MIDTERMS REVIEWER

Fundamentals of Accountancy, Business, and Management

12 Heliodor | For The | SEM 1 2022

Natural Balances

Assets Debit

Liabilities Credit
Accounting Process
Owner’s Equity Credit
Journalizing - Journalize the economic
transactions and events.
Revenue or Income Credit
Posting - Post the journal entries in
number 1 to the general ledger.
Cost and Expense Debit
Trial Balance - Prepare the trial balance
from the general ledger.
Adjusting - Adjust the ledger balances.
Financial Statements - Make income
statements and balance sheets from the
adjusted trial balance.
Closing - Close or transfer the income and Balance Sheet ◂
expense accounts to income summary and is the report of the financial position or
the latter account to owner's drawing, and financial condition. Further, there are two
the owner's drawing to owner's equity. other elements affecting owner's equity - the
Post-Closing Trial Balance - Make a trial revenue and the costs and expenses.
balance of all assets, liabilities and owner's Revenue ◂
equity. refers to the sales or gross income.
Cost ◂
means the cost of products sold or services
rendered, and expenses incurred to run the
Accounting Equation entity.
Post Closing Trial Balance ◂
An adjusted trial balance is prepared from
the general ledgersat the end of the
accounting period.

Statement of Financial Position

The analysis of transactions and events will
always yield results in at least two effects in
the accounting equation.
MIDTERMS REVIEWER
Fundamentals of Accountancy, Business, and Management
12 Heliodor | For The | SEM 1 2022

Income - These are increases in economic

The Financial Statements are as follows:
benefits during the accounting period in the
• Statement of Financial Position or balance
form of inflows or enhancements of assets
sheet
or decreases of liabilities that result in
• Statement of Income of Results of
increases in equity; other than those relating
Operation or income statement
to contributions from equity participants.
• Statement of changes in owner's equity is
prepared to connect the Statement of
Expenses - These are decreases in
Income with the Statement of Financial
economic benefits during the accounting
Position.
period in the form of outflows or depletion of
• Statement of Cash Flows or cash flow
assets or incidences of liabilities that results
statement
in decrease in equity; other than those
• Notes to the Financial Statements
relating to distribution to equity participants

Contents of Statement of Finance

Position

❖ Statement of Financial Position or

Balance Sheet reports the
permanent accounts as of the
end of an accounting period.

• Assets are what the business owns.

• Liabilities are what the business owes

Element of Financial Statements or claims against assets.

• Owner's Equity is what the business

is worth.

Asset - It is a resource controlled by the SOFP : BALANCE SHEET

enterprise as a result of past events and
from which future economic benefits are
expected to flow to the enterprise Contra Assets - are accounts that are
presented under the assets portion of the
Liability - It is a present obligation of the SFP but are reductions to the company's
enterprise arising from past events. The assets. It includes:
settlement of which is expected to result in
an outflow of resources from the enterprise
embodying economic benefits

Equity - It is the residual interest or

remainder of the asset of the enterprise
after deducting all its liabilities.
MIDTERMS REVIEWER
Fundamentals of Accountancy, Business, and Management
12 Heliodor | For The | SEM 1 2022

CLASSIFICATION : BALANCE SHEET

Current Asset
An asset shall be classified as current
when it satisfies any of the following
criteria:
★ It is expected to be realized, or is
intended for sale or consumption within
the entity's normal operating cycle.
★ It is held primarily for the purpose of
being traded.
★ It is expected to be realized within the
twelve months after the balance sheet
date.
★ It is cash or a cash equivalent unless it
is restricted from being exchanged or
used to settle a liability for at least
twelve months after the balance sheet
date.
All other assets shall be classified as
noncurrent.

Example Of Accounts & Their Normal

Classification

SOFP : BALANCE SHEET