.

NON-CURRENT LIABILITIES

Mortgage Payable – this accounts record long term debt of the business entity for which the
business entity has pledged certain assets as security to the creditor. In the event that the debt
payments are not made, the creditor can foreclose or cause the mortgaged assets to be sold to
enable the entity to settle the claim.
Bonds Payable – Business organizations often obtain substantial sums of money from the
lenders to finance the acquisition of equipment and other needed assets. They obtain these funds
by issuing bonds. The bond is a contract between the issuer and the lender specifying the terms
of repayment and the interest to be charged.

OWNER’S EQUITY
Capital – this account is used to record the original and additional investments of the owner of
the entity. It is increased by the amount of profits earned during the year or is decreased by a
loss. Cash or other assets that the owner may withdraw from the business ultimately reduced it.
This account title bears the name of the owner.
Withdrawals – when the owner of the business withdraws cash or other assets, those are
recorded in the drawing or withdrawal account.
Income Summary – It is a temporary account used at the end of the accounting period to close
income and expenses. This account shows the profit or loss for the period before closing the
capital account.

INCOME STATEMENT
Or
INCOME – Revenue or income is the inflow of money or other assets (including claims to money,
such as sale made on credit) that results from sales of goods or services or from the use of money
or proper. The result of revenue is an increase in assets.
Service Income – revenues earned by performing services for a customer or client; for example,
accounting services by a CPA firm, laundry services by a laundry shop.
Sales – Revenues earned as a result of merchandise; for example, sale of building materials by
a construction supplies firm.
EXPENSES – involve the outflow of money, the use of other assets, or the incurring of a liability.
Expenses include the cost of any materials, labor and supplies and services used in an effort to
produce revenue.
Cost of Sales – the cost incurred to purchase or to produce the products sold to customers
during the period; also called cost of goods sold.
Salaries or wages expense – includes all payment as a result of an employer-employee
relationship such as salaries or wages, 13th month pay, cost of living allowances and another
related benefits.
Utilities expense – expenses related to the use of telecommunication facilities, consumption of
electricity, fuel and water.
Supplies expense – expense of using supplies (office supplies) in the conduct of daily
business.
Rent Expense – Expense for space, equipment or other asset rentals.
Insurance expense – Portion of premiums paid on insurance coverage (examples; motor
vehicle, health, life, fire, typhoon or flood) which has expired.
Depreciation expense – the portion of the cost of a tangible asset (example; buildings and
equipment) allocated or charged as expense during an accounting period.
Uncollectible accounts expense – the amount of receivable estimated to be doubtful of
collection and charged as expense during an accounting period.
Interest expense – an expense related to use of borrowed funds.

Account – is the basic summary device of accounting. A separate account is maintained for
each element that appears in the balance sheet. Thus, an account maybe defined as “a detailed
record of the increases, decreases and balance of each element that appears in the entity’s
financial statement. The simplest form of the account is known as the “T-account” because of its
similarity to the letter “T”.

THE ACCOUNTING EQUATION

- It states that assets must always equal liabilities and owner’s equity.

ASSETS = LIABILITIES + OWNER’S EQUITY

RULES OF DEBITS and CREDITS – THE DOUBLE ENTRY SYSTEM

Initial Transactions
Starting a Business
Dec 1 Michiko Haru obtained the funds to start the business by withdrawing P 800,000 from his
personal savings. He deposited the money in a new bank account that he opened in the
name of the firm. HARU ACCOUNTING SERVICES.

ASSET = LIABILITIES + OWNER'S EQUITY

Cash = Haru Capital

(1) 800,000.00 = + 800,000.00

Purchasing equipment on credit

Dec 3 Haru bought a computer, a copy machine, a fax machine, calculators and other
necessary equipment from A. Nicart, Inc., at a cost of P 100,000. Mr Nicart agreed to
allow 60 days for the firm to pay the bill.

ASSET = LIABILITIES + OWNER'S EQUITY

Accounts
Cash + Equipment = Payable Haru Capital

800,000.00 + 100,000.00 = 100,000.00 + 800,000.00

900,000.00 900,000.00
Purchasing supplies for cash
Dec 5 Haru placed and order for toner, fax paper, bond papers, CDs’s, pens, folders and other
supplies that had a total cost of 20,000. It was paid in cash.

ASSET = LIABILITIES + OWNER'S EQUITY

Accounts
Cash + Supplies + Equipment = Payable Haru Capital
800,000.00 + + 100,000.00 + 800,000.00
100,000.00
(20,000.00) + 20,000.00 + =

780,000.00 20,000.00 900,000.00 = 900,000.00

Paying a creditor
Dec 9 Haru decided to pay P 40,000 to A. Nicart , Inc. to reduce the firm’s debt to the business.

ASSET = LIABILITIES + OWNER'S EQUITY

Accounts
Cash + Supplies + Equipment = Payable Haru Capital
800,000.00 + + 100,000.00 100,000.00 + 800,000.00

(20,000.00) + 20,000.00 + =

(40,000.00) (40,000.00)
740,000.00 20,000.00 100,000.00 = 60,000.00 800,000.00

860,000.00 860,000.00