ACCOUNTING

Essential Elements
1. Identifying - accountable or unaccountable events
2. Recording -Journalizing
-Posting
3. Communicating
-financial statements

 Vs. Bookkeeping
 For external & internal users
 Fra. Luca Pacioli

 Financial statements - structured representation of an entity's financial position & results of

its operations.
 Financial report- financial statements + other information

Common branches of Accounting

 Financial Accounting
 Management Accounting
 Government Accounting
 Auditing
 Tax accounting
 Cost accounting
 Accounting education
 Accounting research

Forms of Business Organizations

 Sole or single proprietorship -DTI (Department of Trade and Industry)
 Partnership - SEC (Securities and Exchange Commission)
 Corporation -SEC
 Cooperative -CDA (Cooperative Development Authority)

Basic Accounting Concepts

 Separate Entity Concept
 Historical Cost Concept
 Going concern assumption
 Matching
 Accrual Basis
 Prudence (or Conservatism)
 Time Period
 Stable monetary unit
 Materiality concept
 Cost-benefit
 Full disclosure principle
 Consistency principle
ASSETS= LIABILITY+ EQUITY*

NOTE: (INCOME-EXPENSES)*

ACCOUNT

The Five Major Accounts

 Assets
 Liabilities
 Equity
 Income (Revenue & Gains)
 Expenses (Expenses & Losses)

 Balance Sheet "Statement of Financial Position"

 Income Statement "Statement of Profit or Loss"
 Chart of accounts

Types of Journals
 Special Journal
A) Sales Journal
b) Purchases Journal
c) Cash receipts journal
d) Cash disbursements journal

 General Journal

 Contra vs. Adjunct account

 Concept of duality
 Concept of equilibrium

Steps in the Accounting Cycle

 Identifying and analyzing
 Journalizing
 Posting
 Prepare the unadjusted trial balance
 Prepare adjusting entries
 Prepare the adjusted trial balance
 Prepare the financial statements
 Closing the books
 Prepare the post-closing trial balance
 Record the reversing entries.

Source Documents
 Sales invoices
  Official receipts
 Purchase orders
 Delivery receipts
 Bank deposit slips
 Bank statements
 Checks
 Statements of account and the like

Adjusting Entries
 Accruals of income and expenses
-income that is already earned but not yet collected
-expense that is already incurred but not yet paid
E.g. Interest receivable xxx
Interest income xxx
#
Interest expense xxx
Interest payable xxx
#
 Recognition of depreciation expense and bad debts expense
E.g. Depreciation Expense xxx
AD xxx
#
3. Deferrals of income and expenses

 Real Accounts (Permanent Accounts)

 not closed at the end of the period
 all balance sheet accounts (ASSET & LIABILITY), except Owner's Equity

 Nominal Accounts
 All income statement accounts, drawings account, clearing accounts and suspense accounts

 Mixed Accounts