CENTRAL PHILIPPINE UNIVERSITY

College of Agriculture, Resources, and Environmental Sciences

Jaro, Iloilo City

CPU CARES

DETORIO, KEAN ROY B.

BSA 1

AEcon. 1301

Laboratory Exercise. No. 2a

Definition of Terms

I. Objectives

1. To be able to define accounting terms

2. To know the different terms used in accounting applied to farm business

II. Procedure

3. Define the following:

a. Accounting - deals with the recording, classifying, summarizing and interpreting results of
the financial transactions of a business. It is the process of identifying, measuring, and
communicating economic information to permit informed judgments and decisions by users of
the information.

b. Bookkeeping - is the systematic recording of financial transactions and events in a

chronological order. It is the process of recording your company's financial transactions into
organized accounts on a daily basis.

c. Accounting equation - is a formula that shows the sum of a company's liabilities and
shareholders' equity are equal to its total assets (Assets = Liabilities + Equity). The clear-cut
relationship between a company's liabilities, assets and equity are the backbone to double-entry
bookkeeping.

d. Accounting period - is an established range of time during which accounting functions are
performed, aggregated, and analyzed including a calendar year or fiscal year. The accounting
period is useful in investing because potential shareholders analyze a company’s performance
through its financial statements that are based on a fixed accounting period.

e. Assets - are any resources owned or controlled by a business or an economic entity. It is

anything (tangible or intangible) that can be used to produce positive economic value. Assets
represent value of ownership that can be converted into cash (although cash itself is also
considered an asset).
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College of Agriculture, Resources, and Environmental Sciences
Jaro, Iloilo City

f. Liabilities - are legally binding obligations that are payable to another person or entity.
Settlement of a liability can be accomplished through the transfer of money, goods, or services.
A liability is increased in the accounting records with a credit and decreased with a debit. the
financial claim of other parties over the assets of the business 

g. Capital - represent the owner’s claim to the assets of the farm business represented by the
excess of assets over liabilities (owner’s equity, net worth, proprietorship) h. Income -

i. Expense - temporary accounts set up for the purpose of recording decreases in capital that
have taken place during the accounting period. It include all the business ordinary costs of
operating the farm business

j. Balance sheet - Balance sheet is a point in time which displays the value of the assets,
liabilities, and equity of the company. A balance sheet consists of what are called permanent
accounts.

k. Income statement - is one of the most common, and critical, of the financial statements
you're likely to encounter. Also known as profit and loss (P&L) statements, income statements
summarize all income and expenses over a given period, including the cumulative impact of
revenue, gain, expense, and loss transactions.

l. T – account - is an informal term for a set of financial records that uses double-entry
bookkeeping. The term describes the appearance of the bookkeeping entries. First, a large
letter T is drawn on a page. The title of the account is then entered just above the top
horizontal line, while underneath debits are listed on the left and credits are recorded on the
right, separated by the vertical line of the letter T.

m. Journal - is used to enter financial data. It is a chronological record of transactions.

n. Ledger - is the book of final entry.  It contains all accounts listed on the chart of accounts
and in the book of original entry or the journal

o. Journalizing - is the process of keeping a record of all your business transactions, tracking
them in chronological order, and generally includes the date, the account you're debiting or
crediting and a brief description of the transaction that occurred.

p. Posting - the process by which the entries in the journal are transferred to the accounts. It
consists of transferring each amount in the debit column of the journal to the debit column of
the account and in transferring each amount in the credit column of the journal to the credit
column of the account.

q. Journal entry - is used to record a business transaction in the accounting records of a

business.
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College of Agriculture, Resources, and Environmental Sciences
Jaro, Iloilo City

r. Debit - is an entry on the left side of an account. Debit means an entry recorded for a
payment made or owed.

s. Credit - is an entry on the right side of an account. A credit is an entry that records a
decrease in assets or an increase in liability as well as a decrease in expenses or an increase in
revenue (as opposed to a debit that does the opposite). So a credit increases net income on the
company's income statement, while a debit reduces net income.

t. Depreciation - the reduction of the recorded cost of a fixed asset in a systematic manner
until the value of the asset becomes zero or negligible.

u. Transaction - is any monetary business event that impacts a business's financial

statements.

v. Trial balance - Trial Balance is a list of accounts on the ledger at a given date with the
debit and credit totals of each account, or it is a list of the accounts on a ledger at a given date
with the debit or credit balance of each account.

w. Adjusted trial balance – it is the trial balance taken after the posting of adjusting journal
entries. 

x. Worksheet - is a device used to aid the preparation of financial statements and in

completing the work of the accounting cycle.  It is a device for work simplification and is merely
a computation sheet.

y. Farm inventory - is a list of assets - anything of value - that can be sold.

z. Chart of account - is an index of all the financial accounts in the general ledger of a
company. In short, it is an organizational tool that provides a digestible breakdown of all the
financial transactions that a company conducted during a specific accounting period, broken
down into subcategories.

aa. Accounts - is a record in the general ledger that is used to sort and store transactions.

III. Results

IV. References
 CENTRAL PHILIPPINE UNIVERSITY
College of Agriculture, Resources, and Environmental Sciences
Jaro, Iloilo City