CHAPTER 1 Accounting considers the partnership as a

separate organization, distinct from the

Definition of Accounting:
personal affairs of each other.
• A service activity. Its function is to
• Corporation
provide quantitative information,
primarily financial in nature about (Mas Malaki ang funds compare sa
economic entities that is intended partnership)
to be useful in making economic
A corporation is a business owned by
decisions.
its stockholders. It is an artificial being created
• Process of identifying, measuring by operation of the law, having the rights of
and communicating economic succession and the powers, attributes and
information to permit informed properties expressly authorized by law or
judgments and decisions by users incident to its existence. The stockholders are
of the information. not personally liable for the corporation’s
debts. The corporation is a separate legal
• Art of recording, classifying and
entry.
summarizing in a significant
manner and in terms of money,
transactions & events which are,
TYPES OF BUSINESS OPERATION
in part at least of a financial
character and interpreting the • Service Business
results thereof
• Merchandising
•
• Manufacturing
FORMS OF BUSINESS ORGANIZATIONS
ACTIVITIES IN BUSINESS ORGANIZATIONS
• Sole Proprietorship
• Financing – methods an
(Person is liable) organization uses to obtain
financial resources from financial
This business organization has a single
markets and how it manages
owner called the proprietor who generally is
these resources.
also the manager. Sole proprietorships tend
to be small service-type businesses and retail (Loans)
establishments.

• Partnership
• Investing – transform resources
(Unlimited liabilities that can affect to the from one form to a different
personal assets) form, which is more valuable, to
meet the needs of the people.
(Mere Agreement)
(investing in other company)
A partnership is a business owned
and operated by two or more persons who
bind themselves to contribute money,
property, or industry to a common fund, with • Operating – involve the use of
the intention of diving profits among resources to design, produce,
themselves. Each partner is personally liable distribute and market goods and
for any debt incurred by the partnership. services.
 (Daily operation of the business)
Fundamental concepts
• Entity Concept
(Business transaction should be separated
from the personal transaction of the owner)
The most basic concept in accounting
is the entity is an organization or a section of
an organization that stands apart accounting
entity is an organization or a section of an
organization that stands apart from other
organization and individuals as a separate
economic unit. Simply put, the transactions of
different entities should be accounted for
together. Each entity should be evaluated
separately.
• Periodicity Concept
(Timelines Jan 1 to Dec. 1 (Calendar Year))
An entity’s life can be meaningfully
subdivided into equal time periods for
reporting purposes. It will be aimless to wait
for the actual time periods for reporting
purposes. It will be aimless to wait for the
actual last day of operations to perfectly
measure the entity’s profit. This concept
allows the users to obtain timely information
to serve as a basis on making decisions about
future activities. For the purpose of reporting
to outsiders, ne year is the usual accounting
period.
• Stable Monetary Unit
(We assume na hindi siya nababago)
The Philippine peso is a reasonable
unit of measure and that its purchasing power
is relatively stable. It allows accountants to
add and subtract peso amounts as though
each peso has the same purchasing power as
any other peso at any time. This is the basis
for ignoring the effects of inflation in the
accounting records.
• Going Concern
(Indefinite life)
Financial statements are normally
prepared on the assumption that are
reporting entity is a going concern and will
continue in operation for the foreseeable
future. Hence, it is assumed that the entity
has neither for the intention nor the need to
enter liquidation or to case trading. This
assumption underlies the depreciation of
assets over their useful lives.
Basic principles
• Objectivity Principle
Accounting records and statements
are based on the most reliable data available
so that they will be as accurate and as useful
as possible. Reliable data are verifiable when
they can be confirmed by independents
observers. Ideally, accounting records are
based on information that flows from
activities documented by objective evidence.
Without this principle, accounting records
would be based on whims and opinions and is
therefore subject to disputes.
• Historical Cost
This principle states that acquired
assets should be recorded at their actual cost
and not at what management thinks they are
worth as at reporting date.
• Revenue Recognition Principle
(Accrual basis of Accounting)
Revenue is to be recognized in the
accounting period in which goods and
services are rendered or performed.
 • Expense Recognition Principle
(Accrual basis of Accounting)
Expenses should be recognized in the
accounting period when goods and services
are used up to produce revenue and not
when the entity pays for those goods and
services.
• Adequate Disclosure
(everything should be disclosed)
Requires that all relevant information
that would affect the user’s understanding
and assessment of the accounting entity be
disclosed in the financial statement.
• Materiality
(Always considered the amount and the life of
an asset)
Financial reporting is only concerned
with information that is significant enough to
affect evaluations and decisions. Materiality
depends on the size and nature of the item
judged in the particular circumstances of its
omission. In deciding whether an item or an
aggregate of items is material, the nature and
size of the item are evaluated together.
Depending on the circumstances, either the
nature or the size of the item could be the
determining factor.
• Consistency Principle
(Consistent Method)
The firms should use the same
accounting method from period to period to
achieve comparability over time within a
single enterprise. However, changes are
permitted if justifiable and disclosed in the
financial statements.
The cpa examination
• All applicants for registration for
the practice of accountancy shall
be required to undergo a
licensure examination to be given
by the Board in such places and
dates as the Commission may
designate subject to compliance
with the requirements prescribed
by the Commission in accordance
with Republic Act No. 8981.
QUALIFICATIONS of applicants for
examination
• Filipino citizen
• With good moral character
• Holder of the degree of BSA
conferred by a school, college or
institute duly recognized and/or
accredited by the Commission on
Higher Education (CHED)
• Has not been convicted of any
criminal offense involving moral
turpitude
SCOPE OF EXAMINATION
• Theory of Accounts
• Business Law and Taxation
• Management Services
• Auditing Theory
• Auditing Problems
• Practical Accounting Problems I
• Practical Accounting Problems II
RATING in the licensure exam
 A candidate must obtain a general
average of 75% with no grades lower
than 65% in any given subject. In the
 event a candidate obtains the rating by the Board of Accountancy
of 75% and above in at least a whether he/she be in public
majority of subjects as provided for in practice, industry, commerce,
this act, he/she shall receive a the public sector or
conditional credit for the subjects education.
passed: Provided, that a candidate
The Code is in 3 parts:
shall take an examination in the
remaining subjects within (2) years - Part A establishes the
from the preceding examination. fundamental principles of
Provided further, that if the candidate professional ethics
fails to obtain at least a GA of 75%
and a rating of at least 65% in each of - Part B & C illustrate how the
the subjects, he/she shall be conceptual framework is to be
considered as failed in the entire applied in specific situations.
examination. Fundamental principles
REFRESHER COURSE • Integrity – honest, fair dealing
 Any candidate who fails in (2) & truthfulness
complete CPA Board Exam shall • Objectivity – should not allow
be disqualified from taking bias, conflict of interest or
another set of examinations undue influence of others
unless he/she submits evidence
to the satisfaction of the Board • Professional Competence &
that he/she enrolled in and Due Care – diligence, exercise
completed at least 24 units of sound judgment
subject given in the licensure • Confidentiality – should not
examination. disclose any confidential
• The accountancy profession information to others

• All members of the Accountancy • Professional Behavior –

profession are CPAs should comply with relevant
laws and regulations
• CPAs have their own body of
language CAREER OPPORTUNITIES

• CPAs adhere to a Code of Ethics • Public Practice

• Like other professions, CPAs are • Commerce and Industry

members of a national • Government Service
organization, the PICPA whose
role is to ensure the continued • Education / Academe
improvement of the Accountancy
BRANCHES OF ACCOUNTING
profession
• Auditing
Code of ethics
Auditing is the accounting profession’s
• A professional accountant is
most significant service to the public. An
defined as “an individual who
external audit is the independent examination
holds a valid certificate issued
that ensures the fairness and reliability of the
reports that management submits to the
users outside the business entity.
• Bookkeeping
Bookkeeping is a mechanical task
involving the collection of basic financial data.
The data are entered in the accounting
records or the books of accounts, and then
extracted, classified and summarized in the
form of income statement, balance sheet and
cash flow statement.
• Cost Accounting
(Manufacturing Business)
Cost Bookkeeping is the process that
involves the recording of cost data in books of
accounts. It is, therefore, similar to
bookkeeping except that data are recorded in
very much greater detail. Cost accounting
makes use of those data once they have been
extracted from the books in providing
information for managerial planning and
control.
• Financial Accounting
(Private Companies)
Financial Accounting is focused on the
recording of business transaction and the
periodic preparation of reports on financial
position and results of operations.
• Financial Management
(It includes budget planning, controlling and
leading)
Financial management is a relatively
new branch of accounting that has grown
rapidly over 30 years. Financial managers are
responsible for setting financial objectives,
making plans based on those objectives,
obtaining the finance needed to achieve the
plans, and generally safeguarding all the
financial resources of the entity.
• Management Accounting
Management accounting incorporates
cost accounting data and adapts them for
specific decisions which management may be
called upon to make.
• Taxation
Tax accounting includes the preparation
of tax return and the consideration of the tax
consequences of proposed business or
alternative courses of action.
• Government Accounting
It is concerned with the identification
of the sources and uses of resources
consistent with the provisions of city,
municipal, provincial, or national laws.
The government collects and spends huge
amount of public funds annually so it is
necessary that there is proper custody
and disposition of these funds.
CHAPTER 2
ELEMENTS OF FINANCIAL STATEMENTS
The elements of financial statements defined in the March
2018 Conceptual Framework foe financial reporting (2018
Conceptual framework)
Assets
A present economic resource controlled by the
entity as a result of past events. An economic resource is a
right that has the potential to produce economic benefits.
Liability
A present obligation of the entity to transfer an
economic resource as a result of past events.
 Equity
the residual interest in the assets of the entity
after deducting all its liabilities.
Income
Increases in assets, or decreases in liabilities,Equity
result in increases in equity, other than those relating to
contributions forms holders of equity claims.
Expenses
Decrease in assets, or increases in liabilities, that
result in decreases in equity, other than those relating to
distributions to holders of equity claims.
FINANCIAL POSITION
Asset
Per March 2018 Conceptual Framework
for Financial Reporting (Conceptual Framework),
Assets is a present economic resource controlled by
the entity as a result of past events. An economic
resource is a right that has the potential to produce
economic benefits. There are three aspects to these
definitions: “right”; “potential to produce economic
benefits”; and “control”.
An entity controls an economic resource
if it has the present ability to direct the use of the
economic resource and obtain the economic benefits
that may flow from it. Control includes the present
ability to prevent other parties from directing the use
of the economic resource and from obtaining the
economic resource, no other party controls that
resource.
Liability
A liability is a present obligation of the
entity to transfer an economic resource as a result of
past events.
An obligation is a duty or responsibility that an
entity has no practical ability to avoid. An obligation
is always owed to another party (or parties). The
other party (or parties) could be a person or another
entity, a group of people or other entities, or society
at large. It is not necessary to know the identity of
the party (or parties) to whom the obligation id owed.
If one party has an obligation to transfer an economic
resource, it follows that another party (or parties) has
a right to receive that economic resource.
that
Equity is the residual interest in the
assets of the enterprise after deducting all its
liabilities. In other words, they are claims against the
entity that do not meet the definition as a liability.
FINANCIAL PERFORMANCE
Income
is increases in assets, or decreases in
liabilities, that result in increases in equity, other than
those relating to contributions from holders of equity
claims.
Expenses
Are decreases in assets or increases in liabilities,
that result in decreases in equity, other than those relating to
distributions to holders of equity claims.
THE ACCOUNT
The basic summary device of accounting is the Account.
A separate account is maintained for each element that appears
in the balance sheet (Assets, Liabilities, and Equity) and in the
income statement (Income and Expenses). Thus, an account
may be defined as a detailed record of the increases, decreases
and balance of each element that appears in an entity’s
financial statements. The simplest form of the account is
known as the “T” account because of its similar to the letter
“T”. The account has three parts: Account title (Top), debit
(left side), and credit (right side).
THE ACCOUNTING EQUATION
Financial statements tell us how a business is
performing. They are the final products of the accounting
process. The most basic tool of accounting is the accounting
equation. This equation presents the resources controlled by
thr enterprise, the present obligations of the enterprise and the
 residual interest in the assets. In states that assets must always
equity) account increases Received utilities bill but
equal liabilities and owner’s equity. did not pay.

Assets = Liabilities + Owner’s Equity

TYPICAL ACCOUNT TITLES USED
DEBITS AND CREDITS – THE DOUBLE-ENTRY Assets are should be classified only into two:
SYSTEM current assets and non-current assets. Per revised
Philippine Accounting Standards (PAS) No. 1, an
Accounting is based on a double-entry system
entity shall classify assets as current when:
which means that the dual effects of a business transaction id
recorded. A debit side entry must have a corresponding creditit expects to realize the asset, or intends to sell
side entry. For transaction, there must be one or more accounts
or consume it, in its normal operating cycle;
debited and one or more accounts credited. Each transaction it holds the asset primarily for the purpose of
affects at least two accounts. The total debits for a transaction
trading;
must always equal the total credits. it expects to realize the asset within twelve
months after the reporting period; or
the asset is cash or a cash equivalent (as
NORMAL BALANCE OF AN ACCOUNT
defined in PAS No. 7) unless the asset is restricted
The normal balance of any account from being exchanged or used to settle a liability
refers to the side of the account-debit or credit- for at least twelve months after the reporting
where increases are recorded. Asset, owner’s period.
withdrawal and expense accounts normally have
debit balances; liability, owner’s equity and
income accounts normally have credit balances.
This result occurs because increases in an account
are usually greater than or equal to decreases.

TYPES AND EFFECTS OF TRANSACTIONS CURRENT ASSETS

1. Source of Assets (SA). Cash

An asset account increases and a corresponding Cash is any medium of exchange that a bank
claims (liabilities or owner’s equity) account will accept for deposit at face value. It includes
increases. Examples: (1) Purchase of supplies on coins, currency, checks, money orders, bank
account; (2) Sold goods on cash delivery basis. deposits and drafts.

2. Exchange of Assets (EA). Cash Equivalents

One asset account increases and another asset
account decreases. Example: Acquired equipment
for cash.
3. Use of Assets (UA).
An asset account decreases and a corresponding
claims (liabilities or equity) account decreases.
Examples: (1) Settled accounts payable; (2) Paid
salaries of employees.
4. Exchange of Claims (EC).
One claims (liabilities or owner’s equity) account
increases and another claims (liabilities or owner’s
Per PAS No. 7, 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
A note receivable is a written pledge that
the customer will pay the business a fixed amount of money on
a certain date.
Accounts Receivable
 These are claims against customers arising from sale Perofrevised Philippine Accounting Standards (PAS)
services or goods on credit. This type of receivable offersNo.less1, an entity shall classify a liability as current
security than a promissory note. when:
it expects to settle the liability in its normal
operating cycle;
Inventories
it holds the liability primarily for the purpose
Per PAS No. 2, these are assets which are (a) held for sale
of trading;
in the ordinary course of business; (b) in the process of
the liability is due to be settled within twelve
production for such sale; or (c) in the form of materials or
months after the reporting period; or
supplies to be consumed in the production process or in the
the entity does not have an unconditional right
rendering of services.
to defer settlement of the liability for at least twelve
months after the reporting period.
Prepaid Expenses
These are expenses paid for by the business in advance. It
CURRENT LIABILITIES
is an asset because the business avoids having to pay cash in
the future for a specific expense. These includes insurance and
Accounts Payable
rent. These prepaid items represent future economic benefits-
This account represents the reverse
assets-until the time these start to contribute to the earning
relationship of the accounts receivable. By
process; these, then, become expenses.
accepting the goods and services, the buyer agrees
to pay for them in the near future.
NON-CURRENT ASSTES
Notes Payable
Property, Plant, and Equipment A note payable is like a note receivable
Per PAS No. 16, these are tangible assets thatbut arein a reverse sense. In the case of a note payable,
held by an enterprise for use in the production or supply theofbusiness entity is the maker of the note; that is,
goods or services, or for rental to others, or for administrative
the business entity is the party who promises to pay
purposes and which are expected to be used during more the thanother party a specified amount of money on a
one period. specified future date.

Accumulated Depreciation Accrued liabilities

It is a contra 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
Per PAS No.38, these are identifiable,
nonmonetary assets without physical substance held
for use in the production or supply of goods or
services, for rental to others, or for administrative
purposes. These include goodwill, patents,
copyrights, license, franchises, trademarks, brand
names, secret processes, subscription lists and non-
competition agreements.
LIABILITIES
Amounts owed to other for unpaid
expenses. This account includes salaries payable,
utilities payable, interest payable, and taxes payable.
Unearned revenues
When the business entity receives
payment before providing its customers with goods
and services, the amounts received are recorded in
the in earned revenue account (liability method).
When the goods or services are provided to the
customer, the unearned revenue is reduced and
income is recognized.
Current Portion of Long-term debt
These are portions of mortgage notes, bond, and
other long-term indebtedness which are to be paid within one
year from the balance sheet date.

NON-CURRENT LIABILITIES
Mortgage Payable EXPENSES
This account records long-term debt of Cost the of Sales
business entity for which the business entity has pledge certain
The cost incurred to purchase or to produce the
assets as security to the creditor in the event that the products
debt sold to customers during the period; also
payments are not made, the creditor can be foreclose or causecalled cost of goods sold.
the mortgaged asset to enable the entity to settle the claim.
Salaries of Wages Expense
Bonds payable Includes all payments as a result of an employer-
Business organizations often obtain substantial employees relationship such as salaries or wages, 13 th
sums of money from lenders to finance the acquisition month
of pay, cost of living allowances and other related
equipment and other needed assets. They obtain these funds benefits.
by
issuing bonds. The bond is a contract between the issuer and
the lender specifying the term of repayment and the interest Telecommunications,
to electricity, Fuel, and Water
be charged. Expenses
Expenses related to use or telecommunications
OWNER’S EQUITY facilities, consumption of electricity, fuel and water.

Capital Rent Expense

(from the Latin capitalis, meaning property). Expense
This for space, equipment or other asset rentals.
account is used to record the original and additional
investments of the owner of the business entity. It is increased
Supplies Expenses
by the amount of profit earned during the year or is decreased
Expense of using supplies (office supplies) in the
by a loss. Cash or other assets that the owner may withdraw conduct of daily business.
from the business ultimately reduce it. This account title bears
the name of the owner. Insurance Expense
Portion of premiums paid on insurance coverage (e.g.
Withdrawals. motor, vehicle, health, life,, fire, typhoon, flood)
When the owner of a business entity withdrawals which has expired.
cash or other assets, such are recorded in the drawing or
withdrawal account rather than directly reducing the owner’sDep[recitation Expense
equity account. The portion of the cost of a tangible asset (e. g.
Buildings and equipment) allocated or charged as
Income Summary expense during an accounting period.
It is a temporary account used at the end of the
accounting period to close income and expenses. This accountUncollectible Accounts Expense
shows the profit or loss the period before closing to the capital
The amount of receivables estimated to be doubtful of
account. collection and charged as expense during an
accounting period.
INCOME STATEMENT
INCOME Interest Expense
Service Income An expense related to use of borrowed funds.
Revenues earned by performing services for a
customer or client; for example, accounting services
by a CPA firm, laundry services by a laundry shop.

Sale
Revenues earned as a result of sale of merchandise; CHAPTER 3
for example, sale of building materials by a ACCOUNTING CYCLE
construction supplies firm.
Step 1 Identification of Events to be
recorded
To gather information about transactions or events Step 10 Revising Journal Entries are
generally through the source documents. Journalized and Posted
To simplify the recording of certain regular
Step 2 Transactions are Recorded in the transactions in the next accounting period.
Journal
General Journal (The book of original entry)
To record the economic impact of transaction s on Shows all the effects of a transaction in terms
the firm in a journal, which is a form that facilitates of debits and credits.
transfer to the accounts.
Office Equipment xx
Step 3 Journal Entries are Posted to the Cash xx
Ledger Accounts Payable xx

To transfer the information from the journal to the Posting

ledger for classification. Transferring the amounts from the general
journal to appropriate accounts in the ledger.
Step 4 Preparation of a Trial Balance
The Ledger
To provide a listing to verify the equality of debits A grouping of accounts. Used to
and credits in the ledger. classify and summarize transactions and to prepare
data for basic financial statements.
Step 5 Preparation of the Worksheet
Trial Balance
including Adjusting Entries
To aid in the preparation of financial statements. Assets
Liabilities
Owner’s Equity
Step 6 Preparation of Financial Statement Revenues
To provide useful information to decision-makers. Expenses

Listing of all ledger accounts, in order,

Step 7 Adjusting Journal Entries are with their respective debit or credit balances.
Journalized and Posted
THE JOURNAL
To record the accruals, expiration of deferrals,
The journal is a chronological record of
estimations and other events from the worksheet.
the entity’s transactions. A journal entry shows all
the effects of a business transaction in terms of
Step 8 Closing Journal Entries are debits and credits. Each transaction is initially
Journalized and Posted recorded in a journal rather than directly in the
ledger.
To close temporary accounts and transfer profit to A journal is called the book of original
owner’s equity. entry. The nature and volume of transactions of the
business determine the number and type of journals
Step 9 Preparation of Post-Closing Trial needed. The general journal is the simplest
Balance journal.

To check the equality of debits and credits after the FORMAT

closing entries. Date
 The year and month are not rewritten for every
entry unless the year of month changes or a new
page is needed.
2. Account Titles and Explanation.
The account to be debited is entered at the extreme
left of the first line while the account to be credited
is entered slightly indented on the next line. A brief
description of the transaction id usually made on
the line below the credit. Generally, skip a line after
each entry.
3. P. R. (Posting Reference)
This will be used when the entries are posted, that
is, until the amounts are transferred to the related
ledger accounts. The posting process will be
described later.
4. Debit
The debit amount for each account is entered in this
column.
5. Credit
The credit amount for each amount is entered in
this column.
SIMPLE AND COMPOUND ENTRY
In a simple entry, only two accounts are affected-
one account is debited and the other account is
credited.
Where tree or more accounts are required in a
journal entry, the entry is referred to as a
compound entry.
NOTE that the rules of double-entry system are
observed in each transaction.
1. Two or more accounts are affected by each
transaction.
2. The sum of the debits for every transaction
equals the sum of the credits.
3. The equality of the accounting equation is
always maintained.
THE LEDGER
A grouping of the entity’s account is referred
to as a ledger. Although some firms may use
various ledgers to accumulate certain detailed
information, all firms have a general ledger. A
general ledger is the “reference book” of the
accounting system and is used to classify and
summarize transactions, and to prepare data for
basic financial statement.
The accounts in the general ledger are classified
into two general groups:
Balance sheet or permanent accounts (Assets,
Liabilities, owner’s Equity)
Income statement or temporary accounts
(income or expenses). Temporary or nominal
accounts are used to gather information for a
particular accounting period. At the end of the
period, the balances of these accounts are
transferred to a permanent owner’s equity account.
Each account has its own record in the ledger.
Every account in the ledger maintains the basic
format of the T0account but offers more
information (e. g. The account number at the upper
right corner and the journal reference column).
Compared to a journal, a ledger organizes
information by account.
CHART OF ACCOUNTS
A listing all the accounts and their numbers in the
ledger is known as the chart of accounts. This
chart is arranged in the financial statement order,
that is, assets first, followed by liabilities, owner’s
equity, income and expenses. The accounts should
be numbered in a flexible manner to permit
indexing and cross-referencing.
When analyzing the accountant refers to the chart
of accounts to identify the pertinent accounts to be
increased or decreased. If an appropriate account
title is not listed in the chart, an additional account
may be added.
POSTING (STEP 3)
Posting means transferring the amounts from the
journal to the appropriate accounts in the ledger.
Debits in the journal are posted as debits in the
ledger, and credits in the journal as credits in the
ledger.
Transfer the date of the transaction from
journal to the ledger.
Transfer the page number from the journal to
the journal reference (J. R.) column of the ledger.
3. Post the debit figure the journal as a debit
figure in the ledger and the credit figure from the
journal as a figure in the ledger.
4. Enter the account number in the posting
reference column of the journal once the figure has
been posted to the ledger.
TRIAL BALANCE (STEP 4)]
The trial balance is a list of all accounts with their
respective debit or credit balances. It is prepared to
verify the equality of debits and credits in the
ledger at the end of each accounting period or any
time the postings are updated.
The procedures in the preparation of trial balance
follows:
1. List the account titles in numerical order.
2. Obtain the account balance of each amount
from the ledger and enter the debit balances in the
debit column and the credit balances in the credit
column.
3. Add the debit and credit columns.
4. Compare the totals.
The trial balance is a control device that helps
minimize accounting errors. When the totals are
equal, the trail balance is in balance. This equality
provides an interim proof of the accuracy of the
records but it does not signify the absence of errors.
CHAPTER 4
PERIODICITY CONCEPT
- The only way to know how successfully a
business has operated is to close its doors, sell all
its assets, pay the liabilities, and return any excess
cash to the owners. This process of going out of
business is called liquidation.
- Accounting information is valued when it is
communicated early enough to be used for
economic decision-making. To provide timely
information, accountants have divided the
economic life of a business into artificial time
periods. This assumption is referred to as the
periodicity concept.
Fiscal Year- a period of any twelve consecutive
months.
Calendar Year- an annual period ending on
December 31.
Natural Business Year- a twelve-month period
that ends when business activities are at their
lowest level of the annual cycle.
Interim Period- Period of less than a year.
Periodicity Concept- ensures that accounting
information is reported at regular intervals. It
interacts with the recognition and derecognition
principles to underlie the use of accruals.
RECOGNITION AND DERECOGNITION
Per 2018 Conceptual Framework, recognition is
the process of capturing for inclusion in the
statement of financial position or the statement/s
of financial performance an item that meets the
definition of an asset, liability, equity, income or
expenses. The amount at which an asset, a liability
or equity is recognized in the statement of
financial position is referred to as its ‘carrying
amount”.
Recognition- is appropriate if it results in both
relevant information about assets, liability, equity,
income or expenses and faithful representation
of those items, because the aim is to provide
information that is useful to investors lenders, and
other creditors.
Derecognition- the removal of all or part of a
recognized asset or liability from an entity’s
statement of financial position. Derecognition
normally occurs when that item no longer meets
the definition of an asset or of a liability.
THE NEED FOR ADJUSTMENTS
Accountants make adjusting entries to
reflect in the accounts information on economic
activities that have occurred but have not yet been
recorded. Adjusting entries assign revenues to the
period in which they are earned, and expenses to
the period in which they are incurred. These
entries are needed to measure properly the profit
for the period, and to bring related asset and
liability accounts to correct balances for the
financial statements.
 3.
DEFERRALS AND ACCRUALS
Deferrals- This adjustment deals with an amount
already recorded in a balance sheet account.
- Expense (Already paid but not yet incurred).
- Revenue (Already collected nut not yet
earned).
Accrual- the entry, in effect, increases both a
balance sheet and income statement account.
- Expense (Already incurred but unpaid).
- Revenue (Already earned but uncollected).
ADJUSTMENT FOR DEFFERALS (STEP 5)
Allocating assets to expenses
Entities often make expenditures that benefit
more than one period. These expenditures are
generally debited to an asset account. At the end of
each accounting period, the estimated amount that
has expired during the period or that has benefited
the period is transferred from the asset account to
an expense account. Two of more important kinds
of adjustments are prepaid expenses, and
depreciation of property and equipment.
Prepaid Expenses- are assets, not expenses. At the
end of accounting period, a portion or all of these
prepayments may have expired. The portion of an
asset that has expired becomes an expense.
Prepaid expenses expire either the passage of time
or through use and consumption.
If adjustment for prepaid expenses are not made at
the end of the period, both the balance sheet and
income statement will be misstated.
DEPRECIATION OF PROPERTY AND
EQUIPMENT
Depreciation/Depreciation Expense- The
estimated amount allocated to anyone accounting
period.
1. Asset Cost is the amount an entity paid to
acquire the depreciable asset.
2. Estimated Salvage Value is the amount that
asset can probably be sold for at the end of its
estimated useful life.
Estimated Useful Life is the estimated number
of periods that an entity can make use of the asset.
Useful life is an estimate, not an exact
measurement.
Straight line method- The simplest procedure.
Accumulated Depreciation- The reduction is
recorded in a contra account.
Contra Account- Used to record reductions in a
related account and its normal balance is opposite
that of the related account.
The use of Contra Account-Accumulated
Depreciation- allows the disclosure of the original
cost of the related asset in the balance sheet. The
balance of the contra account is deducted from the
cost to obtain the book value of the property and
equipment.
ADJUSTMENTS FOR ACCRUALS (STEP 5)
Accrued Expense- An entity often occurs
expenses before paying for them. Cash payments
are usually made at regular intervals of time such
as weekly, monthly, quarterly, or annually.
Accrued Revenue- An entity made provide
services during the period that are neither paid for
by clients nor billed at the end of the period. The
value of theses services represents revenue earned
by the entity. Any revenue that has been earned
but not recorded during the accounting period calls
for an adjusting entry that debits an asset account
and credits an income account.
CHAPTER 5
Cross footing- the adjusted trial balance prepared
by combining horizontally, line by line, the
amount of each account in the unadjusted trial
balance columns with the corresponding amounts
in the adjustment columns.
ESSENCE OF FINANCIAL STATEMENTS
The financial statements are the means by which
the information accumulated and processed in the
financial accounting is periodically communicated
to the users.
Per March 2018 Conceptual Framework for
Financial Reporting (2018 Conceptual
Framework), the objective of financial statements
is to provide financial information about the
reporting entity’s assets, liabilities, equity, income,
and expenses that is useful to users of financial
statements in assessing the prospects for future net
cash inflows to the reporting entity and in
assessing management’s stewardship of the
entity’s economic resources.
PREPARING THE FINANCIAL
STATEMENTS (STEP 6)
Once the worksheet is completed, it is easy to
prepare the financial statements for the account
balances have been extended to the appropriate
income statement and balance sheet columns.
Most of the information needed to prepare the
income statement, statement of changes and equity
and balance sheet are available from the
worksheet.
STATEMENT OF FINANCIAL
PERFORMANCE
An entity can present all items of income and
expense recognized in a period:
- In a single statement of comprehensive
income
- In two statements: a statement displaying
components of profit or loss (separate income
statement)and a second statement beginning with
profit or loss displaying components of other
comprehensive income.
However, the 2018 Conceptual Framework
does not specify whether the statement(s) of
financial performance comprise(s) a single
statement or two statements.
STATEMENT OF CHANGES IN EQUITY
The statement of changes in equity summarizes
the changes that occurred in owner’s equity. This
statement is now a required statement (per revised
Philippine Accounting Standards (PAS) No. 1).
Changes in an enterprise’s equity between two
balance sheet dates reflects the increase or
decrease in its net assets during the period.
STATEMENT OF FINANCIAL POSITION
The statement of financial position is a statement
that shows the financial position or condition of an
entity by listing the assets, liabilities, and owner’s
equity as at a specific date.
Balance sheet- the information needed for this
statement are the net balances at the end of the
period, rather than the total for the period as in the
income statement.
Liquidity- refers to the availability of cash in the
ear future after taking account of the financial
commitments over this period.
Financial Flexibility- the ability to take effective
actions to alter the amounts and timings of cash
flows so that it can respond to unexpected needs
and opportunities.
Solvency- refers to the availability of cash over
the longer term to meet financial commitments as
they fall due.
FORMAT
the balance sheet can be presented in either the
report format or the account format.
REPORT FORMAT- simply lists the assets,
followed by the liabilities the by the owner’s
equity in VERTICAL SQUENCE.
ACCOUNT FORMAT- lists the assets on the left
ang the liabilities and owner’s equity in the right.
Either balance sheet format is acceptable.
CLASSIFICATION
The revised PAS No. 1 not prescribe the order or
format in which an entity presents items in the
statement of financial position; what is required is
the current and non-current distinction for assets
and liabilities. Assets can be presented current
then non-current, or vise versa. Liabilities and
equity can be presented current liabilities then
non-current liabilities then equity, or vise-versa. CASH FLOWS FROM INVESTING
ACTIVITIES
STATEMENT OF CASH FLOWS
The statement of cash flows provides information
about the cash receipts and cash payments of an
entity during a period. It is a formal statement that
classifies cash receipts (inflows) and cash
payments (outflows) into operating, investing, and CASH INFLOWS
financing activities.
CASH FLOWS FROM OPERATING
ACTIVITIES
Generally, the cash affects of transactions and
other events enter into the determination of profit
or loss. It can be also presented using direct or CASH OUTFLOWS
indirect method.
DIRECT METHOD- the entity’s net cash
provided by (used in) operating activities is
obtained by adding the individual operating cash
flows and then subtracting the individual operating
cash flows.
INDIRECT METHOD- derives the net cash
provided by(use in) operating activities by
adjusting profits for income and expense items not
resulting from cash transactions.
CASH INFLOWS
 Receipts from sale of goods and
performance of services.
 Receipts from royalties, fees,
commissions, and other revenues
CASH OUTFLOWS
 Payments to suppliers of goods and
services
 Payments to employees
 Payment for taxes
 Payments for interest expense
 Payments for other operating expenses
 Investing activities include making
and collecting loans; acquiring and
disposing of investments in debit or
equity securities; and obtaining and
selling of property and equipment and
other productive assets.
 Receipts from sale of property and
equipment
 Receipts from sale of investments in
debt or equity securities
 Receipts from collections on notes
receivable
 Payments to acquire property and
equipment
 Receipts from sale of investments in
debt or equity securities
 Receipts from collection on notes
receivable
CASH FLOWS FROM FINANCING
ACTIVITIES
 Financing activities include obataing
resources from owners and creditors.
CASH INFLOWS
 Receipts from investment by owners
 Receipts from issuance of notes
payable
CASH OUTFLOWS
 Payments to owners in the form of
withdrawals
 Payments settle in notes payable

Additional reviewer <3
ACCOUNTING TUTORIAL (PART 1)
"BASIC" ACCOUNTING EQUATION"
A = L + OE
Assets = Liabilities + Owner's Equity
P100 = P60 + P40
"CHARACTERS" 🙂
a. BUSINESS = "Ikaw"
b. ASSET = Pag-aari "ng business"
c. LIABILITY = Utang "ng business" sa iba (Ex.
Bank)
d.OWNER'S EQUITY = "Utang" "ng business" sa
may-ari (owner)
#CommonMistake
Ang "Business" at ang "Owner" ay IISA.
*MALI po yan. Para maintindihan natin ang
Accounting Equation (A=L+OE), ang una dapat
nating isipin ay magkaiba ang "BUSINESS" at ang
"OWNER"
#HALIMBAWA
BUSINESS(Ikaw) = Buy & Sell ng damit
~kung ikaw si BUSINESS, kailangan mo ng "pera"
pambili ng damit.
#QUESTION
Saan manggagaling ang pera?
Answer:
a. Mangungutang sa iba (Ex. Bank) P60
b. "Mangungutang" sa may-ari or owner P40
P60 + P40 = P100
Ang pera na ngayon ni "Business" ay P100
Business:
A = P100 (Pera/Asset)
L = P60 (Utang sa Bank)
OE = P40 ("Utang" sa Owner)
In simple words, ang Pera ng Business na P100
(ASSET):
~ay galing sa utang sa Bank P60 (LIABILITY), at
galing sa "utang" sa Owner P40 (OWNER'S
EQUITY)
A = L + OE
P100 = P60 + P40
#REMINDER
~In Form, parang ISA lang ang "Business" at
"Owner"
~Pero in Substance, IKAW lang si " BUSINESS"
(at "parang" pinautang ka lang ng sarili mo)
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
"DEBIT AND CREDIT"
1. Bumili ka ng Laptop at nagbayad ka ng P50000
DEBIT: Laptop 50000
CREDIT: Cash 50000
Nagkaroon ka ng Laptop, kaya DEBIT
Nawalan ka naman ng Cash, kaya CREDIT
NOTE: (ASSET)
Pag "nagkakaroon" ka ng Asset (or bagay) =
DEBIT
Pag "nawawalan" ka ng Asset (or bagay) =
CREDIT
..............................................
2. Bumili ka ng Laptop pero utang, P50,000
DEBIT: Laptop 50000
CREDIT: Accounts Payable 50000
Nagkaroon ka ng Laptop, kaya DEBIT
Nagkaroon ka ng utang (Accounts Payable), kaya
CREDIT
NOTE: (LIABILITY or UTANG)
Pag "nagkakaroon" ka ng utang = CREDIT
Pag "nawawalan" ka ng utang = DEBIT
#IMPORTANT
Baliktad ang ASSET at LIABILITY
(ASSET)
DEBIT: pag "nagkakaroon" ka ng Asset (or bagay)
CREDIT: pag "nawawalan" ka ng Asset (or bagay)
(LIABILITY)
CREDIT: pag "nagkakaroon" ka ng utang
DEBIT: pag "nawawalan" ka ng utang
..............................................
3. Binayaran mo na ang utang.
DEBIT: Accounts Payable 50000 Tumataas ang Equity pag mas malaki ang
CREDIT: Cash 50000 kita(revenue) kaysa sa gastos(expenses). Ang
Nawala na ang utang (Accounts Payable), kaya tawag dito ay "Net Income".
DEBIT.  Pwede rin tumaas ang Equity pag
Nawalan ka din ng Cash, kaya CREDIT. nadadagdagan ang capital (pera o gamit)
*Yehey, wala nang utang. 🙂 ng business.
.............................................. Decrease in Equity
4. Ginamit mo yung Laptop sa business mong -Bumababa ang Equity pag mas malaki ang
Accounting Tutorial. Kumita ka ng P20,000 pero gastos(expenses) kaysa sa revenue or kita. Ang
"pautang". tawag dito ay "Net Loss".
DEBIT Accounts Receivable 20,000 -Pwede rin bumaba ang Equity pag ibinalik na ang
CREDIT Service Income 20,000 capital (pera o gamit) sa may-ari. (Withdrawal by
Nagkaroon ka ng "pautang"(Asset siya kasi the owner)
makokolekta mo siya), kaya DEBIT
Nagkaroon ka din ng kita o income, kaya CREDIT. Normal Balances:
NOTE: (INCOME or KITA) DEBIT (DEAL)
Pag "nagkakaroon" ka ng income = CREDIT D-ividends (Drawings)
.............................................. E-xpenses
5. Nakolekta mo na yung pautang mo sa tinuruan A-sset
mong estudyante P20,000. L-osses
DEBIT Cash 20000 CREDIT (GIRLS)
CREDIT Accounts Receivable 20000 G-ains
Nagkaroon ka ng Cash, kaya DEBIT I-ncome
Nawalan ka ng pautang (Accounts Recevable), R-evenues
kaya CREDIT L-iabilities
............................................... S-tockholder's (or Owner's) Equity
6. Nagbayad ka ng P10,000 sa inuupahan mong
lugar para sa tutorial.
DEBIT Expense 10000 ACCOUNTING TUTORIAL (Part 2)
CREDIT Cash 10000 "ASSETS"
Nagkaroon ka ng gastos(expense), kaya DEBIT PAALALA: "Mahaba"
Nawalan ka din ng cash, kaya CREDIT. ~BAWAL basahin ng mga taong ayaw magka-
NOTE: (EXPENSE or GASTOS) IDEA sa Accounting 🙂
Pag "nagkakaroon" ka ng gastusin = DEBIT It takes time to Learn and Understand.
~~~~~~~~~~~~~~~~~~~~~~~~~~~ The key is "REPETITION. (basahin lamang po ng
Point of view of the BUSINESS: maraming beses) 🙂
Increase in Asset You need Patience, Perseverance.. Sipag, Tiyaga
Nagkakaroon ng asset ang business kasi pwedeng (at Dasal na rin) 😇
-nanggaling sa inutang niya (ito ang pautang or Tip:
investment ng creditors) "Don't MEMORIZE, INTERNALIZE" 😊
-nanggaling sa owner (ito ang initial or additional ~~~~~~~~~~~~~~~~~~~~
investment ng owner) Topic: "ASSETS"
-galing sa serbisyo/benta ~~~~~~~~~~~~~~~~~~~~
Decrease in Asset #REVIEW
Nawawalan naman ng asset ang business kasi Assets = Liabilities + Owner's Equity
pwedeng CHARACTERS" 🙂
-nagbayad siya ng utang a. BUSINESS = "Ikaw"
-ibinalik na yung capital sa owner (withdrawal by b. ASSET = Pag-aari "ng business"
the owner) c. LIABILITY = Utang "ng business" sa iba (Ex.
-may mga gastusin o expenses Bank)
Equity/Capital = Investment + Revenue - Expenses d. OWNER'S EQUITY = "Utang" "ng business" sa
– Drawings (Withdrawal) may-ari (owner)
Increase in Equity Tinawag po nating "Utang" or "Obligation" ang
Owner's Equity/Capital dahil ang point of view
natin ay si "Business"
Dahil na kay BUSINESS ang mga (dahil may tinatawag tayong "Normal operating
ininvest/contributions/puhunan ni Owner, parang cycle")
may "Utang" si BUSINESS dahil may "obligation" ~~~~~~~~~~~~~~~~~~~~~~~~~~
siyang ibalik ang mga yan sa may-ari/owner. Q: ANO BA ANG MGA HALIMBAWA NG
Again, our POINT of VIEW is the "Business" (not "CURRENT ASSETS"?
the owner po) ANS:
** Current Assets:
Magkaiba/hiwalay ang "Business" at "Owner" -Cash
("Entity" Concept) -Trading Securities (Marketable Securities) (Fair
1. Business = as if an "Artificial being" (our value through Profit or Loss) (Short-term
POINT OF VIEW) Investment)
2. Owner = Human being -Accounts Receivable
~~~~~~~~~~~~~~~~~~~~~~~ -Allowance for Doubtful Accounts (Allowance for
#START Bad debts)
~~~~~~~~~~~~~~~~~~~~~~~ -Notes Receivable
ASSETS: -Merchandise Inventory*
A. Current Assets: -Accrued "_____" Income
-Cash -Prepaid Expenses
-Trading Securities (Marketable Securities) (Fair a. (Supplies/Office Supplies/Store Supplies*)
value through Profit or Loss) (Short-term b. (Prepaid Rent, Prepaid Salaries, etc.) - ang
Investment) keyword ay "PREPAID"
-Accounts Receivable -Advances "TO" Employess (Advances to
-Allowance for Doubtful Accounts (Allowance for Suppliers*)
Bad debts) -Other "current" assets***
-Notes Receivable **
-Merchandise Inventory* 1. "CASH"
-Accrued "_____" Income A = L + OE
-Prepaid Expenses 100 =60 + 40
a. (Supplies/Office Supplies/Store Supplies*) Si Business(Ikaw) ay may perang P100 ngayon.
b. (Prepaid Rent, Prepaid Salaries, etc.) - ang (P60, utang sa bank)
keyword ay "PREPAID" (P40, utang sa owner)
-Advances "TO" Employess (Advances to Ano ang tawag sa P100?
Suppliers*) Yan po ay CASH.
-Other "current" assets CASH = P100
B. Noncurrent Assets *"CURRENT asset" siya, kasi pwede mo gastusin
-Land "anytime" (1 year or less)
-Building **
-Machinery and Equipment 2. "ACCOUNTS RECEIVABLE"
-Furniture & Fixtures ASSUME: Ang "line of busines" mo ay
-Accumulated Depreciation "pagpapautang"
-Intangible Assets Ngayon, si Business ay nilapitan ng isang kaibigan.
-Other "noncurrent" assets Ang sabi niya sayo ay.. "Business, pwedeng
.................... "PAUTANG"?
Ang ASSET ay nahahati sa dalawang Dahil may P100 Cash ka, ang sabi mo ay " Sige,
classifications. pauutangin kita.
1. "Current" Assets At yun ang nangyari. Inabot mo ang P100 sa kanya
2. "Noncurrent" Assets at walang natira sa iyo.
CURRENT = SHORT-TERM (generally, "1 year Tanong: Magkano na ang asset mo? Zero o P100
or less"). pa rin?
NONCURRENT = LONG-TERM (generally, Sagot: P100 pa rin.
"more than 1 year") Oo, nawala yung P100 kaya parang walang asset.
*Siyempre, pag sinabing "general", may exception. Pero nagkaroon ka naman ng "PAUTANG". Ang
Ibig sabihin, pwedeng hindi masunod yung guide pautang ay hindi nahahawakan pero asset mo pa rin
na "1 YEAR" siya.
Ang tawag sa PAUTANG na yan ay "ACCOUNTS
RECEIVABLE". Receivable kasi may "mare-
receive" kang bayad o pera.
**
3. "ALLOWANCE FOR DOUBFUL
ACCOUNTS"
May experience ka dati na laging "kalahati" lang
kung magbayad itong kaibigan mo (Mabait ka lang
talaga kaya lagi mo siyang pinapautang).
TAKE NOTE: Hindi pa siya nagbabayad sa
inutang niyang P100.
Pero iaanticipate mo na yung hindi niya
mababayaran. Ang tawag dito ay "Allowance for
Doubtful Accounts". Iaanticipate or ire-record mo
nang "Allowance for Doubtful Accounts" yung
kalahati na P50 (P100/2=P50)
Simple Math lang ang accounting di ba? pa divide-
divide ka lang. 🙂
SUMMARY:
Pautang (Accounts Receivable-AR) P100
Anticipated na di babayaran (Allowance for
Doubtful Accounts-ADA) P50
P100(AR)-P50(ADA)
= P50 (ito na lang ang sa tingin mong makokolekta
mo sa future). In Accounting, "NRV or Net
Realizable Value" ang tawag dito.
Ang ACCOUNTS RECEIVABLE (or Pautang) ay
pwede ring manggaling sa "services rendered", na
hindi mo pa nakokolekta yung bayad ng client or
customer mo.
**
5. "TRADING SECURITIES" (Marketable
Securities) (Fair value through Profit or Loss)
(Short-term Investment)
Si Business(IKAW) ay may P100 ngayon
Ang P100 ay ININVEST.
Pag sinabing ininvest, parang "PAUTANG" din
yan. Ipapahawak mo muna sa iba yung pera mo
para kumita or madagdagan (Take note: pwede rin
na mabawasan)
Pwede ka mag-invest(or magpautang) sa dalawang
ito.
~DEBT Securities (dito, pwede madagdagan ang
pera mo ng tinatawag na "INTEREST")
~EQUITY Securities (dito, pwede madagdagan
ang pera mo ng tinatawag na "DIVIDEND" and
"PRICE APPRECIATION)
Example:
Nag-invest ka ng P100. So nawalan ka ng P100.
After ng ilang buwan, binawi mo na yung pera at
naging P120.
Paki compute. Magkano po ang sobra?
P120-P100=P20
Ang tawag po sa sobrang P20 ay INTEREST(pag
debt security), or DIVIDEND/PRICE
APPRECIATION(pag equity security)
*Simple Illustration lang po ito 🙂
(Wag muna sa komplikado)
Kailan siya naging TRADING SECURITIES?
Yun ay nung time na nag-invest ka.
Nag-invest ka at nawalan ka ng pera. Pero
nagkaroon ka naman ng "short-term investment"
(parang pautang din) na ang tawag ay TRADING
SECURITIES.
**
6. "MERCHANDISE INVENTORY"
Si Business (IKAW), ay may P100.
Pinambili mo ng "DAMIT (assuming ang business
mo ay "BUY & SELL" or "Merchandising") para
ibenta sa mas mahal na halaga.
BUY: Damit P100
SELL: P120
P120-P100=P20.
Kumita ka ng P20.
Ano ang tawag dun sa DAMIT na binibenta mo?
*Answer: MERCHANDISE INVENTORY
**
7. "PREPAID EXPENSE"
Si Business (IKAW), ay may P100.
Pumunta ka sa 7eleven at pinambili mo ng LOAD.
Globe or SMART? (ikaw na po mamili 🙂 )
Nung mga oras na inabot mo yung bayad sa
cashier, nawalan ka ng P100 Cash. Pero nagkaroon
naman ng P100 load ang celllphone mo.
Ano yung tawag sa P100 load.
*Answer: Prepaid Expense
PREPAID EXPENSE:
~PAID but not yet incurred.
"Bayad na" pero "di pa nagagamit"
Paano kung nagtext ako at nabawasan ng Piso?
~Ang PREPAID EXPENSE mo ay P99 na lang
(P100-P1)
In short, ang PREPAID EXPENSE ang yung
amount ng load na "HINDI MO PA
NAGAGAMIT".
~Ganun din pag bumili ka ng ballpen, pencil, or
yung mga nabibiling "SUPPLIES" sa NATIONAL
BOOKSTORE, "Prepaid Expense" din ang tawag
dun.
**
8. "ADVANCES TO EMPLOYEES"
P100, pinautang sa empleyado. Ang pambayad ay
ibabawas na lamang sa kanyang sweldo.
Ang tawag: ADVANCES TO EMPLOYEES
**
9. "NOTES RECEIVABLE"
P100, pinautang pero may kasulatan L-A-N-D
(PROMISSORY NOTE)-at kumikita ng L-ove (of GOD)
"INTEREST. A-lways "Appreciate" And
Ang tawag: Notes Receivable N-ever
** D-epreciate 🙂
10. "ACCRUED INCOME" You: Yan ba talaga ang meaning ng Land?
Nagpapaupa ka(ikaw ang may-ari) ng isang room Me: Sa ACCOUNTING, siyempre hindi. 🙂
for rent. Pinapaalala lang namin sayo na wag mong
Ang paupa mo ay P100 per month. kalimutan si God. Alam mo ba na alam Niya ang
Walang ka pang natatanggap na pera kahit lahat ng sakripisyo mo?
magkano(Advance man or Deposit) Naniniwala kami na lahat ng magaganda at di
Lumipas ang isang buwan. May kinita ka nang magagandang nangyayari sa buhay mo ay
P100 para sa isang buwang upa. nakadisenyo. Disenyo na kailangan mong
Pero hindi mo pa natatanggap yung pera. pagdaanan para "makumpleto" ka. 😊
Kumita ka na, Pero hindi pa natatanggap yung Example:
pera. Alam mo yung "PUZZLE" di ba?
Ang tawag: ACCRUED INCOME Nilalaro ko ito nung bata ako. Pinagdidikit-dikit ko
(Earned but not yet received) yung mga piraso para mabuo ang magandang
Kumita na, hindi pa natatanggap yung pera larawan.
*Ito po ay isang uri din ng RECEIVABLE (Parang Ganun din si God sayo. Ang mga piraso ay yung
ACCOUNTS RECEIVABLE) dahil may "mare- magaganda at di magagandang nangyayari sa
receive" kang pera. buhay mo. Na kailangan mong maranasan, para sa
~~~~~~~~~~~~~~~~~~~~~~~~ dulo ay maging "magandang larawan" ka. Maging
#NEXT TOPIC SUCCESSFUL ka. 🙂
Ang next topic ay NONCURRENT ASSETS. #TEKA-TEKA, mabalik nga tayo sa Accounting
Q: ANO BA ANG EXAMPLES NG 🙂🙂🙂
NONCURRENT ASSETS APPRECIATE? DEPRECIATE? Ano yun?
ANS: APPRECIATE:
PROPERTY, PLANT AND EQUIPMENT or PPE ~Ito ba yung pag may ginawa kang mabuti sa
(or FIXED ASSET) kaibigan mo, tapos na-APPRECIATE niya?
-Land Ay hindi po. 🙂
-Building Appreciate(Appreciation) means "increase in
-Machinery and Equipment value".
-Furniture & Fixtures Example:
-Accumulated Depreciation(Building) Bumili ka ng Land(Lupain) sa probinsya niyo for
-Accumulated Depreciation(Machinery & P100.
Equipment After 10 years, ang value ay naging P500.
-Accumulated Depreciation(Furniture & Fixtures) Tumaas yung value.
(Take note: walang Accumulated Depreciation- From P100, naging P500. Tumaas, nag-
Land) APPRECIATE.
OTHERS: Kaya ang LAND ay isang klase ng PPE nag-
-Intangible Assets aAPPRECIATE.
-Other "noncurrent" assets **
** Q: ANO naman yung mga PPE na nagde-
Ang Noncurrent Asset ay Long-term. DEPRECIATE?
**NONCURRENT = LONG-TERM (generally, (DEPRECIATE= means lumiliit ang value habang
"more than 1 year") tumatagal)
Kaya siya "Long-term" kasi ANS:
-matagal ang buhay niya and/or 2. Building (alam niyo na ito)
-matagal mo siya pwedeng magamit or 3. Machinery and Equipment (Ex. Computer,
mapakinabangan Aircon, etc)
** 4. Furniture & Fixtures (Ex. Table, Chair, Wall
1. "LAND" decorations, etc)
Ito ang "FAVORITE asset" ko kasi ang ganda ng Ano naman ang "ACCUMULATED
meaning niya. DEPRECIATION"?
Example na lang natin yung BUILDING ng school ~~~~~~~~~~~~~~~~~~~~
niyo. Kunwari, 10 years ang buhay niya. Q: Pag wala ka nang maintindihan at di ka na nag
BUILDING: eenjoy sa ACCOUNTING TOPICS, di na ba para
Cost: P100 sayo ang Accountancy?
Life: 10 years **
P100 / 10 years = P10* (Depreciation or pagliit ng A: Let me give you an ANALOGY.
value) For example, may "Boyfriend or Girlfriend" ka.
End of: Madalas kayong mag-away kasi hindi na kayo
Year 1 100-10*=90 (remaining value) magkaintindihan.
Year 2 90-10*=80 Pag ganun ba, hindi na kayo pwedeng
Year 3 80-10*=70 magkatuluyan?
Year 4 70-10*=60 -syempre, pwede pa rin po. Kailangan mo lang
Year 5 60-10*=50 pag-aralan ang ugali niya, at dapat marunong kang
Year 6 50-10*=40 "mag-SACRIFICE", "mag-ADJUST" at "mag-
Year 7 40-10*=30 BALANCE." ❤️
Year 8 30-10*=20 Ganun din po sa Accounting topics. Dapat po ay
Year 9 20-10*=10 may gagawin ka para maintindihan mo siya. ☺
Year 10 10-10*=0 (remaining value) **
I hope, nasundan niyo. YOU: Sir.. di po ako maka-relate. SINGLE pa po
Kung napansin mo, naubos or naging zero ang eh
value sa Year 10. ME: Edi JOWAin mo muna si ACCOUNTING
Kaya ang tawag na sa BUILDING ay "FULLY 😄😄😄
DEPRECIATED". Or simply, wala nang value. ~~~~~~~~~~~~~~~~~~~~
Question: #START
Nasaan yung "Accumulated Depreciation". Simulan natin sa "OWNER'S EQUITY"
Answer: - INITIAL INVESTMENT by the owner
Ito yung naipon or "na-aacumulate" na pagbaba ng - ADDITIONAL INVESTMENT by the owner
value - REVENUE / INCOME of the business
*Hindi namin ipapaliwang ang susunod(kasi ang - EXPENSES of the business
gusto namin ay kayo ang mag-ANALYZE) - DRAWINGS / WITHDRAWAL by the owner
End of Isa-isahin natin yan mamaya. 😊
YEAR 1 Accumulated Depreciation = 10 ~~~~~~~~~~~~~~~~~~~~
(P100-90) "BASIC" ACCOUNTING EQUATION
YEAR 2 Accumulated Depreciation = 20 A = L + OE
(100-80) or (10+10) Assets = Liabilities + Owner's Equity
YEAR 3 Accumulated Depreciation = 30 P100 = P60 + P40
(100-70) or (10+10+10) **
YEAR 4 Accumulated Depreciation = 40 "Ibahin" natin ang EQUATION
(100-60) or (10+10+10+10) A - L = OE
YEAR 5 Accumulated Depreciation = 50 Assets - Liabilities = Owner's Equity
YEAR 6 Accumulated Depreciation = 60 P100 - P60 = P40
YEAR 7 Accumulated Depreciation = 70 Nasundan ba?
YEAR 8 Accumulated Depreciation = 80 **
YEAR 9 Accumulated Depreciation = 90 Ang ibig sabihin nito ay:
YEAR 10 Accumulated Depreciation = 100 Sa ASSETS na P100,
~~~~~~~~~~~~~~~~~~~~~~ "priority" na mabayaran muna ang LIABILITIES
"INTANGIBLE ASSETS" sa Creditors na P60.
Examples: Kaya ang matitira na lang para sa OWNER ay P40.
1. Patent (inventions) **
2.Copyright (Books, musical composition) Kung hahatiin or ibi-break down natin yung natira
3.Trademark(Logo, Brand name) sa owner na P40, ito po ay ang mga sumusunod (1
4. Franchise (Jollibee, Mcdo, Starbucks, 7eleven, to 5):
etc) (PERO this time, let us change our POINT OF
ACCOUNTING TUTORIAL (PART 3) VIEW)
"LIABILITIES" AND "OWNER'S EQUITY"
(Isipin mo naman ngayon na IKAW ang
"OWNER")
(Gagawin lang natin 'to para mas madali mong
maunawaan)
Kung ikaw si OWNER, tanungin mo lang ang sarili
mo:
"Kung ihihinto ko na ang Business ko, ano kaya
ang mababawi ko galing sa business ko?
1. "INITIAL INVESTMENT" by the owner.
Nang magtayo ka ng negosyo, yan ang kauna-
unahang binigay mong puhunan. Pwedeng pera,
pwedeng gamit, etc. Investments or contributions
mo ito "before operations"
2. "ADDITIONAL INVESTMENT" by the owner.
Dagdag-puhunan. Binigay mo ito "during
operations".
Maaaring sa unang taon ay sobrang dami agad ng
customers mo kaya naman nagdagdag ka ng
puhunan. Yung dagdag-puhunan na yan ay ginawa
mo "during operations" ng business mo.
* BASIC!!! Kayang-kaya mo!
3. "REVENUE" or "INCOME
"Kita" ng business mo
4. "EXPENSES"
"Gastusin" ng business mo
Sa 3 & 4, ang dapat na goal ay mas malaking
REVENUE kaysa EXPENSE.
Example:
a) Revenue - Expense = Net INCOME
20 - 15 = 5
b) Revenue - Expense = (Net LOSS)
15 - 20 = -(5)
(between the two, better ang Net INCOME)
Simple MATH lang ang Accounting di ba? 😄
* Panindang damit = Liabilities + Owner's equity
5. "DRAWINGS / WITHDRAWAL" of the owner
Parang sa ATM card. Pag nagwithdraw ka, may
kinuha ka
DRAWINGS or Temporary withdrawal - ito ang
tawag pag ang kinuha mo ay yung KITA ng
business mo (Net INCOME)
PERMANENT WITHDRAWAL - ito ang tawag
pag ang kinuha mo ay ang INVESTMENT mo
(yung 1 & 2)
~~~~~~~~~~~~~~~~~~~~
EXAMPLE:
Initial investment P50
Additional investment P30
Revenue 20
Expenses 15
Drawings 45
* Ibabayad sa Owner = 50*
Q: How much ang NET INCOME
A: Revenue - Expenses = Net Income
20 - 15 = 5
Answer is 5
*
Q: How much ang OWNER'S EQUITY?
A: Beginning Capital(Initial investment) +
Additional investment + Net income - Drawings =
Ending Capital (Owner's equity)
50 + 30 + 5 - 45 = P40
Answer is P40.
*YUNG P40, yan na lang ang portion ng asset na
pwedeng MABAWI ng owner.
**
Supposedly, ang "mababawi" niya dapat ay yung
INITIAL AND ADDITIONAL INVESTMENT
niya (50+30) at yung NET INCOME ng business
(5).
50 + 30 + 5 = 85.
Kaya lang, may "actual" DRAWINGS siyang P45.
Kaya ang natira na lang is 40 (85-45).
*GRABE na 'to.. Plus(+) Minus(-) lang pala ang
Accounting 😄
**
If ever mag-decide ang owner na ihinto na ang
business ngayon, P40* na lang ang mababawi niya.
*Pero pwede pang mabago ang amount na yan pag,
"na-convert into cash" ang mga ASSETS bago
ibalik sa owner.
Yan ay dahil sa tinatawag na FAIR VALUE and
NET REALIZABLE VALUE ng assets (in simple
words, "Today's value").
HALIMBAWA:
*Let's go back to the POINT OF VIEW of the
"BUSINESS"
A = L + OE
100 = 60 + 40.
Yung halaga ng panindang damit ay P100.
Q: Pwede bang ipambayad yung DAMIT(P100)..
sa LIABILITIES (P60) at sa OWNER (P40)?
Pwede po.. "Gugupitin na lang.." WOW magic....
😄
Siyempre, alam ko hindi yan ang isasagot mo.
Ang gagawin mo ay, ibebenta yung damit para
maging PERA or CASH. At yung cash na yun ang
ibabayad sa LIABILITIES at sa OWNER.
Cost ng Damit: P100
A. Nabenta for P100 CASH.
Ibabayad sa Liabilities = P60
Ibabayad sa Owner: P40*
B. Nabenta for P110 CASH
Ibabayad sa Liabilities = 60
C. Nabenta for P80 CASH
Ibabayad sa Liabilities = 60
Ibabayad sa Owner = 20*
*Priority munang mabayaran ang LIABILITIES, ACCOUNTS = Utang
bago ang Owner. PAYABLE = Babayaran pa (hindi pa bayad)
~~~~~~~~~~~~~~~~~~~~ ACCOUNTS PAYABLE = "Utang" na "hindi pa
NOTE THESE FORMULAS: bayad"
1. Revenue and Income - Expenses = Net Income Utang ng business sa mga tinatawag na "Trade"
or (Net Loss) creditors.
2. Beginning Capital + Additional Investment - **
Permanent Withdrawal + Net Income - Drawings = B. Notes Payable (SHORT-term)
Ending Capital NOTES = Utang "na may kasulatan" (Promissory
3. Beginning Capital + Additional Investment - Note)
Permanent Withdrawal - Net Loss - Drawings = PAYABLE = Babayaran pa (hindi pa bayad)
Ending Capital TANDAAN:
4. Beginning Capital + Additional Investment - In paying NOTES PAYABLE, may "dagdag-
Permanent Withdrawal + Revenue and Income - bayad" na "INTEREST" (Interest Expense)
Expenses - Drawings = Ending Capital **
*Capital = Owner's Equity C. Accrued "_______" Expense
~~~~~~~~~~~~~~~~~~~~~~~~~~~ ACCRUED: Hindi pa Bayad
REVENUE or Income "vs" EXPENSE EXPENSE: Gastusin
A. INCOME = Earnings or Kita' ACCRUED EXPENSE = "Hindi pa bayad" na
STORY 1: "Gastusin"
Ang Business ay "Salon". May isang empleyado na EXAMPLE:
ang pangalan ay "Alma". -MERALCO Bill
Nang mag-open ang Salon, may pumasok na isang (Hindi ka pa bayad... sa gastusin(electricity) na
customer at nagpa-haircut. nagamit or na-consume ng business mo)
Pagtapos ay nakakolekta ang "Business" ng P100 **
dahil sa HAIRCUT. D. Unearned "_____" Income (Advances from
QUESTION: Customers)
Ano ang tawag sa P100? UNEARNED INCOME
ANSWER: ~nakatanggap ng CASH (Pera)
*INCOME = P100 (INCOME = Earnings or Kita') ~pero hind pa INCOME (Kita')
B. EXPENSE = Cost or Gastos STORY(new)
STORY 2: Pumasok si customer sa Salon mo para
Dahil nagtatrabaho si "Alma" sa Business, "MAGBAYAD" ng P100.
kailangan siyang swelduhan. Ang "binayad" kay (Pero "BUKAS" pa siya magpapagupit)
Alma ay P70. BUSINESS (Ikaw)
QUESTION: ~nakatanggap ng CASH (Pera)
Ano ang tawag sa P70? ~pero hind pa INCOME kasi "BUKAS" pa
ANSWER: magpapagupit.
*EXPENSE = P70 (EXPENSE = Cost or Gastos) TANDAAN:
#SUMMARY May pagkakaiba ang UNEARNED
INCOME: P100 INCOME(General term) at ADVANCES FROM
(EXPENSE): P70 CUSTOMERS(specific for customers)
= NET INCOME: P30 ~~~~~~~~~~~~~~~~~~~~
~~~~~~~~~~~~~~~~~~~~~~~~~~~~ #NoncurrentLiabilities
#NextTOPIC E. Notes Payable (LONG-term)
LIABILITIES Pareho sa (B.), pero BABAYARAN NG "HIGIT"
** SA ISANG TAON.
Classification of LIABILITIES **
~Current Liabilities F. Bonds Payable (LONG-term)
babayaran within 1 year (1 year o less) Pangmatagalang kontrata ng pagkakautang. Mga
~Noncurrent Liabilities lima hanggang sampung taon bago bayaran.
babayaran beyond 1 year (more than 1 year) **
-------------------------- G. Mortgage Payable
#CurrentLiabilities MORTGAGE: Utang na may SANLA
A. Accounts Payable PAYABLE: Babayaran pa (hindi pa bayad)
STORY:
Bumili ka ng LAND pero di pa bayad (Utang-
Mortgage Payable)
*pero yung Land ay nakaSANLA (Collateral)
Anong meaning ng nakaSANLA(Collateral)?
A: Pag hindi nakabayad sa utang na Mortgage
Payable, yung LAND(Collateral) ay ibebenta.
Yung pera galing sa benta ay gagamitin para
mabayaran na yung Utang na Mortgage Payable.
*Kung halimbawang nag-LOAN naman sa bangko,
pwede ring gawing Collateral ang other real
properties ng business.
ACCOUNTING TUTORIAL (Part 4)
"BASIC ACCOUNTING"
"FORMS" OF BUSINESS ORGANIZATION
1. SINGLE/SOLE PROPRIETORSHIP is a
business owned by only ONE INDIVIDUAL.
2.PARTNERSHIP is an association of "TWO or
MORE" persons who bind themselves to contribute
money, property or industry(services) to a common
fund, with the intention of dividing the profits
among themselves.
3. CORPORATION is an artifical being(not
natural, like human being) created by operation of
LAW, having the rights of SUCCESSION, and the
POWERS AND ATTRIBUTES expressly
authorized by law or incident to its existence.
4. COOPERATIVE is a legal entity owned and
democratically controlled by its members.
Members often have a close association with the
enterprise as producers or consumers of its
products or services, or as its employees.
~~~~~~~~~~~~~~~~~~~~~~~~~~
"TYPES" OF BUSINESS
4.SERVICE BUSINESS. This business renders
services to customers or clients for a fee.
(Sale of SERVICES)
5. MERCHANDISING/TRADING BUSINESS.
This business buy goods or commodities and sell
them at a profit.
(Sale of GOODS) (Buy=>Sell)
6. MANUFACTURING BUSINESS. This business
makes "finished goods" from "raw materials" or
unassembled parts. It "produces" the goods that it
sells.
(Sale of GOODS) (Buy=>"Produce"=>Sell)
~~~~~~~~~~~~~~~~~~~~~~~~~~
"ELEMENTS" of FS (Financial Statements)
7. INCOME/REVENUE is the gross INFLOW of
economic benefits during the period in the form of
INFLOWS or enhancements on assets or decrease
in liabilities that result in increase in equity, other
than those relating to contributions from the owner
or owners.
8. EXPENSE is defined as the gross OUTFLOW of
economic benefits during the period in the course
of ordinary activities when these OUTFLOWS
result in DECREASE in equity other than those
relating to distribution to owners.
~In simple terms, these are COSTS incurred to
produce income/revenue.
9. ASSETS are defined as RESOURCES
controlled by the enterprise as a result of past
transactions and events and from which future
economic benefits are expected to flow to the
enterprise.
~In simple terms, these are PROPERTIES owned
by the business.
10. LIABILITIES are defined as present
OBLIGATIONS of an enterprise arising from past
transactions or events, the settlement of which is
expected to result in an outflow from the enterprise
of resources embodying economic benefits.
~In simple terms, these are the financial
obligations or DEBTS of the business.It is also
described as CLAIM of the CREDITORS on the
Assets of the enterprise.
11. OWNER'S EQUITY/CAPITAL represents the
CLAIM of the OWNER on the Assets of the
business. It is the RESIDUAL INTEREST in the
Assets of the business after deducting all its
liabilities.
~~~~~~~~~~~~~~~~~~~~~~~~~~~
Important: CAPITAL ACOUNT (or EQUITY
ACCOUNT) consists of the following:
a. "Owner's Capital"
b. "Owner's Drawing"
~~~~~~~~~~~~~~~~~~~~~~~~~~
EXAMPLES of "ASSET" Accounts
1. CASH is any medium of exchange that a bank
will accept at face value. It includes coins and
currencies, checks, money orders and bank drafts.
Current asset.
2. TRADING SECURITIES are debt and equity
securities that are purchased with the intent of
selling them in the "near term" or very soon.
Current asset.
3. ACCOUNTS RECEIVABLES are claims
against debtors or customers arising from services
rendered on account and sale of merchandise on
account.
Current asset.
4. ALLOWANCE FOR DOUBTFUL ACCOUNT
relates to the company's receivables which might
not be collected.
Current asset. (Contra-Asset)
#NOTE: "CONTRA-ASSET" account is the
opposite of "ADJUNCT" account
In layman's term,
CONTRA = deducted
ADJUNCT = added (Example: Freight In)
5. NOTES RECEIVABLE are claims supported by
promissory note.
Current asset, if short-term. (Also a Current Asset
if the problem is SILENT)
Noncurrent asset, if long-term.
6. MERCHANDISE INVENTORY are goods on
hand and are available for sale.
Current asset.
7. ACCRUED INCOME. Earned but not yet
received/collected.
Current asset.
8. ADVANCES TO EMPLOYEES. Cash received
by employees to be deducted from their salaries in
the future.
Current Asset.
9. PREPAID EXPENSES are expenses PAID IN
ADVANCE by the business ("Paid but not yet
incurred").
Current asset.
10. OFFICE/STORE SUPPLIES are being used by
the business like papers, pens, pencils, folders,
staplers, etc.
Current asset.
11. LAND is an asset that is not subject to
depreciation. It appreciates (value increases) as
time goes by.
Noncurrent asset.
12. BUILDING can be acquired by PURCHASE or
by means of CONSTRUCTION. Construction
costs may include materials, labor, overhead,
permit or license, Architect fee, Excavation cost,
etc.
Noncurrent asset.
13. MACHINERY & EQUIPMENT includes
computers, air-conditioning units, electric fans,
freezers, refrigerators, truck, etc.
Noncurrent asset.
14. FURNITURE AND FIXTURES includes
tables, chairs, filing cabinets, etc.
Noncurrent asset.
15. ACCUMULATED DEPRECIATION. "Total"
depreciated cost of a depreciable asset.
Noncurrent asset. (Contra-asset)
16. INTANGIBLE ASSET is an identifiable non-
monetary asset "without physical substance" or
have no physical appearance but are expected to
provide future economic benefits to the company.
Noncurrent asset.
~~~~~~~~~~~~~~~~~~~~~~~~~~~~
"LIABILITIES"
1. ACCOUNTS PAYABLE are amounts due to
creditors for ASSETS ACQUIRED on account.
(Current Liab)
2. NOTES PAYABLE(short-term) are amounts
due to creditors "within" one year, evidenced by
WRITTEN PROMISE to pay.
(Current Liab)
3. ACCRUED EXPENSES are amounts owed to
others for UNPAID EXPENSES.
(Current Liab)
4. UNEARNED INCOME is revenue collected by
the business in advance. (Received/ collected IN
ADVANCE, but not yet earned).
(Current Liab)
5. CURRENT PORTION OF LONG-TERM
DEBT are portions of mortgage, notes, bonds and
other long-term indebtedness which are to be paid
"WITHIN ONE YEAR" from the Balance Sheet
date (or end of Reporting Period).
(Current Liab)
6. NOTES PAYABLE (long-term) are amounts
due to creditors "beyond" one year, evidenced by
WRITTEN PROMISE to pay.
(Noncurrent Liab)
7. BONDS PAYABLE is a liability owed by a
company to obtain substantial sums of money from
lenders to finance the acquisition of equipment and
other needed assets.
(Noncurrent Liab)
8. MORTGAGE PAYABLE. Long-term debt of
the business 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 asset TO BE SOLD to enable the entity
to settle the claim.
(Noncurrent Liab)
~~~~~~~~~~~~~~~~~~~~~~~~~~
"OWNER'S EQUITY"
9. CAPITAL. This account is used to record the
"ORIGINAL and ADDITIONAL
INVESTMENTS" of the owner of the business
entity. It is increased by the amount of PROFIT
earned during the year or is decreased by a LOSS.
#NOTE: This account is also used to record the
"PERMANENT withdrawal" of the owner.
(PERMANENT withdrawal means withdrawal of
INVESTED capital)
10. DRAWINGS/TEMPORARY
WITHDRAWALS. Charged to this account are
cash or other assets withdrawn by the owner 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 end of the accounting period to
close income and expenses. This account shows the
profit or loss for the period before closing to the
capital account.
~~~~~~~~~~~~~~~~~~~~~~~~~~ CREDIT (LOR)
True or False L - iabilities
12. The excess of INCOME over EXPENSES is O - wner's equity
called "NET INCOME". True R - evenue
13. The excess of EXPENSES over INCOME is ~~~~~~~~~~~~~~~~~~~~~~~~
called "NET LOSS". True *For DECREASES, just do the "OPPOSITE"
14. INCOME "increases" Owner's Equity. True 24. DECREASE in ASSET..... CREDIT
15. EXPENSE "decreases" Owner's Equity. True 25. DECREASE in LIAB..... DEBIT
16. ADDITIONAL INVESTMENT "increases" 26. DECREASE in OE..... DEBIT
Owner's. True 27. DEREASE in INCOME..... DEBIT
17. OWNER's DRAWING "decreases" Owner's 28. DECREASE in EXPENSE..... CREDIT
Equity. True 29. DECREASE in OWNER'S DRAWING.....
~~~~~~~~~~~~~~~~~~~~~~~~~~ CREDIT
DEBIT OR CREDIT DECREASE in CONTRA-ASSET..... DEBIT
Guide: 30. What is the "NORMAL BALANCE" of Cash,
A = L + OE Trading Securities, Accounts Receivables, Notes
Look at the equal sign ( = ) Receivables, Accrued Income, Supplies, Prepaid
If LEFT: Debit Expense, Land, Building, Machinery & Equipment,
If RIGHT: Credit Furniture & Fixtures..... DEBIT
(Normal Balance) 31. What is the "NORMAL BALANCE" of
18. INCREASE in ASSET..... DEBIT Accounts Payable, Notes Payable, Accrued
19. INCREASE in LIAB..... CREDIT Expense, Unearned Income, Bonds Payable,
20. INCREASE in OE..... CREDIT* Mortgage Payable..... CREDIT
Apply "FRIENDS" and "ENEMIES" of OE 32. What is the "NORMAL BALANCE" of
Who are the "Friends" of OE? Owner's Capital, Revenue or Income..... CREDIT
-Income, Revenue, Gain (CREDIT)* 33. What is the "NORMAL BALANCE" of
Who are the "Enemies" Owner's Drawing, Expense..... DEBIT
-Expense, Drawings (DEBIT) 34. What is the "NORMAL BALANCE" of
21. INCREASE in INCOME..... CREDIT Allowance for Doubtful Accounts, Accumulated
22. INCREASE in EXPENSE..... DEBIT Depreciation..... CREDIT*
23. INCREASE in OWNER'S DRAWING..... *CREDIT, because they are contra-assets
DEBIT ~~~~~~~~~~~~~~~~~~~~~~~~~~~
NOTE: Definitions, Classifications and Examples of
(INCREASE in ASSET..... DEBIT) Accounts
(INCREASE in "CONTRA-ASSET.".... I.
"CREDIT") -REAL accounts (or PERMANENT accounts)
* The real accounts are
(Normal Balance) - DEAL & GIRLS 😊 -Assets
DEBIT (DEAL) -Liabilities and
D-ividends (Drawings) -Owner’s Equity/Capital
E-xpenses Real accounts are reported in the Statement of
A-sset Financial Position(or "BALANCE SHEET"). They
L-osses are not "closed" at the end of accounting period.
CREDIT (GIRLS) --------------------------------------------------------------
G-ains -
I-ncome -NOMINAL accounts (or TEMPORARY
R-evenues accounts)
L-iabilities The nominal accounts are
S-tockholder's (or Owner's) Equity -Income/revenues
* -Expenses and
(Normal Balance) - ADE & LOR 😊 -Owner’s Drawing
DEBIT (ADE) Nominal Accounts are those that comprise the
A - sset elements of the Statement of Financial
D -rawings Performance (or INCOME STATEMENT) – the
E - xpense revenue and expenses accounts.
These accounts are called temporary because they DEBIT balances. Some common expense accounts
are "closed", or put into zero balance, at the end of are as follows:
the accounting period.  Cost of Sales – the value of merchandise sold
*Please note that Owner’s Drawing is NOT an  Supplies Expense – the amount of supplies
income statement account, but must also be closed, consumed or used by the business during the
or put into zero balance, at the end of the period. Examples: used in papers, inks, ballpoint
accounting period. pens, etc.
--------------------------------------------------------------  Salaries and Wages Expenses – the amount paid
- to service rendered by the employees in the
SUMMARY: operation of the business
REAL accounts (or PERMANENT accounts)  Insurance Expense – the amount of insurance
-Assets policy incurred during the current period.
-Liabilities Examples: premiums on building insurance, life
-Owner’s Equity insurance, plant insurance, etc.
NOMINAL accounts (or TEMPORARY accounts)  Taxes and Licenses Expenses – the cost of local
-Income/revenues as well as national taxes that are incurred and
-Expenses and required to be paid in connection with the conduct
-Owner’s Drawing of the business.
-------------------------------------------------------------- Example: Cost to acquire mayor’s permit,
- registration cost of the building, percentage tax on
II. sales, etc.
The REVENUE Accounts  Others
Revenue represents the earnings of the business "Estimated Expense"
from sales of goods or service rendered.  Doubtful Account Expenses – the estimated
Revenue accounts have normal CREDIT balance. amount of losses the uncollectible accounts arising
Below are some common revenue accounts: from credit sales of the current period. This is also
 Sales – an account used to summarize sale of called the debt expense or uncollectible account
goods of a trade or merchandising business. This expense.
includes cash sales and sales on account.  Depreciation Expense – represents the current
 Service Income – the earning derived from periodic cost for using depreciable plant assets. In
service rendered by a servicing business to its accordance with the systemic cost of depreciable
customers. This includes cash and on account asset should be allocated as expense over its useful
service. life.
 Professional Fees – the earning derived from  Others
services rendered by a professional or professional --------------------------------------------------------------
servicing firm which could be in cash or in -
collectibles to its clients. SUMMARY:
 Interest Income – the earning representing the Revenue
time value of money derived from promissory -Sales
notes received by the business, whether in cash or -Service Income
collectibles in the future. -Professional Fees
 Rent Income – the income earned from allowing -Interest Income
others to use property or facility of the business. -Rent Income
 Gain on Sales of other Assets – the income -Gain on Sales of other Assets
derived from the sales of assets used in the -Others
business operation. There is a gain on sale if the Expenses
proceeds exceed the book value or cost of disposed -Cost of Sales
asset. Examples are gain on equipment, gain on -Supplies Expense
sale investments, gain on sale of land, etc. -Salaries and Wages Expenses
 Others -Insurance Expense
-------------------------------------------------------------- -Taxes and Licenses Expenses
- -Doubtful Account Expenses
The EXPENSES Account -Depreciation Expense
Expenses are cost incurred in conducting the -Others
business activities. Expense accounts have normal "DEBIT and CREDIT" 😊
ACCOUNTING TUTORIAL - PART 5
~~~~~~~~~~~~~~~~~~~~~~~~~~
ASSETS:
Cash, Accounts Receivable, Prepaid Rent, Prepaid
Insurance, Office Supplies.
Office Building, Office Equipment, Furniture and
Fixture.
LIABILITIES:
Accounts Payable, Mortgage Payable
CAPITAL (Owner's Equity):
De Asis Capital, De Asis Drawing
REVENUES:
Service Income
EXPENSES:
Salaries and Wages Expense, Repairs and
Maintenance Expense, Taxes and Licenses
Expense
~~~~~~~~~~~~~~~~~~~~~~~~~~
#JOURNALIZING
1. Francis "opened an account " with BPI under the
TAC COMPANY name and deposited 850000
CASH. He also "invested" his two personal
COMPUTERS which he acquired a year ago for
20000 each but with a fair market value of 15000
each.
DEBIT: Cash 850000
DEBIT: Office Equipment 30000 (15000 x 2)
CREDIT: De Asis, Capital 880000
(850000+30000)
.........................................
2. PAID barangay and municipal TAXES, 3500.
DEBIT: Taxes and Licenses Expense 3500
CREDIT: Cash 3500
.........................................
3. Bought a small office CONDOMINIUM for
500000, giving 250000 CASH and signing a
MORTGAGE payable in 10 years for the balance.
DEBIT: Office Building 500000
CREDIT: Cash 250000
CREDIT: Mortgage Payable 250000 (500000-
250000)
.........................................
4. HIRED a secretary with monthly salary of 8500.
"No Entry"
.........................................
5. Bought office TABLES AND CHAIRS on
CREDIT from Mansion, Inc., 40000
DEBIT: Furniture and Fixture 40000
CREDIT: Accounts Payable 40000
.........................................
6. BILLED a client for SERVICES rendered,
20000.
DEBIT: Accounts Receivable 20000
CREDIT: Service Income 20000
.........................................
7. Purchases computer INK, COUPON BOND
PAPER and BALLPENS to be used in the office;
terms: CASH basis, 4500.
DEBIT: Office Supplies 4500
CREDIT: Cash 4500
.........................................
8. PAID fifty percent of the amount OWED to
Mansion, Inc. (See #5)
DEBIT: Accounts Payable 20000 (40000 x 50%)
CREDIT: Cash 20000
.........................................
9. Francis "WITHDREW" "CASH" of 50000 and
two reams of BOND PAPER worth 1000 for
personal use.
DEBIT: De Asis, Drawing 51000 (50000 + 1000)
CREDIT: Cash 50000
CREDIT: Office Supplies 1000
.........................................
10. PAID 400 for the REPAIR of one of the
computers
DEBIT: Repairs and Maintenance Expense 400
CREDIT: Cash 400
.........................................
11. RECEIVED 5000 as payment for the
SERVICES rendered to one of their clients.
DEBIT: Cash 5000
CREDIT: Service Income 5000
.........................................
12. COLLECTED one half of the AMOUNT DUE
FROM CLIENT on #6 (see #6)
DEBIT: Cash 10000
CREDIT: Accounts Receivable 10000 (20000 x
1/2)
.........................................
13. PAID "ONE YEAR RENT" for a special
machine to be used in business operations, 30000.
DEBIT: Prepaid Rent 30000
CREDIT: Cash 30000
.........................................
14. PAID "ONE YEAR INSURANCE" of the
office condominium, 25000.
DEBIT: Prepaid Insurance 25000
CREDIT: Cash 25000
.........................................
15. PAID one half of the SALARY of the secretary
(see #4)
DEBIT: Salaries Expense 4250 (8500 x 1/2)
CREDIT: Cash 4250
~~~~~~~~~~~~~~~~~~~~~~~~
#GENERAL LEDGER
- See first photo
~~~~~~~~~~~~~~~~~~~~~~~~~~~~
#TRIAL BALANCE
- See second photo
Prepared by: Admin Rose/Tutor Michael V.
"BALANCING" Note: Nabawasan ang OE(-), dahil nadagdagan ang
ACCOUNTING TUTORIAL - Part 6 EXPENSE(+)
(May "EXPLANATION" sa CAPTION ng bawat
photo) 👍 balancing 3:
~~~~~~~~~~~~~~~~~~~~ Ang "business" ay nagkaroon ng ASSET na
GUIDE: Building (500,000). Para makuha ito, siya ay
For beginners, tingin muna sa GUIDE. nagbayad ng ASSET na Cash (250000), at ang
Kung maaari ay isulat mo ito sa papel, at tingnan balanseng P250,000 ay UTANG(nagkaroon ng
habang sinasagot ang bawat items. LIABILITY).
Malilito ka sa simula, pero ulit-uliting lang
hanggang sa masanay ka na. 😊 ~~~~~
Ito yung guide (paki sulat mo na):
*ASSET ASSET:
Nagkaroon (+), DEBIT ~nagkaroon (OFFICE BUILDING 500,000
Nawalan (-), CREDIT "minus" CASH 250,000 = 250,000)
*LIABILITIES
Nagkaroon (+), CREDIT LIABILITIES
Nawalan (-), DEBIT ~nagkaroon (MORTGAGE PAYABLE)
*OWNER'S EQUITY
Nagkaroon (+) ng OE: blancing 4:
=Investment/Capital.... CREDIT 4. Wala pang nasisimulang trabaho, kaya wala pa
=Revenue or Income.... CREDIT din dapat expense para sa sweldo ng secretary.
Nawalan (-) ng OE:
= Expenses: 5. Ang "business" ay nagkaroon ng ASSET na
"Bawas"(-) sa OE, pero "Dagdag"(+) sa Furniture and Fixture, ngunit hindi pa niya ito
Expense.... DEBIT nababayaran. LIABILITY pa.
= Drawings:
"Bawas"(-) sa OE, pero "Dagdag"(+) sa ~~~~~
Drawings.... DEBIT
ASSET:
balancing 1: ~nagkaroon (FURNITURE AND FIXTURES)
Ang "business" ay nagkaroon ng ASSET, galing sa
Owner. LIABILITIES
~nagkaroon (ACCOUNTS PAYABLE)
~~~~~
balncing 5:
ASSET: Ang "business" ay nagkaroon ng ASSET (or
~nagkaroon (CASH and OFFICE EQUIPMENT) PAUTANG) galing sa rendered services (Service
INCOME)
OWNER'S EQUITY
~nagkaroon (INVESTMENT ng Owner) ~~~~~

balancing 2: ASSET:
Ang business ay nawalan ng ASSET, dahil sa ~nagkaroon (Pautang or ACCOUNTS
EXPENSES. RECEIVABLE)

~~~~~ OWNER'S EQUITY

~nagkaroon (kita or SERVICE INCOME)
ASSET:
~nawalan (CASH) balancing 6:
Ang "business" transaction na ito ay walang epekto
OWNER'S EQUITY sa TOTAL ASSETS.
~nawalan ("EXPENSES" or gastusin ng business)
Nagkaroon ka ng Supplies, nawalan ka naman ng
Cash (ng "parehong" halaga)
 Ang "business" ay nagkaroon ng ASSET (Cash)
~~~~~ galing sa rendered services (Service INCOME)

ASSET: ~~~~~
~nagkaroon (OFFICE SUPPLIES, 4,500)
ASSET:
~nawalan (CASH, 4,500) ~nagkaroon (CASH)

4,500 - 4,500 = 0 OWNER'S EQUITY

balancing 7:
Ang "business" ay nawalan ng LIABILITY kasi
binayaran na niya. Nawalan din siya ng ASSET
dahil nagbigay siya ng Cash.
~nagkaroon (kita or SERVICE INCOME)
balancing 11:
Ang "business" transaction na ito ay walang epekto
sa TOTAL ASSETS.

~~~~~ Matatandaang may PAUTANG tayo sa #6. Ngayon

ay kokolektahin na.
LIABILITY:
~nawalan (utang or ACCOUNTS PAYABLE) Nagkaroon ka ng Cash, nawalan ka naman ng
PAUTANG (Accounts receivable)
ASSET:
~nawalan(Cash) ~~~~~

balancing 8: ASSET:
Ang "business" ay nawalan ng ASSET (Cash and ~nagkaroon (CASH, 10,000)
Office supplies) dahil nag-WITHDRAW ang
owner. ~nawalan (Pautang or ACCOUNTS
RECEIVABLE, 10,000)
~~~~~
10,000 - 10,000 = 0
ASSET:
~nawalan (CASH and OFFICE SUPPLIES) balancing 12:
Same explanation in #7. 😊
OWNER'S EQUITY
~nawalan (DRAWINGS ng Owner) balancing 13:
Same explanation in #7. 😊
Note: Nabawasan ang OE(-), dahil nadagdagan ang
DRAWINGS(+) balancing 14:
Same explanation in #10. 😊
balancing 9: ACCOUNTING TUTORIAL - PART 7
Ang business ay nawalan ng ASSET, dahil sa 1. CPA Board Exams
EXPENSES. 2. Career Fields in Accounting
3. Different Accounting Areas
~~~~~ 4. Different Regulatory Bodies
~~~~~~~~~~
ASSET: 1. CPA Board Exams
~nawalan (CASH) Q: SINO ang allowed mag-take ng Philippine CPA
Board Exam?
OWNER'S EQUITY A:
~nawalan ("EXPENSES" or gastusin ng business) - Yung mga graduate sa course na BACHELOR
OF SCIENCE IN ACCOUNTANCY
Note: Nabawasan ang OE(-), dahil nadagdagan ang - Yung may GOOD MORAL CHARACTER
EXPENSE(+) - Yung hindi napatunayang guilty ng "MORAL
TURPITUDE" (like Adultery or Concubinage -
balancing 10: pakikiapid)
- Filipino citizen. 4. Different Regulatory Bodies
** A. PRC (professional Regulation Commission)
Q: Tuwing KAILAN ginaganap ang CPA Board B. PRBOA (Professional Regulatory Board of
Exam? Accountancy)
A: Dalawang beses sa isang taon. May and C. PICPA (Philippine Institute of Certified Public
October. Accountants)
** D. FRSC (Financial Reporting Standards Council)
Q: Ilan at Ano ang mga SUBJECTS sa CPA board E. IASB (International Accounting Standards
exam ? Board)
A: 6 subjects ACCOUNTING TUTORIAL - Part 8
- RFBT (Regulatory Framework for Business "ADJUSTING ENTRIES"
Transactions) Q: What are the six (6) "Adjusting Entries" of a
- TAX (Taxation) SERVICE business?
- MAS (Management Advisory Services) A:
- AUDITING (Auditing theory and Auditing 1. Accrued expense
problems) 2. Accrued income (including "Accrued Service
- FAR (Financial Accounting and Reporting) Income")
- AFAR (Advanced Financial Accounting and 3. Prepaid expense
Reporting) 4. Unearned income (including "Unearned Service
Q: Paano makapasa sa CPA board exam? Income")
A: General weighted average of 75% and above 5. Depreciation expense
(with no grades below 65% in any subject) 6. Doubtful accounts expense / Bad debt expense
** ~~~~~~~~~~~~~~~~~~~~
Q: Anong mangyayari pag ang Gen. Ave. ay above PAALALA: "Basahin"
75%, ngunit may grade na below 65% sa ibang (Kahit wag munang unawain) 😃😃😃
subject(s) Halos lahat yata ng nag-BASIC ACCOUNTING,
A: ay sa topic na ito nahirapan.
- CONDITIONAL if 75% and above ang at least 4 PERO I WANT TO "CHALLENGE" YOU. Aralin
subjects (at ang uulitin na lang ay yung subjects na mo na ito. Para pag tinuro na ni Teacher ay may
may grade below 75%) baon ka nang kaalaman at di ka na masyadong
-FAILED if 3 subjects and below lamang ang 75% mahirapan.
and above. **
*Masasabing CONDITIONAL ang status ng isang Ngayon ay gagawa muna tayo ng "SUMMARY"
examinee kapag 75% and above ang grade niya sa ng lahat ng Adjusting Entries.
at least 4 subjects (kahit na ZERO pa ang grade sa Sa mga susunod na tutorial (simula bukas) ay saka
natitirang 2 subjects). natin iisa-isahin ang bawat ADJUSTMENTS (1-6)
*Ang CONDITIONAL examinee ay kailangang Okay lang ba sayo yun???
mag-exam ulit para kunin ang di naipasang "YES" di ba?.. Wala ka namang magagawa eh.
subject(s) within 2 years mula sa exam kung saan 😄😄😄
siya na-conditional. ~~~~~~~~~~~~~~~~~~~~
~~~~~~~~~~~~~~~~~~~~ #GAME
2. Career Fields in Accounting Let me discuss the six (6) adjusting entries thru a
A. Public Accounting STORY. 😊
B. Commerce and Industry / Private Accounting **
C. Academe (Education) Bumili ka ng "OFFICE BUILDING" worth P500.
D. Government Accounting Ang building na ito ay may dalawang rooms.
~~~~~~~~~~~~~~~~~~~~ Room 1: Gagamitin sa "main business" mong
3. Different Accounting Areas tutorial.
A. Basic Accounting / Bookkeeping Room 2: Vacant (bakante siya)
B. Financial Accounting **
C. Managerial Accounting Next mong ginawa ay bumili ka ng isang
D. Auditing CELLPHONE na worth P500 din.
E. Cost Accounting **
F. Government Accounting Next ay pumunta ka sa 7 eleven para bumili ng
~~~~~~~~~~~~~~~~~~~~ PREPAID LOAD CARD worth P100.
**
Summary:
- OFFICE BUILDING P500
- CELLPHONE P500
- PREPAID LOAD CARD P100
Total: P1,100
Lahat ng ito ay ininvest mo sa itatayo mong
"ACCOUNTING TUTORIAL business". 😊
(Date: January 1, 2018)
~~~~~~~~~~~~~~~~~~~~
~~~~~~~~~~~~~~~~~~~~
#START na ng business 😊
First: Ni-register mo muna yung PREPAID LOAD
CARD sa iyong CELLPHONE.
Gagamitin mo ito para makahanap ng mga
tuturuang STUDENTS (Text, Call and Surf)
**
TUTORIAL FEE: P120 per year
- STUDENT A: nag-advance payment siya ng
P360 (good for 3 years). Dito ay nakatanggap tayo
ng P360 cash
- STUDENT B: hindi muna nagbayad
- STUDENT C: hindi muna nagbayad
**
Maya-maya ay nilapitan ka ng isang kaibigan.
Naghahanap daw siya ng mauupahan. Kaya ang
ginawa mo, pinagamit mo muna yung bakanteng
ROOM 2 bilang room for rent.
Ang usapan, P60 kada taon ang upa. At
makokolekta mo lang ang bayad at the END OF
2ND YEAR (60 + 60)
(Date: January 1, 2018)
~~~~~
SUMMARY (Jan. 1, 2018)
"ACCOUNTING TUTORIAL BUSINESS"
*"ASSETS":
- Office Building P500
- Cellphone P500
- Prepaid Expense (Load) P100
- Cash (advance from STUDENT A) P360
Note: ang "prepaid expense", gaya ng LOAD, ay
"nabayaran na" "pero di pa nagagamit"
Total assets: (500 + 500 + 100 + 360)
= P1460
*"LIABILITY":
- Unearned income (advance from STUDENT A)
P360
Note: ang "unearned income" ay isang liability.
Utang siya kasi may natanggap kang P360 cash,
ngunit hindi mo pa natuturuan si Student A (wala
pang service)
Kaya ang liability/utang (unearned income) mo kay
Student A, ay ang pagtuturo or "service".
*"OWNER'S EQUITY":
- Capital (Investments) P1100
**
A = L + OE
1460 = 360 + 1100
BALANCE! Amazing!!!! 😃😃😃
~~~~~~~~~~~~~~~~~~~~
~~~~~~~~~~~~~~~~~~~~
"ITO NA ANG ADJUSTING ENTRIES"
Q: Ano naman ang mga pwede mong KITA
makalipas ang isang (1) taon? (Date: December 31,
2018)
A:
1. "SERVICE INCOME"
Student A P120 (bayad na)®
Student B P120 (di pa rin bayad)
Student C P120 (di pa rin bayad)
**
STUDENT A: - "UNEARNED INCOME"
®Yung P360 worth of service (to be rendered in 3
years) ay tatanggalan na natin ng P120.
Ito ay dahil may "rendered services" na ngayong
taon (1 year).
Kaya sa Dec 31, 2018, P240 na lang ang hindi pa
natin nabibigay kay Student A na serbisyo.
(P240 na lang ang "unearned income")
Nakakasunod pa ba?
At the same time, kumita ka na rin ang tutorial
business ng para sa unang taon, P120.
EFFECT:
mababawasan ang UTANG na service
madadagdagan ang INCOME
DEBIT: Unearned Service Income 120
CREDIT: Service Income 120
**
STUDENT B & C (ACCRUED SERVICE
INCOME)
Ito ay ACCRUED INCOME(in general). Hindi mo
pa nakokolekta ang cash, pero INCOME na siya
dahil nagturo ka na ng isang taon.
Pero mas tama na tawagin itong ACCRUED
SERVICE INCOME dahil galing ito sa "main
business" mo (tutorial)
EFFECT:
-magkakaroon ka ng PAUTANG (Accounts
Receivable)
-magkakaroon ka ng INCOME (Service Income)
DEBIT: Accounts Receivable 240
CREDIT: Service Income 240
(B + C) (120 + 120)
~~~~~
2. "RENT INCOME" P60 (di pa rin bayad)
Ito ay isang halimbawa ng ACCRUED INCOME
na hindi nanggaling sa "main business" mong
tutorial.
May rent income ka nang P60 ngayong YEAR
2018.
Ito ay galing sa ROOM FOR RENT kung saan ~Ito ay Adjustment for ACCRUED EXPENSE.
nakatira na ang kaibigan mo ng isang taon. Kaya Ipagpalagay na di mo pa bayad ang electricity bill.
lang ay di mo pa nakokolekta ang bayad as of Dec. Na-consume na ang electricity sa office mo, pero di
31, 2018 dahil ang usapan ay sa end of 2nd year pa ba nababayaran.
ang bayaran (Dec 31, 2019) EFFECT:
Year 2018 = P60 Rent Income (ACCRUED -magkakaroon ka ng EXPENSE (consumed
INCOME kasi di pa nakokolekta as of Dec. 31, electricity)
2018) -magkakaroon ka ng UTANG
EFFECT: DEBIT: Utilities expense
-magkakaroon ka ng PAUTANG CREDIT: Utilities payable
-magkakaroon ka ng INCOME Sa ibang mga libro, ganito ang ginagawa:
DEBIT: Rent Receivable 60 DEBIT: Utilities expense
CREDIT: Rent Income 60 CREDIT: Accrued Utilities expense
Sa ibang mga libro, ganito ang ginagawa: Note: Ang "Accrued Utilities Expense" ay isang
DEBIT: Accrued Rent Income 60 PAYABLE account (Liability po siya)
CREDIT: Rent Income 60 **
Note: Ang "Accrued Rent Income" ay isang 5. DOUBTFUL ACCOUNTS EXPENSE
RECEIVABLE account (Asset po siya) (para sa student na hindi pa bayad, at maaaring
~~~~~~~~~~~~~~~~~~~~ "hindi na talaga magbabayad")
Q: Ano naman ang mga pwede mong mga Candidate dito sina STUDENT B & C.
EXPENSES or GASTUSIN makalipas ang isang Ipagpalagay natin na si Student C ay lubos na
(1) taon? (Date: December 31, 2018) naghihirap financially. Malaking posibilidad na
A: hindi siya makakabayad sa parating na due date.
1. DEPRECIATION EXPENSE - Office building EFFECT:
(pagliit ng halaga or "pagkaluma" dahil nagamit -magkakaroon ka ng EXPENSE
mo na ang "Office Building" ng isang taon) -mawawalan/mababawasan ang PAUTANG
EFFECT: DEBIT: Doubtful account expense
-magkakaroon ka ng EXPENSE CREDIT: Allowance for doubtful accounts
-mawawalan(ng value) ang OFFICE BUILDING Note: Allowance for doubtful accounts is a
DEBIT: Depreciation expense CONTRA-ASSET account. Kaya ang effect nito ay
CREDIT: Accumulated depreciation "bawas" sa Accounts receivable.
Note: Accumulated depreciation is a CONTRA- 👍👍👍
ASSET account. Kaya ang effect nito ay "bawas" ACCOUNTING TUTORIAL - PART 9
sa Office Building. "ADJUSTING ENTRIES" - continuation
** ~~~~~~~~~~~~~~~~~~~~
2. DEPRECIATION EXPENSE - Cellphone ACCRUALS
(pagliit ng halaga or "pagkaluma" dahil nagamit 1. Accrued Expense
mo na ang "Cellphone" ng isang taon) ADJUSTING ENTRY: 😊
DEBIT: Depreciation expense Debit: _____ expense
CREDIT: Accumulated depreciation Credit: _____ payable
** (Amount: used)
3. LOAD EXPENSE *
(yung gastusin mo sa text, call and surf) 2. Accrued Income
~Ito ay Adjustment for PREPAID EXPENSE ADJUSTING ENTRY: 😊
Pag nagtext ka, yan ay NAPAGASTOS ka. Kasi Debit: _____ receivable
nabawasan yung LOAD mo. Credit: _____ income
EFFECT: (Amount: earned)
-magkakaroon ka ng EXPENSE ~~~~~~~~~~~~~~~~~~~~
-mawawalan/mababawasan ka ng PREPAID DEFERRALS
BALANCE 3. Prepaid Expense
DEBIT: Load expense A. ASSET Method
CREDIT: Prepaid expense Original Entry:
** Debit: Prepaid _____
4. UTILITIES EXPENSE (Meralco) Credit: Cash
(yung gastusin mo sa "Electricity") (Amount: total)
ADJUSTING ENTRY: 😊 MERCHANDISING (PART 11)
Debit: _____ expense Kamusta?
Credit: Prepaid _____ Tayo na't mag-aral muli ng Accounting. 😊
(Amount: used portion) Ano ang MERCHANDISING business?
** Kung bumibili ka ng isang bagay/paninda sa
B. EXPENSE Method halagang P100, at binenta mo ito sa mas mahal na
Original Entry: halaga (halimbawa P150), ikaw ay masasabing
Debit: _____ expense engaged sa Merchandising business.
Credit: Cash In simple words, BUY and SELL.
(Amount: total) (BUY low => SELL high)
ADJUSTING ENTRY: 😊 Note: Kung ano ang binili mo, siya din dapat ang
Debit: Prepaid _____ binenta mo.
Credit: _____ expense Example.
(Amount: unused portion) Tela, binenta mo din as Tela.
~~~~~~~~~~ Damit, binenta mo din as Damit
4. Unearned Income (or Deferred Income) Pero pag bumili ka ng TELA para gupitin/tahiin
a. LIABILITY Method upang maging DAMIT, ito ay HINDI na
Original Entry: masasabing merchandising.
Debit: Cash Ang tawag na diyan ay "MANUFACTURING"
Credit: Unearned _____ dahil may "processing" nang nangyari kung saan
(Amount: total) ang TELA ay naging DAMIT bago ibenta.
ADJUSTING ENTRY: 😊 Isang halimbawa din ay KAHOY, na naging
Debit: Unearned _____ LAMESA. (etc)
Credit: _____ income **
(Amount: earned portion) Let's go back sa MERCHANDISING.
** BUYER = bumibili
b. INCOME Method SELLER = nagbebenta
Original Entry: Pwede kang tawaging BUYER at SELLER.
Debit: Cash BUYER ka kung ikaw ang bumibili galing sa
Credit: _____ income "supplier" mo.
(Amount: total) SELLER ka naman kung ikaw ay nagbebenta sa
ADJUSTING ENTRY: 😊 iyong mga "customers".
Debit: _____ income **
Credit: Unearned _____ WHOLESALER vs RETAILER
(Amount: unearned portion) WHOLESALER = sila yung bumibili ng
~~~~~~~~~~~~~~~~~~~~ "maramihan" galing sa suppliers/manufacturers. Na
5. Depreciation siyang nagbebenta naman sa mga small retailers
ADJUSTING ENTRY: 😊 RETAILER = sila naman yung bumibili galing sa
Debit: Depreciation expense - _____ wholesalers. Na siyang nagbebenta sa mga
Credit: Accumulated depreciation - _____ customers
FORMULA: (straight line method) #Summary
Cost - Salvage Value / Useful life = Depreciation Suppliers/Manufacturers => Wholesaler =>
Expense per year Retailer => Customers
** Example:
6. Doubtful Accounts (or Bad debts) Manufacturing Companies => Stalls in Baclaran
ADJUSTING ENTRY: 😊 => Sari-sari store => Customers
Debit: Doubtful accounts expense **
Credit: Allowance for doubtful accounts INVENTORY SYSTEM
FORMULA: 1. Periodic Inventory System
(Accounts Receivable x % uncollectible) = 2. Perpetual Inventory System
Allowance for doubtful accounts or ADA By the way, sa Accounting, ang tawag sa paninda
ADA +(-) "some adjustment" = Doubtful accounts ay Goods or "INVENTORY"
expense 1. PERIODIC inventory system
("some adjustment" means: write-off, beginning Inventory system para sa mga panindang
balance of ADA, etc) - Mura (Low Value)
- Maramihan (Large quantity) CASH DISCOUNT = Sales discount (if SELLER)
- Pare-pareho (Homogenous) (iisa lang ang CASH DISCOUNT, PURCHASE
Example: DISCOUNT, at SALES DISCOUNT)
Candies *
2. PERPETUAL inventory system Pero kelan ba nakakakuha ng cash discount?
Inventory system para sa mga panindang Ans.
- Mahal (High Value) Pag nakabayad ka ng maaga within the "discount
- Konti (Small quantity) period"!!!
- Magkakaiba (Heterogenous) Ating pag-usapan ang "discount period" (at "credit
Example: term")
Car CREDIT TERM: 2/10 n/30
Ang iba pang pagkakaiba ng dalawang systems na 2 = discount rate (%)
ito (Periodic at Perpetual) ay mas pag-uusapan 10 = DISCOUNT PERIOD (days)
natin pagdating sa Journal entries. n = net
** 30 = deadline (maximum days)
TRADE DISCOUNTS vs CASH DISCOUNTS ANONG meaning niyan?
I'm sure na alam mo ang salitang "discount" *
Pag bumili ka ng goods sa halagang P100, at Mabibigyan ka ng "2%" discount, pag nagbayad ka
nagbayad ka lang ng P98, magkano ang na- sa 10th day (or mas maaga pa)
discount mo? Halimbawa.
100 - 98 = 2. May babayaran kang P100.
P2 ang discount. In this case, babawasan ng P2 ang babayaran mo.
So ang discount pala ay ang halaga ng "ibabawas" (2% of P100)
sa dapat mo bayaran. P100 - P2 (cash discount) = P98.
Ang dapat mong bayaran ay P100. P98 nalang ang babayaran.
Dahil naka discount ka ng P2, ang babayaran mo Dahil nagbayad ka ng maaga, lumiit ang binayaran
nalang ay P98. mo.
* Bakit nasabi nating nagbayad ng maaga??
Ano ba ang mga klase ng discounts? Dahil ang deadline ay sa 30th day pa.
Ans. *
1. TRADE discount Lagyan natin ng DATES.
Nakakakuha ka ng "TRADE discount" kapag May 1, Bumili ka ng goods with an "invoice price"
- marami kang binibili (bulk orders) of P100.
- additional discounts for being a "member" Credit term: 2/10 n/30
- "sale" (yung madalas mong nakikita sa SM 😊) May 11 (after 10 days), nagbayad ka na.
NOTE: Ang "TRADE discount" ay hindi nire- P100 - 2 = P98 (yan nalang babayaran).
record sa journal. Note: pwede ka din magbayad between May 1 -
Example: May 11)
List Price: P120 *
Less: Trade Discount P20 PAANO kung wala kang perang pambayad?
= Invoice Price P100 Ans.
Yung "invoice price" lang na P100 ang ating nire- Pwede ka pang magbayad hanggang May 31
record. Okay? 😊 (deadline). Pero babayaran mo na ng buo ang
2. CASH discount P100.
Nakakakuha ka ng "CASH discount" kapag I hope nasundan ang kwento. 😊
- maaga kang nagbayad (early or "prompt **
payment") TAKE NOTE the following:
- PURCHASE DISCOUNT (ito ang tawag sa List price
"point of view" ni buyer) - Trade discount
- SALES DISCOUNT (yan naman ang tawag sa = INVOICE PRICE
"point of view" ni seller) Sales
NOTE: Yan naman ay nire-record sa ating journal. - Sales returns and allowances
* - Sales discounts
CASH DISCOUNT = Purchase discount (if = NET SALES
BUYER) Beginning inventory
+ Purchases *
- Purchase returns and allowances PERIODIC INVENTORY" SYSTEM (SELLER'S
- Purchase discounts point of view)
+ Freight in 1. Sale of merchandise
= COST OF GOODS AVAILABLE FOR SALE Debit: Cash / Accounts receivable
- Ending inventory Credit: Sales
= COST OF GOODS SOLD (or COST OF 2. Returns and allowances (defective merchandise)
SALES) Debit: Sales returns and allowances
Net sales Credit: Cash / Accounts receivable
- Cost of goods sold (or Cost of sales) 3. Partial collection
= GROSS PROFIT Debit: Cash
+ Other income Credit: Accounts receivable
= TOTAL INCOME 4. Full collection
- Distribution cost (or selling expenses) Debit: Cash
- General and administrative expense Credit: Accounts receivable
- Other expenses Or
- Finance cost (interest expense) Debit: Cash
= INCOME BEFORE TAX Debit: Sales discount
- Tax Credit: Accounts receivable
= NET INCOME ( or NET LOSS) ~~~~~~~~~~~~~~~~~~~~~~~~~
MERCHANDISING (PART 12) "PERPETUAL" INVENTORY SYSTEM
"PRO-FORMA ENTRIES" (BUYER'S point of view)
A. "PERIODIC INVENTORY" SYSTEM 1. Initial investment of merchandise
B. "PERPETUAL INVENTORY" SYSTEM Debit: Merchandise inventory
- BUYER'S point of view Credit: Owner's capital
- SELLER'S point of view 2. Purchase of merchandise
** Debit: Merchandise inventory
#START Credit: Cash / Accounts Payable
"PERIODIC INVENTORY" SYSTEM (BUYER'S 3. Returns and allowances (defective merchandise)
point of view) Debit: Cash / Accounts Payable
1. Initial investment of merchandise Credit: Merchandise inventory
Debit: Merchandise inventory 4. Partial payment
Credit: Owner's capital Debit: Accounts payable
2. Purchase of merchandise Credit: Cash
Debit: Purchases 5. Full payment
Credit: Cash / Accounts Payable Debit: Accounts payable
3. Returns and allowances (defective merchandise) Credit: Cash
Debit: Cash / Accounts Payable Or
Credit: Purchase returns and allowances Debit: Accounts payable
4. Partial payment Credit: Cash
Debit: Accounts payable Credit: Merchandise inventory
Credit: Cash 6. Additional investment of merchandise
5. Full payment Debit: Merchandise inventory
Debit: Accounts payable Credit: Owner's capital
Credit: Cash 7. Withdrawal of merchandise
Or Debit: Owner's drawing
Debit: Accounts payable Credit: Merchandise inventory
Credit: Cash *
Credit: Purchase discount "PERPETUAL" INVENTORY SYSTEM
6. Additional investment of merchandise (SELLER'S point of view)
Debit: Purchases 1. Sale of merchandise
Credit: Owner's capital Debit: Cash / Accounts receivable
7. Withdrawal of merchandise Credit: Sales
Debit: Owner's drawing Debit: Cost of goods sold
Credit: Purchases Credit: Merchandise inventory
2. Return and allowances (defective merchandise) OR
RETURNS Debit: Freight out
1st entry Credit: Accounts payable (if sale is made for
Debit: Sales returns and allowances CASH)
Credit: Cash / Accounts receivable ~~~~~~~~~~~~~~~~~~~~~~~~~
2nd entry "FREIGHT" (Perpetual system)
Debit: Merchandise inventory BUYER'S point of view
Credit: Cost of goods sold 1. FOB SHIPPING POINT, COLLECT
ALLOWANCES Debit: Merchandise inventory
1st entry Credit: Cash
Debit: Sales returns and allowances 2. FOB DESTINATION, PREPAID
Credit: Cash / Accounts receivable "No entry"
No 2nd entry 3. FOB SHIPPING POINT, PREPAID
3. Partial collection Debit: Merchandise inventory
Debit: Cash Credit: Accounts payable
Credit: Accounts receivable 4. FOB DESTINATION, COLLECT
4. Full collection Debit: Accounts payable
Debit: Cash Credit: Cash
Credit: Accounts receivable OR
Or Debit: Accounts receivable (if purchase is made for
Debit: Cash CASH)
Debit: Sales discount Credit: Cash
Credit: Accounts receivable *
~~~~~~~~~~~~~~~~~~~~~~~~~ SELLER'S point of view
#NewTopic 1. FOB SHIPPING POINT, COLLECT
"FREIGHT" (Periodic system) "No entry"
BUYER'S point of view 2. FOB DESTINATION, PREPAID
1. FOB SHIPPING POINT, COLLECT Debit: Freight out
Debit: Freight in Credit: Cash
Credit: Cash 3. FOB SHIPPING POINT, PREPAID
2. FOB DESTINATION, PREPAID Debit: Accounts receivable
"No entry" Credit: Cash
3. FOB SHIPPING POINT, PREPAID 4. FOB DESTINATION, COLLECT
Debit: Freight in Debit: Freight out
Credit: Accounts payable Credit: Accounts receivable
4. FOB DESTINATION, COLLECT OR
Debit: Accounts payable Debit: Freight out
Credit: Cash Credit: Accounts payable (if sale is made for
OR CASH)
Debit: Accounts receivable (if purchase is made for **
CASH) NORMAL BALANCES:
Credit: Cash DEBIT:
** - Merchandise inventory
SELLER'S point of view - Purchases
1. FOB SHIPPING POINT, COLLECT - Freight in
"No entry" - Freight out
2. FOB DESTINATION, PREPAID (contra accounts)
Debit: Freight out - Sales returns and allowances
Credit: Cash - Sales discount
3. FOB SHIPPING POINT, PREPAID *
Debit: Accounts receivable CREDIT:
Credit: Cash - Sales
4. FOB DESTINATION, COLLECT (contra accounts)
Debit: Freight out - Purchase returns and allowances
Credit: Accounts receivable - Purchase discount
MERCHANDISING (PART 13) Dahil inabonohan ko ang P9 na pamasahe mo, may
FREIGHT (Transportation cost), sinong obligation kang bayaran ako.
magbabayad??? *
* Scenario A:
- FOB "SHIPPING POINT" May DATI kang utang saken na P91.
- FOB "DESTINATION" Idadagdag ko yung bagong utang mo saken na P9
- "COLLECT" dahil sa pamasahe.
- "PREPAID" Total na utang mo na saken ay P100 (91+9)
** *
COMBO 1 Scenario B:
FOB shipping point, Collect Ako ang may utang sayo DATI na P91.
- si BUYER ang "dapat" magbayad Nagkautang ka naman saken ngayon na P9 dahil sa
- si BUYER din ang nagbayad pamasahe.
COMBO 2 Imbis na bayaran ko ng buo yung utang ko,
FOB destination, Prepaid ibabawas nalang dun yung P9.
- si SELLER and "dapat" magbayad Kaya magiging P82 nalang ang ibabayad ko sayo
- si SELLER din ang nagbayad (91-9=82)
COMBO 3 **
FOB shipping point, Prepaid #GoingBack
- si BUYER ang "dapat" magbayad SELLER: Manila
- pero si SELLER muna ang nagbayad BUYER: Cebu
COMBO 4 Inventory: P100
FOB destination, Collect Freight (transportation cost): P9
- si SELLER and "dapat" magbayad COMBO 1
- pero si BUYER ang pinagbayad FOB shipping point, Collect
** - si BUYER ang "dapat" magbayad
#SampleSTORY - si BUYER din ang nagbayad
Nagkasabay tayo sa JEEP. Ang pamasahe ay P9. From Manila, ipapadala ni Seller ang inventory
Sinong dapat magbayad ng pamasahe ko? papuntang Cebu para matanggap ni Buyer.
E di AKO. Ang usapan, si BUYER ang "dapat" magbayad ng
Sinong dapat magbayad ng pamasahe mo? pamasahe na P9 (FOB SHIPPING POINT).
E di IKAW. Tapos si BUYER din talaga ang naglabas ng pera
*Yan ang concept pag "FOB Shipping point" at para bayaran yung P9 na pamasahe. (COLLECT)
"FOB Destination" *
Kung sino ang "dapat" magbayad?? COMBO 2
** FOB destination, Prepaid
NGAYON, - si SELLER and "dapat" magbayad
Kumuha ako ng P9 sa bulsa ko para ibayad sa - si SELLER din ang nagbayad
driver. From Manila, ipapadala ni Seller ang inventory
Kumuha ka din P9 sa bulsa mo para ibayad sa papuntang Cebu para matanggap ni Buyer.
driver. Ang usapan, si SELLER ang "dapat" magbayad ng
Ito na ang "ACTUAL" na pagbabayad natin ng pamasahe na P9 (FOB DESTINATION).
pamasahe sa driver. Tapos si SELLER din talaga ang naglabas ng pera
*Yan naman concept pag COLLECT at PREPAID. para bayaran yung P9 na pamasahe. (PREPAID)
Kung sino ang talagang naglabas ng pera *
pambayad sa driver. COMBO 3
** FOB shipping point, Prepaid
#NewSCENARIO - si BUYER ang "dapat" magbayad
PAANO kung inabonohan ko muna ang pamasahe - pero si SELLER muna ang nagbayad
mo? From Manila, ipapadala ni Seller ang inventory
Sinong "dapat" magbayad ng pamasahe mo? papuntang Cebu para matanggap ni Buyer.
Ans. IKAW parin. Ang usapan, si BUYER ang "dapat" magbayad ng
Pero sinong naglabas ng pera para magbayad sa pamasahe na P9 (FOB SHIPPING POINT).
driver? Pero inabonohan muna ni SELLER yung pamasahe
Ans. AKO. na P9 from Manila, going to Cebu (PREPAID)
Kaya ang mangyayari, magiging P109 na ang
makokoleta ni Seller.
Sale of inventory: P100
Plus freight: P9
Total of P109
* classification ng RECEIVABLES sa ating Balance
COMBO 4
FOB destination, Collect
- si SELLER and "dapat" magbayad
- pero si BUYER ang pinagbayad
From Manila, ipapadala ni Seller ang inventory
papuntang Cebu para matanggap ni Buyer.
Ang usapan, si SELLER ang "dapat" magbayad ng
pamasahe na P9 (FOB DESTINATION).
Pero si BUYER ang pinagbayad ng P9 nag
pamasahe (COLLECT).
Kaya ang mangyayari, magiging P91 nalang ang
babayaran ni Buyer.
Purchase of inventory: P100
Minus yung binayaran niyang freight na P9.
Balance: P91
**
FOB = Free On Board
FOB Shipping Point: FREE or nakalibre ang
shipper. Ang shipper ay si seller. Si seller ang libre.
Kaya si "BUYER" ang dapat magbayad ng freight.
FOB Destination: FREE or nakalibre kung sino ang
makakatanggap ng goods/inventory sa destination.
Ang makakatanggap ay si Buyer kayasiya ang
makakalibre sa freight.
Si "SELLER" ang dapat magbayad ng freight.
Collect: Si BUYER ang naglabas ng perang
pambayad.
Prepaid: Si SELLER ang naglabas ng perang
pambayad.
MERCHANDISING (PART 14)
"NORMAL OPERATING CYCLE"
- May CASH si business
- yung CASH ay pinambili ng INVENTORY
- yung INVENTORY ay binenta at naging
ACCOUNTS RECEIVABLE. (or naging CASH
agad - kung cash sales)
- yung ACCOUNTS RECEIVABLE ay kinolekta
at naging CASH ulit.
* SALES = account na ginagamit pag nagbenta ka ng
May CASH na ulit si business
- yung CASH ay pinambili ng INVENTORY
- yung INVENTORY ay binenta at naging
ACCOUNTS RECEIVABLE (or naging CASH
agad - kung cash sales)
- yung ACCOUNTS RECEIVABLE ay kinolekta
at naging CASH ulit.
* account na ginagamit pag "defective" ang binenta
YOU: "Parang inulit lang?" 😅
YES, tama ka! 😊 Kaya siya tinawag na cycle.
Paulit-ulit lang. 😊
*
Q. Kung ang NORMAL OPERATING CYCLE ng
isang business ay "5 YEARS, anong magiging
sheet (or Statement of Financial Position)??
Current assets ba? Or Noncurrent asset?
Ans.
Current asset pa rin. 😊
YOU: "May nabasa po ako na pag
- "12 months or less" => CURRENT
- "more than 12 months" => NONCURRENT
Yes, tama ka. Pero yan ay nag aaply sa tinatawag
nating NON-TRADE RECEIVABLES.
*
#SUMMARY
12 months or less = CURRENT
(except TRADE RECEIVABLES na within the
"NORMAL OPERATING CYCLE". Kahit more
than 12 months pa, CURRENT parin)
More than 12 months = NONCURRENT
**
DEFINITION OF TERMS
MERCHANDISE INVENTORY = paninda
PURCHASES = account na ginagamit pag bumili
ka ng paninda.
PURCHASE "RETURNS" AND
"ALLOWANCES" = account na ginagamit pag
"defective" ang nabili mo.
(RETURNS - defective or may sira ang nabili mo
kaya binalik mo)
(ALLOWANCES - defective or may sira ang nabili
mo PERO hindi mo binalik. Binawasan nalang ang
babayaran mo)
PURCHASE DISCOUNT = account na ginagamit
pag nagbayad ka ng maaga within the discount
period.
(see TUTORIALS PART 11 about sa discount
period)
FREIGHT IN = account na ginagamit para sa
"transportation cost" ng binili mo (kung saan ikaw
na buyer ang "dapat" magbayad nito)
*
goods sa customers mo.
COST OF SALES or COST OF GOODS SOLD =
account na ginagamit para "cost" ng nabenta mong
goods sa customers mo.
Pag sinabing "cost", ito ay wala pang tubo' or mark
up.
SALES RETURNS AND ALLOWANCES =
mo.
(RETURNS - defective or may sira ang binenta mo "PERIODIC INVENTORY SYSTEM"
kaya binalik sayo) June 1
(ALLOWANCES - defective or may sira ang DEBIT: Cash 100,000
binenta mo PERO hindi binalik sayo. Binawasan DEBIT: Merchandise inventory 125,000
nalang ang makokolekta mo) DEBIT: Store equipment 25,000
SALES DISCOUNT = account na ginagamit pag DEBIT: Store furniture and fixtures 50,000
nakakolekta ka ng maaga within the discount CREDIT: Rose, Capital 300,000
period. *
(see TUTORIALS PART 11 about sa discount June 4
period) DEBIT: Purchases 76,000
FREIGHT OUT = account na ginagamit para sa CREDIT: Accounts payable 76,000
"transportation cost" ng binenta mo (kung saan (80,000 x 95% = 76,000)
ikaw na seller ang "dapat" magbayad nito). DEBIT: Freight in 350
PART 15: CREDIT: Accounts payable 350
#TRANSACTIONS (Mark-up on sales is 25%) [ FOB shipping point (place of seller), Prepaid ]
"TAC Bookstore" was formed on June 1, 2019. It *
is located in Manila. June 6
June 1. Rose invested the following: DEBIT: Accounts payable 20,000
Cash 100,000 CREDIT: Cash 20,000
Merchandise (books) 125,000 *
Store equipment 25,000 June 9
Store furniture and fixtures 50,000 DEBIT: Accounts payable 56,350
June 4. Purchased "books" from Edna, QUEZON CREDIT: Purchase discount 1,520
CITY for 80,000 less 5. Terms: 2/5 n/eom; Freight CREDIT: Cash 54,830
of 350 was on terms FOB QUEZON CITY, 76,000 + 350 - 20,000 = 56,350
PREPAID. 76,000 x 2% = 1,520
June 6. Issued a check for 20,000 in partial 56,350 - 1,520 = 54,830
settlement of the account with Edna. ~~~~~~~~~~
June 9 Settled the account with Edna in full. July 2
* DEBIT: Store supplies 9,000
July 2. Purchased "store supplies" from Lorna, CREDIT: Cash 1,800
ANTIPOLO CITY for 10,000 less 10 giving a 20% CREDIT: Accounts payable 7,200
down payment, balance on terms 2/10, n/30. 10,000 x 90% = 9,000
Freight of 500 was on terms FOB MANILA, 9,000 x 20% = 1800
COLLECT 9,000 - 1,800 = 7,200
July 4. Received a credit memo from Lorna for DEBIT: Accounts payable 500
1,000 for an allowance granted for defective CREDIT: Cash 500
supplies sold. [ FOB destination (place of buyer), Collect ]
July 11. Settled the account with Lorna in full. *
* July 4
August 6. Sold various nursery books to Victor, DEBIT: Accounts payable 1,000
BAGUIO CITY for 20,000. Terms: COD. Freight CREDIT: Store supplies 1,000
terms were FOB BAGUIO, PREPAID 700. *
August 7. Victor received a 300 cash refund due to July 11
the return of some defective books. DEBIT: Accounts payable 5,700
August 9. Sold P50,000 worth of books to Felix, CREDIT: Store supplies 124
DAVAO CITY. Terms: 50% down payment, CREDIT: Cash 5,576
balance 2/10, n/30. Freight terms were FOB 7,200 - 500 - 1,000 = 5,700
MANILA, PREPAID 1,800 (7,200 - 1,000) x 2% = 124
August 19. Felix settled its account in full. 5,700 - 124 = 5,576
August 25. 10,000 worth of various periodicals *
were sold to Olive, PASIG CITY. Terms: 2/10, Aug 6
n/30. Freight terms were FOB MANILA, DEBIT: Cash 20,000
PREPAID P500. CREDIT: Sales 20,000
PART 16: DEBIT: Freight out 700
CREDIT: Cash 700 CREDIT: Cash 20,000
[ FOB destination (place of buyer), Prepaid ] *
* June 9
Aug 7 DEBIT: Accounts payable 56,350
DEBIT: Sales returns and allowances 300 CREDIT: "Merchandise inventory" 1,520
CREDIT: Cash 300 CREDIT: Cash 54,830
~~~~~~~~~~ 76,000 + 350 - 20,000 = 56,350
Aug 9 76,000 x 2% = 1,520
DEBIT: Cash 25,000 56,350 - 1,520 = 54,830
DEBIT: Accounts receivable 25,000 ~~~~~~~~~~
CREDIT: Sales 50,000 July 2
50,000 x 50% = 25,000 DEBIT: Store supplies 9,000
DEBIT: Accounts receivable 1,800 CREDIT: Cash 1,800
CREDIT: Cash 1,800 CREDIT: Accounts payable 7,200
[ FOB shipping point (place of seller), Prepaid ] 10,000 x 90% = 9,000
* 9,000 x 20% = 1800
Aug 19 9,000 - 1,800 = 7,200
DEBIT: Cash 26,300 DEBIT: Accounts payable 500
DEBIT: Sales discount 500 CREDIT: Cash 500
CREDIT: Accounts receivable 26,800 [ FOB destination (place of buyer), Collect ]
25,000 + 1,800 = 26,800 *
25,000 x 2% = 500 July 4
26,800 - 500 = 26,300 DEBIT: Accounts payable 1,000
~~~~~~~~~~ CREDIT: Store supplies 1,000
Aug 25 *
DEBIT: Accounts receivable 10,000 July 11
CREDIT: Sales 10,000 DEBIT: Accounts payable 5,700
DEBIT: Accounts receivable 500 CREDIT: Store supplies 124
CREDIT: Cash 500 CREDIT: Cash 5,576
[ FOB shipping point (place of seller), Prepaid ] 7,200 - 500 - 1,000 = 5,700
~~~~~~~~~~ (7,200 - 1,000) x 2% = 124
Aug 29 5,700 - 124 = 5,576
DEBIT: Purchases 45,000 *
CREDIT: Accounts Payable 45,000 Aug 6
"No entry for freight" DEBIT: Cash 20,000
[ FOB destination (place of buyer), Prepaid ] CREDIT: Sales 20,000
¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤ DEBIT: Cost of goods sold 15,000
"PERPETUAL INVENTORY SYSTEM" CREDIT: Merchandise inventory 15,000
June 1 20,000 x 75% = 15,000
DEBIT: Cash 100,000 DEBIT: Freight out 700
DEBIT: Merchandise inventory 125,000 CREDIT: Cash 700
DEBIT: Store equipment 25,000 [ FOB destination (place of buyer), Prepaid ]
DEBIT: Store furniture and fixtures 50,000 *
CREDIT: Rose, Capital 300,000 Aug 7
* DEBIT: Sales returns and allowances 300
June 4 CREDIT: Cash 300
DEBIT: "Merchandise inventory" 76,000 DEBIT: Merchandise inventory 225
CREDIT: Accounts payable 76,000 CREDIT: Cost of goods sold 225
(80,000 x 95% = 76,000) 300 x 75% = 225
DEBIT: "Merchandise inventory" 350 ~~~~~~~~~~
CREDIT: Accounts payable 350 Aug 9
[ FOB shipping point (place of seller), Prepaid ] DEBIT: Cash 25,000
* DEBIT: Accounts receivable 25,000
June 6 CREDIT: Sales 50,000
DEBIT: Accounts payable 20,000 50,000 x 50% = 25,000
DEBIT: Cost of goods sold 37,500
CREDIT: Merchandise inventory 37,500
50,000 x 75% = 37,500
DEBIT: Accounts receivable 1,800
CREDIT: Cash 1,800
[ FOB shipping point (place of seller), Prepaid ]
*
Aug 19
DEBIT: Cash 26,300
DEBIT: Sales discount 500
CREDIT: Accounts receivable 26,800
25,000 + 1,800 = 26,800
25,000 x 2% = 500
26,800 - 500 = 26,300
~~~~~~~~~~
Aug 25
DEBIT: Accounts receivable 10,000
CREDIT: Sales 10,000
DEBIT: Cost of goods sold 7,500
CREDIT: Merchandise inventory 7,500
10,000 x 75% = 7,500
DEBIT: Accounts receivable 500
CREDIT: Cash 500
[ FOB shipping point (place of seller), Prepaid ]
~~~~~~~~~~
Aug 29
DEBIT: Purchases 45,000
CREDIT: Accounts Payable 45,000
"No entry for freight"
[ FOB destination (place of buyer), Prepaid ]
July 2. Purchased "store supplies" from Lorna,
ANTIPOLO CITY for 10,000 less 10 giving a 20%
down payment, balance on terms 2/10, n/30.
Freight of 500 was on terms FOB MANILA,
COLLECT
July 4. Received a credit memo from Lorna for
1,000 for an allowance granted for defective
supplies sold.
July 11. Settled the account with Lorna in full.
*
August 6. Sold various nursery books to Victor,
BAGUIO CITY for 20,000. Terms: COD. Freight
terms were FOB BAGUIO, PREPAID 700.
August 7. Victor received a 300 cash refund due to
the return of some defective books.
August 9. Sold P50,000 worth of books to Felix,
DAVAO CITY. Terms: 50% down payment,
balance 2/10, n/30. Freight terms were FOB
MANILA, PREPAID 1,800
August 19. Felix settled its account in full.
August 25. 10,000 worth of various periodicals
were sold to Olive, PASIG CITY. Terms: 2/10,
n/30. Freight terms were FOB MANILA,
PREPAID P500.