ACCOUNTING – is an art of recording, classifying, summarizing, transaction and events of a financial

character and interpreting the results thereof.

Nature of accounting:

a. Recording – journalizing
b. Classifying – posting
c. Summarizing – preparing trial balance and financial statements
d. Interpreting – preparing financial analysis

DEBIT (DR) – value received

- left side of an account
CREDIT (CR) – value parted with/given away
-right side of an account

THE T-ACCOUNT

ACCOUNT

debitside credit side

ACCOUNTING EQUATION (memorize)

Basic Equation

ASSETS = LIABILITITES + OWNER’S EQUITY

DEBIT = CREDIT + CREDIT

Long Form Accounting Equation

ASSETS = LIABILITIES + OWNER’S EQUITY (+ CAPITAL –WITHDRAWAL + REVENUE – EXPENSES)

DR CR CRCR DR CR DR

CHART OF ACCOUNTS (memorize)

BALANCE SHEET ACCOUNTS – Real accounts
A. ASSETS – normal DEBIT
CURRENT ACCOUNTS – convertible to cash within one year
1. Cash
2. Cash equivalents – short-term investments (maximum of 3 months)
3. Accounts Receivable – pautang
4. Allowance for Uncollectible Accounts – contra-asset account /CREDIT
Entry: Uncollectible Accounts (Debit)
Allowance for Uncollectible Accounts (Credit)
5. Notes Receivable – pautang with note
6. Inventories – goods left at the end of a period
7. Prepaid Expenses – expenses paid but yet incurred or used
Ex. Unused supplies, prepaid rent, prepaid insurance
NON-CURRENT ASSETS – long-term assets
1. Property, Plant and Equipment
a. Building
b. Machineries and Equipment
c. Furniture and fixtures
d. Vehicle
e. Transportation Equipment/Delivery Equipment
f. Leasehold Improvement – improvement made on a leased property
2. Accumulated Depreciation – contra-asset account /CREDIT
Depreciation – wear and tear of an asset

Entry : Depreciation Expense (debit)

Accumulated Depreciation (credit)

COST OF AN ASSET – ACCUMULATED DEPRTECIATION = BOOK VALUE/CARRYING VALUE

3. Intangible assets – assets which can not be seen or touched
Ex. Trademark, copyright, franchise

B. LIABILITITES –normal CREDIT

CURRENT ASSETS – obligations which are payable in one year
a. Accounts Payable – utang
b. Noted Payable – utang with a note
c. Accrued Liabilities/Accrued Expenses – expenses incurred but not yet paid

NON-CURRENT LIABILITITES
a. Mortgage Payable
b. Bonds Payable
c. Loans Payable

C. OWNER’S EQUITY – normal CREDIT

a. Capital credit
b. Withdrawal – debit

INCOME STATEMENT ACCOUNTS – nominal accounts

A. INCOME/REVENUE – normal CREDIT

a. Service Income – for services
b. Sales – for merchandizing business

B. COST OF SALES
a. Purchases – normal DEBIT
– goods bought for sale
C. EXPENSES – normal DEBIT
a. Salaries and Wages
b. Rent
c. Utilities
d. Advertising
e. Insurance
f. Communications/Telephone
g. Light and Water
h. Transportation
i. Gas and Oil
j. Repairs and Maintenance
k. Representation and Entertainment – to entertain visitors and prospective clients
l. Supplies
m. Depreciation
n. Uncollectible Accounts/Doubtful Accounts/Bad Debts – it depends on the business on what
account they wanted to use.
o. Miscellaneous – expense not classifiable above