1.

DeIine and discuss each

( Basic and addt'l accounting elements or values)
Basic: Assets, Liabilities, Capital(Equity)
asset
Any item oI economic value owned by an individual or corporation, especially that which could be converted to
cash. Examples are cash, securities, accounts receivable, inventory, oIIice equipment, real estate, a car, and
other property. On a balance sheet, assets are equal to the sum oI liabilities, common stock, preIerred stock, and
retained earnings. From an accounting perspective, assets are divided into the Iollowing categories: current
assets (cash and other liquid items), long-term assets (real estate, plant, equipment), prepaid and deIerred assets
(expenditures Ior Iuture costs such as insurance, rent, interest), and intangible assets (trademarks, patents,
copyrights, goodwill).
liability
An obligation that legally binds an individual or company to settle a debt. When one is liable Ior a debt, they are
responsible Ior paying the debt or settling a wrongIul act they may have committed. For example, iI John hits
Jane's car, John is liable Ior the damages to Jane's vehicle because John is responsible Ior the damages. In the
case oI a company, a liability is recorded on the balance sheet and can include accounts payable, taxes, wages,
accrued expenses, and deIerred revenues. Current liabilities are debts payable within one year, while long-term
liabilities are debts payable over a longer period.

capital
1. Cash or goods used to generate income either by investing in a business or a diIIerent income property.
2. The net worth oI a business; that is, the amount by which its assets exceed its liabilities.
3. The money, property, and other valuables which collectively represent the wealth oI an individual or
business.

Addt'l: Drawing(Personal Withdrawals), Revenue(Income),Expenses

drawings
Monies withdrawn by the owner oI a sole proprietorship or the partners oI a partnership Iirm Irom the business.
revenue
The income generated Irom sale oI goods or services, or any other use oI capital or assets, associated with the
main operations oI an organization beIore any costs or expenses are deducted. Revenue is shown usually as the
top item in an income (proIit and loss) statement Irom which all charges, costs, and expenses are subtracted to
arrive at net income. Also called sales, or (in the UK) turnover.
expense
Money spent or cost incurred in an organization's eIIorts to generate revenue, representing the cost oI doing
business.
Expenses may be in the Iorm oI actual cash payments (such as wages and salaries), a computed expired portion
(depreciation) oI an asset, or an amount taken out oI earnings (such as bad debts). Expenses are summarized and
charged in the income statement as deductions Irom the income beIore assessing income tax. Whereas all
expenses are costs, not all costs (such as those incurred in acquisition oI income generating assets) are expenses.


2. Explain the meaning oI Terminologies:

- Chart oI accounts
System oI accounting records developed by every organization to be compatible with its particular Iinancial
structure, and in agreement with the amount oI detail required in its Iinancial statements. It consists oI a list
oI ledger account names and numbers showing classiIications and sub-classiIications, and serves as an
index to locate a given account within the ledger.

- General Journal
Common type oI journal used in keeping a chronological record oI Iinancial transactions oI a Iirm not
belonging to other (special) journals, or where no special journal exists.

- Business transaction
An economic event that initiates the accounting process oI recording it in a company's accounting system.

- Book oI Iinal entity
Book oI Final Entity-manual accounting ledgers to which the Iinancial data Irom the 'books oI original
entry' is transIerred. In computerized-accounting, data is entered only once and is automatically reIlected in
all associated books.

- Books oI accounts
Journals, ledgers, and other classiIied records comprising a Iirm's set oI accounts.

- Ledger- Book oI original entity
Ledger-is the principal book or computer Iile Ior recording and totaling monetary transactions by account,
with debits and credits in separate columns and a beginning balance and ending balance Ior each account.

- Posting
Process oI transIerring debit and credit amounts Irom journals to the ledger(s).

- Journal/ Journalizing
Business diary in which all Iinancial data (taken usually Irom a journal voucher) pertaining to the day to
day business transactions oI a Iirm is recorded using double-entry bookkeeping system. Debit and credit
changes caused by each transaction in individual ledger-accounts are subsequently entered in (posted to)
the Iirm's general ledger. Depending on the nature oI its operations and number oI daily transactions, a Iirm
may keep several types oI specialized journals such as cash journal (cash book), purchases journal, and
sales journal. The most common is general journal, used where no special journal exists or in which
transactions not belonging to other journals are entered (see journal entry). Journals are also called 'books
oI Iirst entry' or 'books oI original entry.


- General ledger

Central repository oI the accounting inIormation oI an organization in which the summaries oI all Iinancial
transactions (culled Irom subsidiary ledgers) during an accounting period are recorded. Also called the
book oI Iinal entry, it provides the entire data Ior preparing Iinancial statements Ior the organization.

- Subdiary oI ledges
Details oI an account that support the amount in the general ledger.



3. Provide illustrations oI Trial Balance