JMC Guidelines and Template For Compendium 2

SUBJECT CODE - NAME OF SUBJECT
COMPENDIUM
COMPENDIUM
In partial fulfillment of the requirements in (Subject name here)
Prepared by:
King Solomon Grant Zabate
Prepared for:
Dr. Melchor Q. Bombeo, LPT, CPA, MBA

Instructor
Month Completed here, 2022
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TABLE OF CONTENTS
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SYLLABUS in CMBE 5
Preparation of Financial Statements
PHILOSOPHY
Jose Maria College believes that an Assured, Consistent and Quality Education is an ennobling force that leads to the
development and transformation of individuals.
VISION
Jose Maria College is committed to becoming a world-class institution producing globally competitive individuals who are
adaptive and productive leaders in nation-building.
MISSION
Jose Maria College seeks excellence in the areas of instruction, research and community extension to produce
competent graduates endowed with 21st century leadership skills.
INSTITUTIONAL STRATEGIC GOALS

JMC’s commitment to excellence is reflected in its five over-arching goals, articulated below:
1. Produce globally competitive graduates that shall exemplify the values of the institution.
2. Increase student’s population with evenly subscribed academic programs.
3. Upgrade human resource and employee productivity.
4. Establish quality assurance mechanisms in its operations.
5. Strengthen research and community extension activities aligned with educational and accreditation
standards.
INSTITUTIONAL OUTCOMES
1. Professional Competence Demonstrate proficiency in their respective area of specialization in consonance with
regulatory and global standard (Assured Education)
2. Leadership Skills Execute sustainable leadership in the practice and engagement in the world of work.
(Consistent Education)
3. Value Oriented Exhibit exemplified learning with passion for people, creations, and resources. (Quality Education)
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INSTITUTIONAL CORE VALUES

JUSTICE
Justice commits us to fairness and equal opportunities for all.
ORDER
Order compels us to promote teamwork, unity, accuracy, and prudence in all our endeavors; and to provide a learning
environment where orderliness, peace, security, harmony, love, and compassion thrive.
SPIRITUALITY
Spirituality moves us to have faith in the Divine providence and be God-fearing in order to live a righteous life.
EMPOWERMENT
Empowerment reflects JMC’s commitment to excellence in research, teaching and public engagement, where
everyone is valued and supported in achieving his/her full potential.
MOTIVATION
Motivation leads to discovery of knowledge, creativity, innovation and collaborative leadership that will effect positive
change.
ACCOUNTABILITY
Accountability makes us value discipline and take responsibility for our own actions.
RESPECT
Respect echoes our aspiration to provide a healthy community and environment, and to treat others in a way that
reflects JMC’s qualities and values.
INTEGRITY
Integrity compels us to uphold honesty in both academic and non-academic pursuits; to be ethical in all our actions.
ACTION-ORIENTED
Being action-oriented ricochets JMC’s commitment to value efficiency and effectiveness by taking practical actions to
accomplish tasks; and to develop in students and employees a result-driven attitude that will inspire others to become
self-motivated individuals.
PROGRAM EDUCATIONAL OBJECTIVES

A. Implement the basic functions of management such as planning, organizing, staffing, directing,
leading and controlling
B. Maintain a commitment to good corporate citizenship, social responsibility and ethical practice in
performing functions.
C. Use information and communication technology (ICT) effectively and efficiently.
D. Select the proper decision tools to critically, analytically and creatively solve problems and drive
results.
E. Analyze the business environment for strategic direction.
F. Provide graduates with a foundation upon which continued life-long learning can be built.
STUDENT OUTCOMES PEOs

A B C D E F
A Apply key theories, models and applications within the global business L
context.
B Promote adherence to legitimate and acceptable ethical objectives of an L
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organization.
Analyze business and organizational situations using ethical approaches P
to decision making.
C Prepare a social media marketing plan or business related presentation. O
Demonstrate written and oral skills appropriate for business P
communication.
D Apply appropriate quantitative tools to address a business case problem. P
E Prepare a needs analysis, i.e. market, technical, human resource, O
financial, etc.
Demonstrate evidence of logic-based problem solving, analysis-based P
decision making, strategic thinking, and application of business theory to
solving practical management problems.
F Develop wide spectrum of managerial skills along with competency O
building, qualities in specific areas of business studies
Facilitate LEARNING of the Allow student to PRACTICE Provide opportunity for

L competency (Input is provided P competencies (no input but O development (no input or
and competency is evaluated. competency is evaluated). evaluation, but there is
opportunity to practice the
competencies.
COURSE INFORMATION
Course Title Preparation of Financial Statements
Course Description The course discusses the concepts and principles of accounting for preparing the
financial statements such as the income statement (financial performance, balance
sheet and the cash flows. The course focuses on detailed understanding of accounting
information system, accounting concepts accounting principles, accounting cycle, record
of transactions and financial statement concepts.
Course Credits 3 units
Contact Hours/Week 3 hours per week
Prerequisite
COURSE OUTCOMES Upon completion of the course, the students will be able to:
1.0 Cognitive 1.1 Discuss the concepts, principles of accounting involving preparations of financial statements.
1.2 Explain the accounting concepts and principles to be adhered in preparing financial reports.
2.0 Affective 2.1 Provides reasoning in the proper measurement of the five elements of the financial statements.
2.2 Identify and analyze financial accounting problems and opportunities in real life situations
3.0 Behavioral 3.1 Measure and report issues related to assets, liabilities and equity,
3.2 Conduct the necessary review of accounting transactions and or events.
3.3 Prepare the related business financial statements.
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Lesson 1: Accounting Concepts and Principles
LEARNING OUTCOMES
At the end of these lessons the students are expected to:

1. Define accounting.
2. Describe the nature and purpose of accounting.
TIME FRAME: 2nd Week
Introduction
The worldview of accounting and accountants may certainly involve

some unhelpful characters poring over formidable figures stacked up in
indecipherable columns. Accounting not only records financial transactions
and conveys the financial position of a business enterprise; it also analyses
and reports the information in documents called “financial statements.”
ACTIVITY
INSTRUCTION: ARRANGE THE JUMBLED LETTERS TO FORM WORDS

RELATED TO THE TOPIC. (JUMBLED LETTERS)
• ALL STUDENTS ARE REQUIRED TO PARTICIPATE.

• AFTER THE GO SIGNAL, STUDENTS THAT HAVE ALREADY HAD AN ANSWER
WILL TYPE IN THEIR SURNAMES IN THE CHATBOX.
• STUDENTS WHO WILL NOT FOLLOW THE INSTRUCTION WILL BE
DISQUALIFIED.
1. C T O I N G A U C Answer: ACCOUNTING
2. P T C N O C E Answer: CONCEPT
3. I S B N U S S E Answer: BUSINESS
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ANALYSIS
From the word accounting itself, what do you mean by

accounting?
ABSTRACTION
Accounting Concepts
1. Business entity concept: A business and its owner should be treated
separately as far as their financial transactions are concerned.
2. Money measurement concept: Only business transactions that can be
expressed in terms of money are recorded in accounting, though
records of other types of transactions may be kept separately.
3. Dual aspect concept: For every credit, a corresponding debit is made.
The recording of a transaction is complete only with this dual aspect.
4. Going concern concept: In accounting, a business is expected to
continue for a fairly long time and carry out its commitments and
obligations. This assumes that the business will not be forced to stop
functioning and liquidate its assets at “fire-sale” prices.
5. Cost concept: The fixed assets of a business are recorded on the basis
of their original cost in the first year of accounting. Subsequently, these
assets are recorded minus depreciation. No rise or fall in market price is
taken into account. The concept applies only to fixed assets.
6. Accounting year concept: Each business chooses a specific time period
to complete a cycle of the accounting process—for example, monthly,
quarterly, or annually—as per a fiscal or a calendar year.
7. Matching concept: This principle dictates that for every entry of
revenue recorded in a given accounting period, an equal expense entry
has to be recorded for correctly calculating profit or loss in a given
period.
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8. Realisation concept: According to this concept, profit is recognised

only when it is earned. An advance or fee paid is not considered a profit
until the goods or services have been delivered to the buyer.
Accounting Principles
Obviously, if each business organisation conveys its information in its own
way, we will have babel of unusable financial data.
Personal systems of accounting may have worked in the days when most
companies were owned by sole proprietors or partners, but they do not
anymore, in this era of joint stock companies.
These companies have thousands of stakeholders who have invested millions,

and they need a uniform, standardised system of accounting by which
companies can be compared on the basis of their performance and value.
Therefore, accounting principles based on certain concepts, convention, and

tradition have been evolved by accounting authorities and regulators and are
followed internationally.
These principles, which serve as the rules for accounting for financial
transactions and preparing financial statements, are known as the “Generally
Accepted Accounting Principles,” or GAAP.
The application of the principles by accountants ensures that financial

statements are both informative and reliable.
It ensures that common practices and conventions are followed, and that the
common rules and procedures are complied with. This observance of
accounting principles has helped developed a widely understood grammar
and vocabulary for recording financial statements.
However, it should be said that just as there may be variations in the usage of
a language by two people living in two continents, there may be minor
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differences in the application of accounting rules and procedures depending

on the accountant.
For example, two accountants may choose two equally correct methods for
recording a particular transaction based on their own professional judgement
and knowledge.
Accounting principles are accepted as such if they are (1) objective; (2) usable
in practical situations; (3) reliable; (4) feasible (they can be applied without
incurring high costs); and (5) comprehensible to those with a basic knowledge
of finance.
Accounting principles involve both accounting concepts and accounting

conventions. Here are brief explanations.
APPLICATION
What are the advantage in knowing the concepts and principles of

the Accounting?
CONCLUSION / CLOSURE
The ultimate goal of any set of accounting principles is to ensure that a

company's financial statements are complete, consistent, and comparable.
This makes it easier for investors to analyze and extract useful information
from the company's financial statements, including trend data over a period
of time.
Reference:
https://www.mbacrystalball.com/blog/accounting/
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Lesson 2: Basic Accounting Concepts
LEARNING OUTCOMES

1. Give examples of branches of accounting.
2. State the function of accounting in a business.
Introduction
Theory Base of Accounting consists of accounting concepts, principles,

rules, guidelines, and standards that help an individual in understanding the
basics of accounting. These principles are developed over time to bring
consistency and uniformity to the accounting process.
ACTIVITY
Direction: Complete the words by using the missing letters.
DO YOU WANT TO PLAY WITH ME?
1. _RI_IC_LT_I__I_G ANSWER: CRITICAL THINKING

2. S _ _ I _ L S K_ _L _ S ANSWER: SOCIAL SKILLS
3. C_EA_IV__Y ANSWER: CREATIVITY
4. M_D_A ANSWER: MEDIA
5. C _ _M _ N I _ A T _ _ N ANSWER: COMMUNICATION
ANALYSIS
What are the Basic Accounting Concepts?
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ABSTRACTION
Basic Accounting Concepts
These are the basic ideas or assumptions under the theory base of
accounting that provide certain working rules for the accounting activities of
an organization. There are 13 important basic accounting concepts that
are to be followed by companies to prepare true and fair financial
statements.
Business Entity Concept

The business entity concept states that the business enterprise is separate
from its owner. In simple terms, for accounting purposes, the business and
its owners are treated separately. If an owner invests money in the business,
it will be treated as a liability for the business. However, if the owner takes
out some money from the business for personal use, it will be considered
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drawings. Therefore, assets and liabilities of a business are the business’s

assets and liabilities, not the owner’s.
Money Measurement Concept
The money measurement concept says that a business should record only
those transactions which can be expressed in monetary terms. It means that
transactions like purchase and sale of goods, rent payment, expenses
payment, earning of revenue, etc., will be recorded in the books of accounts
of the firm. However, transactions or happenings, like the research
department’s creativity, machinery breakdown, etc., will not be recorded in
the books of accounts of the firm.
However, there are two drawbacks of this concept in accounting. Firstly,
according to this concept, the accounting of a business is limited to the
recording of information that can be expressed in a monetary unit, but does
not involve or record essential information that cannot be expressed in
monetary units. Secondly, the concept has the limitations of the monetary
unit itself.
Going Concern Concept
The going concern concept assumes that an organization would continue its
business operations indefinitely. It means that it is assumed that the
business will run for a long period of time, and will not liquidate in the
foreseeable future. It is one of the most important assumptions or concepts
of accounting. It is because the going concern concept provides the firm with
the basis to show its assets’ value in the balance sheet.
Accounting Period Concept
The accounting period concept defines the time span at the end of which an
organization has to prepare its financial statements to determine whether
they have earned profits or incurred losses during a specified time span. It
also states the exact position of the firm’s assets and liabilities at the end of
the specified time span.
Cost Concept
The cost concept of accounting states that an organization should record all
of its assets at their purchase price in the books of accounts. This amount
also includes any transportation cost, acquisition cost, installation cost, and
any other cost spent by the firm for making the asset ready to use.
Dual Aspect or Duality Concept
The dual aspect or duality concept is the foundation of any business. The
concept describes the basis of recording business transactions in the books
of accounts. According to the concept, every transaction of the business has
a two-fold effect. Hence, it should record every transaction in two places. In
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simple words, two accounts will be affected by a single transaction. This

concept can be expressed as the Accounting Equation:
Assets = Liabilities + Capital
The accounting equation states that the total of assets of an organization is
always equal to the total of its owners’ and outsiders’ claims. These claims
or equity of the firm’s owners is also known as Capital or Owner’s Equity,
and the outsiders’ claims are known as Liabilities or Creditors’ Equity.
Revenue Recognition Concept
The revenue recognition concept, also known as the realisation concept, as
the name suggests, defines that an organization should record its revenue
from business only when it is realised, not when the firm has received the
cash.
Matching Concept
The matching concept states that an organization should recognize its
expenses in the same financial year if the expense is related to the revenue
of that year. In simple words, if a firm is earning revenue in an accounting
period, even though it incurs the expenses related to that revenue in the next
accounting year, the expense will be realized in the same accounting year
when the revenue has been realized by the firm.
Full Disclosure Concept
As the name suggests, the full disclosure concept states that an organization
should disclose all the facts regarding its financial performance. It is because
the information mentioned in the financial statements is used by different
internal and external users, like investors, banks, creditors, management,
employees, financial institutions, etc., for making financial decisions.
Consistency Concept
The consistency concept states that there should be consistency or
uniformity in the accounting practices and policies followed by an
organization. It is because the accounting information provided by an
organization through its financial statements would be beneficial only when it
allows its users in making a comparison between the statements of different
years or with statements of other firms.
Conservatism Concept
The conservatism or prudence concept believes in playing safely, while
recording the transactions in the book of accounts. According to this
concept, an organization should adopt a conscious approach and should not
record its profits until they are realised.
Materiality Concept
The materiality concept suggests that an organization should focus on
material facts only. In simple words, an organization should not waste its
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time on immaterial facts that do not help in determining its income for the
period. In order to differentiate a fact as material or immaterial, one should
consider its nature and the amount involved. Therefore, a fact will be
considered material if the accountant believes that the information can
influence the decisions of a user of the financial statements.
Objectivity Concept
The objectivity concept of accounting states that an organization should
record transactions in an objective manner. It means that the recording
should be free from any kind of biasness by accountants and other people.
Objectivity in the recording of transactions is possible when the transactions
of the firm are supported by verifiable vouchers or documents. The purpose
of the objectivity concept is that it does not let the firm’s management and
accountants’ opinions impact the financial statements and provide a false
image.
APPLICATION
How can we integrate this lesson in to meaning life experience?
Knowing the Basic Accounting concepts improves the quality of

financial statements and reports concerning the understandability, reliability,
relevance, and comparability of such financial statements and reports.
Reference:
https://www.geeksforgeeks.org/basic-accounting-concepts/
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Lesson 3: Accounting Standards
LEARNING OUTCOMES

1. Harmonize the different accounting policies.
2. Relate the knowledge into a meaningful lifelong learning
Introduction
Accounting standards relate to all aspects of an entity’s finances,

including assets, liabilities, revenue, expenses, and shareholders' equity.
Specific examples of accounting standards include revenue recognition,
asset classification, allowable methods for depreciation, what is considered
depreciable, lease classifications, and outstanding share measurement.
ACTIVITY
Direction: Complete the words by using the missing letters.
DO YOU WANT TO PLAY WITH ME?
1. P_I_C_P_E_S ANSWER: PRINCIPLES

2. S _ _ I _ L S K_ _L _ S ANSWER: SOCIAL SKILLS
3. _T_N_A_D_S ANSWER: STANDARDS
4. P_O_C_D_U_R_S ANSWER: PROCEDURES
5. C _ _M _ N I _ A T _ _ N ANSWER: COMMUNICATION
ABSTRACTION
What Is an Accounting Standard?

An accounting standard is a common set of principles, standards,
and procedures that define the basis of financial accounting
policies and practices.
KEY TAKEAWAYS
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• An accounting standard is a set of practices and policies used

to systematize bookkeeping and other accounting functions
across firms and over time.
• Accounting standards apply to the full breadth of an entity’s
financial picture, including assets, liabilities, revenue, expenses,
and shareholders' equity.
• Banks, investors, and regulatory agencies count on
accounting standards to ensure information about a given
entity is relevant and accurate.

including assets, liabilities, revenue, expenses, and shareholders'
equity. Specific examples of accounting standards include revenue
recognition, asset classification, allowable methods for
depreciation, what is considered depreciable, lease classifications,
and outstanding share measurement.
Accounting standards specify when and how economic events are

to be recognized, measured, and displayed. External entities, such
as banks, investors, and regulatory agencies, rely on accounting
standards to ensure relevant and accurate information is provided
about the entity. These technical pronouncements have ensured
transparency in reporting and set the boundaries for financial
reporting measures.
APPLICATION
Why Are Accounting Standards Useful?
Accounting standards improve the transparency of financial reporting

in all countries. They specify when and how economic events are to be
recognized, measured, and displayed. External entities, such as banks,
investors, and regulatory agencies, rely on accounting standards to ensure
relevant and accurate information is provided about the entity.
Reference: https://www.investopedia.com/terms/a/accounting-
standard.asp
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Lesson 4: The Conceptual Framework for Financial Reporting
LEARNING OUTCOMES

1. provide financial information about the reporting entity
2. Describe each concepts of Conceptual Framework for Financial
Reporting.
Introduction

ACTIVITY
WORD GIBBERISH
Instruction: We will show you nonsense words/phrases and you will read and
read until you got the correct word/phrases.
1. In Vest Or INVESTOR
2. Lie Abilities LIABILITIES
3. Lee Tea Race Seas LITERACIES
4. Inn Tag Greet INTEGRATE
5. Lee Earn Ding LEARNING
ANALYSIS
Is the Framework equivalent to the Standard? Why?
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ABSTRACTION
Chapter 1: The objective of general

purpose financial reporting
The main objective of general purpose financial reports is to provide the financial
information about the reporting entity that is useful to existing and potential:
• Investors,
• Lenders, and
• Other creditors
To help them make various decisions (e.g. about trading with debt or equity
instruments of a reporting entity).
Chapter 1 is NOT about the financial statements itself – these are described in
Chapter 3.
Instead, Chapter 1 describes more general purpose reports that should contain the
following information about the reporting entity:
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• Economic resources and claims (this refers to the financial position);

• The changes in economic resources and claims resulting from entity’s
financial performance and from other events.
Chapter 1 puts an emphasis on accrual accounting to reflect the financial

performance of an entity. It means that the events should be reflected in the reports
in the periods when the effects of transactions occur, regardless the related cash
flows.
However, the information about past cash flows is very important to assess
management’s ability to generate future cash flows.
Chapter 2: Qualitative characteristics of

useful financial information
In this Chapter, the Framework describes 2 types of characteristics for financial
information to be useful:
1. Fundamental, and
2. Enhancing.
Fundamental qualitative characteristics

• Relevance: capable of making a difference in the users’ decisions. The
financial information is relevant when it has predictive value, confirmatory
value, or both.
Materiality is closely related to relevance.
• Faithful representation: The information is faithfully represented when it is
complete, neutral and free from error.
Enhancing qualitative characteristics

• Comparability: Information should be comparable between different entities
or time periods;
• Verifiability: Independent and knowledgeable observers are able to verify the
information;
• Timeliness: Information is available in time to influence the decisions of
users;
• Understandability: Information shall be classified, presented clearly and
concisely.
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Chapter 3: Financial Statements and the

Reporting Entity
Financial Statements
The financial statements should provide the useful information about the reporting
entity:
1. In the statement of financial position, by recognizing

o Assets,
o Liabilities,
o Equity
2. In the statements of financial performance, by recognizing
o Income, and
o Expenses
3. In other statements, by presenting and disclosing information about
o recognized and unrecognized assets, liabilities, equity, income and
expenses, their nature and associated risks;
o Cash flows;
o Contributions from and distributions to equity holders, and
o Methods, assumptions, judgements used, and their changes.
Financial statements are always prepared for a specified period of time, or

the reporting period.
Normally, the financial statements are prepared on the going concern assumption.
It means that an entity will continue to operate for the foreseeable future (usually 12
months after the reporting date).
Reporting Entity
This is a new concept introduced in 2018.
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Although the term “reporting entity” has been used throughout IFRS for some time,
the Framework introduced it and “made it official” only in 2018.
Reporting entity is an entity that must or chooses to prepare the financial

statements. It can be:
• A single entity – for example, one company;

• A portion of an entity – for example, a division of one company;
• More than one entity – for example, a parent and its subsidiaries reporting as
a group.
As a result, we have a few types of financial statements:
• Consolidated: a parent and subsidiaries report as a single reporting entity;

• Unconsolidated: e.g. a parent alone provides reports, or
• Combined: e.g. reporting entity comprises two or more entities not linked by
parent-subsidiary relationship.
Chapter 4: Elements of the financial

statements
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This chapter extensively deals with the definitions of individual elements of the
financial statements.
There are five basic elements:
1. Asset = a present economic resource controlled by the entity as a result of

past events;
2. Liability = a present obligation of the entity to transfer an economic resource
as a result of past events;
3. Equity = the residual interest in the assets of the entity after deducting all its
liabilities;
4. Income = increases in assets or decreases in liabilities resulting in increases
in equity, other than contributions from equity holders;
5. Expenses = decreases in assets or increases in liabilities resulting in
decreases in equity, other than distributions to equity holders;
The Framework then discusses each aspect of these definitions and provides wide
guidance on how to decide what element you are dealing with.
Chapter 5: Recognition and derecognition

This chapter discusses the recognition and derecognition process.
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Recognition
Simply speaking, recognition means including an element of financial statements in
the financial statements.
In other words, if you decide on recognition, you decide on WHETHER to show this
item in the financial statements.
Recognition process links the elements in the financial statements according to the
following formula:
Please let me stress here that not all items that meet the definition of one of the
elements listed above are recognized in the financial statements.
The Framework requires recognizing the elements only when the recognition
provides useful information – relevant with faithful representation.
Then, the Framework discusses the relevance, faithful representation, cost

constraints and other aspects in a detail.
Derecognition
Derecognition means removal of an asset or liability from the statement of financial
position and normally it happens when the item no longer meets the definition of an
asset or a liability.
Again, the Framework discusses the derecognition in a greater detail.
Chapter 6: Measurement
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Measurement means IN WHAT AMOUNT to recognize asset, liability, piece of

equity, income or expense in your financial statements.
Thus, you need to select the measurement basis, or the method of quantifying
monetary amount for elements in the financial statements.
The Framework discusses two basic measurement basis:
1. Historical cost – this measurement is based on the transaction price at the

time of recognition of the element;
2. Current value – it measures the element updated to reflect the conditions at
the measurement date. Here, several methods are included:
o Fair value;
o Value in use;
o Current cost.
Each of these measurement bases is discussed in a greater detail.
The Framework then gives guidance on how to select the appropriate measurement
basis and what factors to consider (especially relevance and faithful representation).
What I personally find really useful is the guidance on measurement of equity.
The issue here is that the equity is defined as “residual after deducting liabilities from
assets” and therefore total carrying amount of equity is not measured directly.
Instead, it is measured exactly by the formula:
• Total carrying amount of all assets, less

• Total carrying amount of all liabilities.
The Framework points out that it can be appropriate to measure some components
of equity directly (e.g. share capital), but it is not possible to measure total equity
directly.
Chapter 7: Presentation and disclosure

The main aim of presentation and disclosures is to provide an effective
communication tool in the financial statements.
Effective communication of information in the financial statements requires:
• Focus on objectives and principles of presentation and disclosure, not on the

rules;
• Group similar items and separate dissimilar items;
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• Aggregate information, but do not provide unnecessary detail or the opposite

– excessive aggregation to obscure the information.
Chapter 8: Concepts of capital and capital

maintenance
This chapter is carried forward from previous versions of Framework, so there’s
nothing new here.
Let me recap shortly.
The Framework explains two concepts of capital:
1. Financial capital – this is synonymous with the net assets or equity of the
entity.
Under the financial maintenance concept, the profit is earned only when the
amount of net assets at the end of the period is greater than the amount of
net assets in the beginning, after excluding contributions from and
distributions to equity holders.
The financial capital maintenance can be measured either in
o Nominal monetary units, or

o Units of constant purchasing power.
2. Physical capital – this is the productive capacity of the entity based on, for
example, units of output per day.
Here the profit is earned if physical productive capacity increases during the
period, after excluding the movements with equity holders.
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The main difference between these concepts is how the entity treats the effects of
changes in prices in assets and liabilities.
APPLICATION
What is the main difference of these concepts?
The Conceptual Framework provides the foundation for Standards that: (a)
contribute to transparency by enhancing the international comparability
and quality of financial information, enabling investors and other market
participants to make informed economic decisions.
Reference:
https://www.cpdbox.com/ifrs-conceptual-framework-
2018/?fbclid=IwAR10VJknzKCWwh7EIehZzXj79b8w6_uqCkgDbCAIzE29aizque
vUyKSbSdw#:~:text=The%20Conceptual%20Framework%20for%20the,was%20
issued%20back%20in%201989
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Lesson 5: Types of Major Accounts
LEARNING OUTCOMES

1. Define what an account is.
2. Explain the five major accounts.
TIME FRAME: 3rd Week
Introduction
The chart of accounts is used by small firms to arrange all the

complex information about their business finances into an understandable
format. Setting up your company's accounting system begins with this. To
provide an accurate picture of how your organization is doing financially, the
chart of accounts clearly divides your income, expenses, assets, and
liabilities.
ANALYSIS
What are the different major accounts?
ABSTRACTION
5 Types of accounts
Although businesses have many accounts in their books, every account falls
under one of the following five categories:
• Assets
• Expenses
• Liabilities
• Equity
• Revenue (or income)
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Familiarize yourself with and learn how debits and credits affect these
accounts. Then, you can accurately categorize all the sub-accounts that fall
under them.
So, how do debits and credits affect asset, expense, liability, equity, and
revenue accounts? Do debits decrease or increase these accounts in your
books? How about credits?
Assets and expenses increase when you debit the accounts and decrease
when you credit them. Liabilities, equity, and revenue increase when you
credit the accounts and decrease when you debit them.
Here’s a quick-reference chart you can use to get started:
A detailed look at the types of accounts—and their sub-accounts
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By this point, you might be wondering about all the other accounts you’ve
seen and heard of. Where’s the Checking account? The Petty Cash
account? The Accounts Payable account? These are all examples of
accounts you may have in your five main accounts. But, you can break
things down even more.
Rather than listing each transaction under the above five accounts,
businesses can break accounts down even further using sub-accounts.
Sub-accounts show you exactly where funds are coming in and out of. And,
you can better track how much money you have in each individual
account.
Let’s say you make utility payments. Rather than listing out each type of utility
expense in your Expense category, you can use utility sub-accounts to group
them under Utilities. This shows you exactly how much money you’re
spending in utilities.
Here are some accounts and sub-accounts you can use within asset,
expense, liability, equity, and income accounts.
Asset accounts
Assets are the physical or non-physical types of property that add value to
your business. For example, your computer, business car, and trademarks are
considered assets.
Some examples of asset accounts include:
• Checking
• Petty Cash
• Inventory
• Accounts Receivable
Although your Accounts Receivable account is money you don’t physically

have, it is considered an asset account because it is money owed to you.
Again, debits increase assets and credits decrease them. Debit the
corresponding sub-asset account when you add money to it. And, credit a
sub-asset account when you remove money from it.
Example
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Let’s look at an example. You sell some inventory and receive $500. You put
the $500 in your Checking account. Increase (debit) your Checking account
and decrease (credit) your Inventory account.
Date Account Debit Credit
XX/XX/XXXX Checking 500
Inventory 500
Expense accounts
Expenses are costs your business incurs during operations. For example, office
supplies are considered expenses.
Examples of accounts that fall under the expense account category include:
• Payroll
• Insurance
• Rent
• Equipment
• Cost of Goods Sold (COGS)
Remember that debits increase your expenses, and credits decrease

expense accounts. When you spend money, you increase your expense
accounts.
You can set up sub-accounts for insurance (e.g., general liability insurance,
errors and omissions insurance, etc.) to further break things down.
Example
Let’s say you spend $1,000 on rent. You pay for the expense with your
Checking account. Increase your Rent Expense account with a debit and
credit your Checking account.
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XX/XX/XXXX Rent Expense 1,000
Checking 1,000
Liability accounts
Liabilities represent what your business owes. These are expenses you have
incurred but have not yet paid.
Types of business accounts that fall under the liability branch include:
• Payroll Tax Liabilities

• Sales Tax Collected
• Credit Memo Liability
• Accounts Payable
Accounts payable (AP) are considered liabilities and not expenses. Why?
Because accounts payables are expenses you have incurred but not yet
paid for. As a result, you add a liability, or debt.
Credit liability accounts to increase them. Decrease liability accounts by

debiting them.
Example
You buy $500 of inventory on credit. This increases your Accounts Payable
account (credit). And, it increases the amount of inventory you have (debit).
Your journal entry might look something like this:
XX/XX/XXXX Inventory 500
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Accounts Payable 500
Equity accounts
Equity is the difference between your assets and liabilities. It shows you how
much your business is worth.
Here are a few examples of equity accounts:
• Owner’s Equity
• Common Stock
• Retained Earnings
Again, equity accounts increase through credits and decrease through

debits. When your assets increase, your equity increases. When your liabilities
increase, your equity decreases.
Example
You invested in stocks and received a dividend of $500. To reflect this

transaction, credit your Investment account and debit your Cash account.
XX/XX/XXXX Cash 500
Investment 500
Revenue accounts
Last but not least, we’ve arrived at the revenue accounts. Revenue, or
income, is money your business earns. Your income accounts track incoming
money, both from operations and non-operations.
Examples of income accounts include:

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• Product Sales
• Earned Interest
• Miscellaneous Income
To increase revenue accounts, credit the corresponding sub-account.

Decrease revenue accounts with a debit.
Example
Say you make a $200 sale to a customer who pays with credit. Through the
sale, you increase your Revenue account through a credit. And, increase
your Accounts Receivable account through a debit.
XX/XX/XXXX Accounts Receivable 200
Revenue 200
Quick-reference list of accounts in accounting
Keeping track of your different types of accounts in accounting can be a

challenge. Remember, you can create a chart of accounts to stay
organized.
Use the list below to help you determine which types of accounts you need
in business.
APPLICATION
What is the importance of knowing The Five Major Accounts?
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The five major account types provide the structure for your chart of
accounts, breaking it down into separate types of information. Several
important financial reports are built around the same five account types.
Reference:
https://bizfluent.com/info-10005386-five-types-accounts-accounting.html
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Lesson 6: The Account
LEARNING OUTCOMES

1. Define what an account is.
2. Explain the five major accounts.
3. Give examples of each type of account.
Introduction
An account is a record in an accounting system that tracks the

financial activities of a specific asset, liability, equity, revenue, or expense.
These records increase and decrease as the business events occur
throughout the accounting period. Each individual account is stored in the
general ledger and used to prepare the financial statements at the end of
an accounting period..
ANALYSIS
What Is an Account?
ABSTRACTION
The term account generally refers to a record-keeping or ledger activity. It

has many different applications in the financial industry. In banking, an
account refers to an arrangement by which an organization, typically a
financial institution such as a bank or credit union, accepts a customer's
financial assets and holds them on behalf of the customer at his or her
discretion.
Types of accounts include savings accounts, which are designed to help

customers accumulate liquid assets; checking accounts, which make it
easier for customers to use liquid assets to pay debts and buy goods and
services; and retirement accounts, which allow customers to earn higher
interest rates on money saved and invest for old age.
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KEY TAKEAWAYS
• In banking, an account refers to an arrangement by which a financial

institution accepts a customer's financial assets and holds them on
behalf of the customer at his or her discretion.
• Consumers open checking, savings, and other bank accounts in order
to more securely manage liquid assets, as assets held in accounts with
a financial institution are less vulnerable to theft than cash.
• Many people also use credit accounts to borrow money for major and
minor purchases.
• Common credit accounts include revolving credit accounts, like
credit cards and lines of credit, and instalment loan accounts like car
loans or mortgages. Financial institutions charge account holders’
interest for the privilege of borrowing money in this manner.
APPLICATION
What is the role and importance of Accounts?
Accounts plays a vital role in running a business because it helps you track
income and expenditures, ensure statutory compliance, and provide
investors, management, and government with quantitative financial
information which can be used in making business decisions.
Reference
https://www.investopedia.com/terms/a/account.asp
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Lesson 7: Common Account Titles
LEARNING OUTCOMES

1. List down the Account Titles
2. Explain each account titles
Introduction
The first thing that comes to mind when one thinks about the
business transaction in terms of accounting is accounts title. These are the
building blocks of a whole accounting system. Every time an accountant
posts some accounting entry in the system, these account titles are updated
to reflect the impact of the transaction.
ANALYSIS
What do you think are the different title Accounts?
ABSTRACTION
Account titles are the names given to the various categories used to
keep track of a business’s finances. For any and every transaction, these
accounts are updated to reflect what happened in an organized and
consistent manner.
The account titles are found on the business' general ledger, which is a
running list of all these transactions. When compiled by an accountant, the
general ledger accounts combine to form the company's financial
statements.
For example, let's say a business pays cash to buy new inventory from its
suppliers. The bookkeeper credits (adds) the inventory account on the
general ledger for the cost of that new inventory. That updates the books to
show that new inventory has been purchased and is now owned by the
company.
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Likewise, the accountant will debit (subtract) the same amount from the
cash account on the general ledger. That indicates that the company paid
for the new inventory with cash, and therefore, the company's cash balance
has decreased by the cost of the new inventory.
There is a near endless possibility of account titles used by the millions of

business around the world. However, we can consolidate that list to the most
common accounts, which are organized below by each's location on the
financial statements.
List of Account Titles:
Account titles Type of account Mapping
Property, plant, and equipment Assets Balance sheet
Inventory Assets Balance sheet
Accounts receivables Assets Balance sheet
Prepaid assets Assets Balance sheet
Cash and bank balance Assets Balance sheet
Share capital Equity Balance sheet
Accounts payable Liability Balance sheet
Loan payable Liability Balance sheet
Deferred tax liability Liability Balance sheet
Bonds payable Liability Balance sheet
Sales Revenue Income statement
Cost of sales Expenses Income statement
Finance expense Expenses Income statement
Administrative expenses Expenses Income statement
Selling and distribution expenses Expenses Income statement
APPLICATION
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What is the purpose of account titles?
An account title is the unique name assigned to an account in an

accounting system. An account title is essential when the accounting staff
needs to identify an account, since the title conveys the purpose of the
account.
Reference
https://www.cfajournal.org/list-of-account-titles/
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Lesson 8: Balance Sheet Accounts
LEARNING OUTCOMES

1. Track of the debits and credits.
2. Know the amount of capital owed to the owner at the year-end
3. Evaluate the value and position of all the assets and liabilities
Introduction
The first thing that comes to mind when one thinks about the
business transaction in terms of accounting is accounts title. These are the
building blocks of a whole accounting system. Every time an accountant
posts some accounting entry in the system, these account titles are updated
to reflect the impact of the transaction.
ANALYSIS
What Is a Balance Sheet?
ABSTRACTION
The term balance sheet refers to a financial statement that reports a

company's assets, liabilities, and shareholder equity at a specific point in
time. Balance sheets provide the basis for computing rates of return for
investors and evaluating a company's capital structure.
In short, the balance sheet is a financial statement that provides a snapshot

of what a company owns and owes, as well as the amount invested by
shareholders. Balance sheets can be used with other important financial
statements to conduct fundamental analysis or calculate financial ratios.
KEY TAKEAWAYS
• A balance sheet is a financial statement that reports a company's

assets, liabilities, and shareholder equity.
• The balance sheet is one of the three core financial statements that
are used to evaluate a business.
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• It provides a snapshot of a company's finances (what it owns and

owes) as of the date of publication.
• The balance sheet adheres to an equation that equates assets with
the sum of liabilities and shareholder equity.
• Fundamental analysts use balance sheets to calculate financial ratios.
How Balance Sheets Work
The balance sheet provides an overview of the state of a company's

finances at a moment in time. It cannot give a sense of the trends playing
out over a longer period on its own. For this reason, the balance sheet
should be compared with those of previous periods.
The balance sheet adheres to the following accounting equation, with

assets on one side, and liabilities plus shareholder equity on the other,
balance out:
{Assets} = {Liabilities} + {Shareholders' Equity} Assets=Liabilities

Shareholders’ Equity
This formula is intuitive. That's because a company has to pay for all the
things it owns (assets) by either borrowing money (taking on liabilities) or
taking it from investors (issuing shareholder equity).
APPLICATION
What is the importance of Balance Sheet?
Balance sheets determine risk. This financial statement lists everything a

company owns and all of its debt. A company will be able to quickly assess
whether it has borrowed too much money, whether the assets it owns are not
liquid enough, or whether it has enough cash on hand to meet current
demands.
Balance sheets are also used to secure capital. A company usually must
provide a balance sheet to a lender in order to secure a business loan. A
company must also usually provide a balance sheet to private investors
when attempting to secure private equity funding. In both cases, the
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external party wants to assess the financial health of a company, the

creditworthiness of the business, and whether the company will be able to
repay its short-term debts.
Reference
https://www.investopedia.com/terms/b/balancesheet.asp
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Lesson 9: Income Statement Accounts
LEARNING OUTCOMES

1. Describe the Income Statement Accounts
2. Explain what the use of Income Statement Accounts is
Introduction
An income statement is a financial statement that shows you the

company’s income and expenditures. It also shows whether a company is
making profit or loss for a given period. The income statement, along with
balance sheet and cash flow statement, helps you understand the financial
health of your business.
ANALYSIS
What are Income Statement Accounts?
ABSTRACTION
Income statement accounts are those accounts in the general ledger

that are used in a firm’s profit and loss statement. These accounts are
usually positioned in the general ledger after the accounts used to
compile the balance sheet. A larger organization may have hundreds or
even thousands of income statement accounts, in order to track the
revenues and expenses associated with its various product lines,
departments, and divisions. The income statement accounts most
commonly used are as follows:
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• Revenue. Contains revenue from the sale of products and services. Could
be segregated into additional accounts to record sales for particular
products, regions, or other classifications.
• Sales discounts. This is a contra account, containing discounts granted to

customers from the gross sale price.
• Cost of goods sold. Contains the cost of manufactured goods or

merchandise sold during the period. Could be segregated into additional
accounts to record the costs of direct materials, direct labor, and factory
overhead.
• Compensation expense. Contains the costs of salaries and wages

incurred during the reporting period for all employees. This includes
bonuses, commissions, and severance pay.
• Depreciation and amortization expense. Contains the periodic

depreciation and amortization charges associated with tangible and
intangible fixed assets.
• Employee benefits. Contains the employer-paid portions of the costs of

numerous benefits, such as medical insurance, life insurance, and pension
plan contributions.
• Insurance expense. Includes the recognized cost of insurance, such as for

building insurance or general liability insurance.
• Marketing expenses. Contains the costs of a variety of expenses, including

advertising, publications, and brochures.
• Office supplies expense. Contains the costs of all incidental supplies

incurred by the business that are not related to production activities.
• Payroll taxes. Contains the employer-paid portions of payroll taxes, such

as social security.
• Professional fees. Contains the costs of auditors, attorneys, and

consultants.
• Rent expense. Contains the cost of lease payments on facilities and land
being leased by the entity.
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• Repair and maintenance expense. Contains the costs of all repair and
maintenance activities incurred by the business that are not related to
production activities.
• Taxes. Contains property taxes, use taxes, and other taxes charged by
local governments.
• Travel and entertainment expense. Contains the costs of all airfare,

mileage reimbursement, hotels, and related expenses incurred by
employees.
• Utilities expense. Contains the costs of telephones, electricity, gas, and so

forth.
• Income taxes. If the entity is subject to income taxes, the amount is

recorded in this account.
An organization located in a unique industry may find that it requires

additional accounts beyond the ones noted here. Alternatively, they may
find that certain accounts are of no use. Thus, the exact set of income
statement accounts used will vary by company.
APPLICATION
What is the importance of Income statement accounts?
An income statement helps business owners decide whether they can

generate profit by increasing revenues, by decreasing costs, or both. It also
shows the effectiveness of the strategies that the business set at the
beginning of a financial period. The business owners can refer to this
document to see if the strategies have paid off. Based on their analysis, they
can come up with the best solutions to yield more profit.
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Reference
https://www.zoho.com/books/guides/what-is-an-income-
statement.html#:~:text=Importance%20of%20an%20income%20statement,be
ginning%20of%20a%20financial%20period.
Assessment for Week 3
Test I. True or False:
1. True, Accounts receivable represents receivables supported by oral or

informal promises
to pay.
2. True, Money is recorded in the “Cash” account.
3. False, Notes payable refers to obligations supported by oral or informal

promises to pay
by the debtor.
4. False, An entity that borrows money from the bank will most likely present
interest
income in its income statement.
5. True, Accounts payable and accounts receivable are opposites, meaning

if Entity A has
an accounts payable to Entity B, Entity B in return, has an accounts
receivable from
Entity A.
6. False, There are three major types of accounts used in accounting.
7. True, Allowance for bad debts represents the aggregate amount of

estimated losses
from uncollectible accounts receivable.
8. True, Cost of sales (or Cost of goods sold) represents the value of
inventories that have
been sold, and consequently charged as expense, during the accounting
period.
9. True, Freight out is an expense account.

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10. False, Building is a liability account.
II. Multiple Choices:
1. Goods that are held for sale by a business.

a. Cash
b. Accounts receivable
c. Accounts payable
d. Inventory
2. The structure owned and being used by a business in its operations.

a. Building
b. Base
c. Castle
d. Kingdom
3. The portion of the cost of a building that is already recognized as expenses

since the
building was acquired and made available for use.
a. Accumulated depreciation – building
b. Upkeep
c. Accumulated upkeep
d. Repairs and maintenance expense
4. The cost of unused office and other supplies

a. Prepaid rent
b. Prepaid supplies
c. Cash
d. Accounts receivable
5. Interest incurred by a borrower but not yet paid

a. Interest payable
b. Interest expense
c. Notes payable
d. Notes receivable
6. Interest incurred by a borrower, whether paid or not.

a. Interest payable
b. Interest expense
c. Notes payable
d. Notes receivable
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7. Obligations supported by a written or formal promise to pay by the debtor

in the form of promissory notes.
a. Notes receivable
b. Accounts receivable
c. Accounts payable
d. Notes payable
8. The seller’s cost of delivering goods to customers.

a. Freight out
b. Freight in
c. Freight good
d. Freight bad
9. The cost of promotional or marketing activities during the period.

a. Market expense
b. Advertising expense
c. Groceries
d. Insurance expense
10. The cost of gasoline, hotel accommodation, taxi fare, and similar
expenditures.
a. Transportation and travel expense
b. Interest expense
c. Taxi expense
d. Gas expense
Answer for Multiple Choices

1d
2a
3a
4b
5a
6b
7d
8a
9b
10 a
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Lesson 10: Business Transactions and their Analysis
LEARNING OUTCOMES

1. Describe the nature and give examples of business transactions
2. Identify the different type of business documents.
3. Analyze common business transactions using the rules of debt and
credit
TIME FRAME: 4-5th Week
Introduction
A service business provides a needed service for a fee

In General service businesses actual have no physical product sold to clients
their services are designed to facilitate the work of clients and in return
are paid Service businesses include salons or barbershops laundry services
car repairs' medical centers and services of professionals like lawyers and
doctors. The revenue of a service business is usual realized once the service
has been substantial. Complete Aside from the minor supplies the service
business does not maintain a high level of inventory as compared to
merchandising and manufacturing businesses
ANALYSIS
What is accounting transaction analysis?
ABSTRACTION
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The accounting transaction analysis process in 5 steps

Every transaction that has a financial impact on your company results in
changes to the make-up of your accounting equation. Buying assets will
result in an increase in equity, while selling assets will result in a decrease in
equity.
Before recording a transaction you’ll need to determine whether it has a

financial impact on your company. If the transaction involves a monetary
amount and funds have been exchanged, it’s a qualifying transaction
and has to be recorded. For example, paying a deposit to purchase
equipment for your business is a recorded transaction, but simply signing
the contract without making a payment is not.
Let’s review this step-by-step guide to the analysis of the business

transaction process.
1. Identify the accounts involved
The first step is to determine which accounts are affected by the

transaction. For example, if a business owner invests $10,000 in cash into
the business in exchange for common stock, the accounts involved would
be the cash account and the common stock account.
2. Establish the nature of the accounts
Review the transaction to determine whether the accounts involved are

assets, liabilities, or equity. To briefly recap:
• Asset accounts include cash, notes receivable, accounts

receivable, land, equipment, buildings, inventory, and prepaid
expenses.
• Liability accounts include debt incurred by the company, such as
notes payable, accounts payable, and accrued liabilities.
• Stockholder’s equity includes any dividends, retained earnings,
revenue (such as sales revenue), expense accounts (such as rent
expense), and common stock.
3. Determine which account increases and which one decreases
Debits increase asset accounts and credits increase liability or equity

accounts. Debit simply means recording the transaction on the left side,
while credit means recording the transaction on the right side.
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4. Apply the rules of debit and credit on accounts
To keep the account equation in balance, every transaction recorded

must have an entry in an opposite but related account. Every debit must
have a corresponding credit. This method, known as double-entry
accounting, is enforced to keep the accounting equation balanced.
5. Record the transactions in your journal entry
Once you’re done analyzing the transaction and have determined the
accounts involved and where the transaction needs to be debited and
credited, you’re ready to record your journal entry. Make sure to record
your transactions in chronological order to ensure your books stay
organized.
APPLICATION
How these topics relate in lifelong learning about accounting?
The accounting process starts with the analysis of business transactions. A is any
financial event that changes the resources of a firm. For example, purchases, sales,
payments, and receipts of cash are all business transactions. The accountant
analyzes each business transaction to decide what information to record and
where to record it.
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Lesson 11: The Accounting Cycle
LEARNING OUTCOMES

1. Discuss the significance of an accounting cycle.
2. Explain the phases of the accounting cycle.
Introduction
The accounting cycle is a comprehensive process designed to

make a company’s financial responsibilities easier for its owner, accountant
or bookkeeper. The accounting cycle breaks down a bookkeeper’s
responsibilities into eight essential steps to identify, analyze and record
financial information. It serves as a clear guideline for accurately completing
bookkeeping tasks.
ABSTRACTION
The accounting cycle’s 8 steps
Here’s an in-depth look at the eight steps in the accounting cycle. Once you
check off all the steps, you can move to the next accounting period.
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1. Identify and analyze transactions during the accounting period.
A business starts its accounting cycle by identifying and gathering details

about the transactions during the accounting period. When identifying a
transaction, you’ll need to determine its impact. Transactions include
expenses, asset acquisition, borrowing, debt payments, debts acquired and
sales revenues.
2. Record transactions in a journal.
The next step is to record your financial transactions as journal entries in your
accounting software or ledger. Some companies use point-of-sale
technology linked with their books, combining steps one and two. Still, it’s
essential for businesses to keep track of their expenses.
Your accounting type and method determine when you identify expenses
and income. For accrual accounting, you’ll identify financial transactions
when they are incurred. Cash accounting, on the other hand, involves
looking for transactions whenever cash changes hands.
Double-entry accounting suggests recording every transaction as a credit or

debit in separate journals to maintain a proper balance sheet, cash flow
statement and income statement. On the other hand, single-entry
accounting is more like managing a checkbook. It doesn’t require multiple
entries but instead gives a balance report.
3. Post transactions to the general ledger.
Once transactions are recorded in journals, they are also posted to the
general ledger. A general ledger is a critical aspect of accounting, serving
as a master record of all financial transactions.
The general ledger breaks down the financial activities of different accounts
so you can keep track of various company account finances. A cash
account is by far the most crucial account in a general ledger, as it gives an
idea of the cash available at any time.
4. Calculate an unadjusted trial balance.
While earlier accounting cycle steps happen during the accounting period,
you’ll calculate the unadjusted trial balance after the period ends and
you’ve identified, recorded and posted all transactions. The trial balance
gives you an idea of each account’s unadjusted balance. Such balances
are then carried forward to the next step for testing and analysis.
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Creating an unadjusted trial balance is crucial for a business, as it helps

ensure that total debits equal total credits in your financial records. If they
don’t, something is either missing or misaligned. This step generally identifies
anomalies, such as payments you may have thought were collected
and invoices you thought were cleared but actually weren’t.
Regardless of the scenario, an unadjusted trial balance displays all your

credits and debits in a table. In the next step, you’ll investigate what went
wrong.
5. Analyze the worksheet to identify errors.
The accounting cycle’s fifth step involves analyzing your worksheets to

identify entries that need to be adjusted. As every transaction is recorded as
a credit or debit, this step requires ensuring that the total credit balance and
debit balance are equal.
Apart from identifying errors, this step helps match revenue and expenses
when accrual accounting is used. Any discrepancies should be addressed
by making adjustments, which happens in the next step.
6. Adjust journal entries to fix errors.
When the accounting period ends, you’ll adjust journal entries to fix any
mistakes and anomalies found during the worksheet analysis. Since this is the
final step before creating financial statements, you should double-check
everything with the help of a new adjusted trial balance.
7. Create and produce financial statements.
Once the company has made all the adjusting entries, it creates financial
statements. Most companies create balance sheets, income statements and
cash flow statements.
The balance sheet and income statement depict business events over the
last accounting cycle. Most businesses produce a cash flow statement; while
it’s not mandatory, it helps project and track your business’s cash flow.
These financial statements are the most significant outcome of the

accounting cycle and are crucial for anybody interested in comparing your
business with others. They are also highly valuable for business owners.
Interpreting financial statements helps you stay on top of your finances and
devise growth strategies.
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8. Close the books for the accounting period.
The last step in the accounting cycle is to make closing entries by finalizing
expenses, revenues and temporary accounts at the end of the accounting
period. This involves closing out temporary accounts, such as expenses and
revenue, and transferring the net income to permanent accounts like
retained earnings.
After you close the books, the financial statements produced provide a
comprehensive performance analysis for the time frame. Then the
accounting cycle starts again for the new reporting period.
This is a good time to file paperwork and plan for the next accounting
period.
APPLICATION
Why an Accounting Cycle is necessary?
The accounting cycle's purpose is to ensure that all the money coming into or
going out of a business is accounted for that's why balancing is so critical.
However, errors are frequently made when recording entries, leading to an
incorrect trial balance that needs to be adjusted so that debits and credits
match
Reference:
https://www.businessnewsdaily.com/16506-accounting-cycle.html
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Lesson 12: Identifying and Analyzing Transactions and Events
LEARNING OUTCOMES

1. Enumerate the 8 cycle of Accounting
2. Modify steps in the accounting process to fit their business model and
accounting procedures.
Introduction
The accounting cycle is a comprehensive process designed to

make a company’s financial responsibilities easier for its owner, accountant
or bookkeeper. The accounting cycle breaks down a bookkeeper’s
responsibilities into eight essential steps to identify, analyze and record
financial information. It serves as a clear guideline for accurately completing
bookkeeping tasks.
ANALYSIS
What is accounting transaction analysis?
ABSTRACTION
According to Miriam – Webster (2020), the argument is a coherent

series of reasons, statements, or facts intended to support or establish a point
of view. Thus, writers used these arguments to present their ideas or beliefs on
certain principles. However, these arguments are sometimes doubted if they
do not have supporting evidence or if these arguments are based on
opinions only. Before we can determine whether a statement is a FACT,
OPINION, or INCORRECT INFORMATION, let us define these three concepts.
(Mondez and Suarez 2016)The fact is Objective. It is not influenced by
personal feelings or judgment Example: COVID-19 pandemic created a
chaotic situation in many parts of the world. Opinion is Subjective. It is based
on or influenced by personal beliefs or feelings. Example: The movie “Flor
Contemplation Story” is very dull. Incorrect information is the opposite of Fact
and not Opinion Example: The Philippines has a total of 7,107 islands. (It has a
total of 7,641)Always consider that opinions include words of judgment or
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personal preference when deciding if a statement is a fact or an opinion.

Opinions are not the opposite of Facts. If it is proved that facts are not
accurate, what you have is called Incorrect Information (Mondez and Suarez
2016).IDENTIFYING ARGUMENTS An argument is a systematic way to make a
point in academic writing.
An argument consists of two parts.
1. Firstly, a claim or statement that summarizes the main idea
2. Secondly, reasons why that claim is accurate, or evidence to

support that claim.
Example, reflective writing can help students become better thinkers. It can
help students see that ideas are meant to be discussed and debated.
Bridges and Jost found that students who did weekly reflective journal writing
about their course content for a semester could analyze course concepts at
a deeper level than those who didn’t.
In this case, the sentence "Reflective writing can help students become
better thinkers "is the claim.
The claim is expanded upon in the next sentence, "It can help students see
that ideas are meant to be discussed and debated.
"Finally, the evidence is presented, often in the form of a citation. Here, we

read that" Bridges and Jost found that students who did weekly reflective
journal writing about their course content for a semester could analyze
course concepts at a deeper level than those who didn't."This evidence
supports the originally presented claim and its expansion
IDENTIFYING AND ANALYZING ARGUMENTS
An arguments is one or more premises put forth to prove a conclusion. The

conclusion is the point of the argument, that which it seeks it proves. The
premises provide the proof in the form of reasons or evidence for the truth of
the conclusion. The goal of the argument is to transfer the certainty of the
premises to the conclusion through logical inference. Because of this, an
argument is only as good as its premises. If the premises are known to be true
and the logic of the argument is good, then the conclusion is known to be
true as well.
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Identifying Arguments
The first question to ask in analyzing an argument is whether you are really
dealing with an argument. Arguments are an attempt at persuasion. They
are an attempt to convince you of something or to get you to believe
something. This makes them different from information, which you might find
in a news report from the Associated Press or Reuters. These reports just tell
you what happened. They may report about arguments, say, of politicians,
and often quote a variety of sources in covering a controversial issue without
taking a stand. Sometimes reporting reflects a subconscious or even
intentional bias on the part of the reporter, but the ideal expressed in
journalistic codes of integrity, is to provide an objective picture. Arguments
are reserved for the opinion page of newspapers or commentary shows on
cable news. Hannity and Rachel Maddow are trying to convince you to
believe certain things. Straight news reporting is not (or at least it's not
supposed to).
Similarly, an explanation is not an argument. An explanation attempts to

show why something is the way it is, not that it is a certain way. For example,
you might read in a science textbook that the explanation for movement of
ocean tides involves the gravitational attraction of the moon. The textbook is
not trying to convince you that this is the reason why tidal action occurs as it
does; it is simply telling you how and why it occurs.
A story is not an argument. Often people will tell stories with no "moral" or
point to them, that is, with no conclusion. If I tell you a story about trying to
convince my twin brother's lab partner that I was not him in college or about
having him masquerade as me with my new girlfriend as a prank, I'm not
trying to convince you of the facts of these stories or trying to get you to draw
any conclusion about twins or mistaken identity or pranks; I'm just sharing
some humorous anecdotes. However, sometimes a story can contain an
implied or implicit argument. Fables, parables or polemical fiction and media
often contain arguments.
A claim is not an argument. If I make a claim without any supporting reasons

or evidence, I haven't made an argument. If I say "You should always believe
women who make claims of sexual assault" without providing any evidence
that you should do this, then, I haven't made an argument. That sentence is a
claim, but it's not a conclusion. By definition, conclusions must be supported
by one or more premises.
Finally, it is important to note that bad arguments are still arguments. In order
to count as an argument, there only has to be a conclusion with one premise
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put forward to support it. The conclusion could be totally absurd and the
premise may be known to be false or true but completely irrelevant. It's still
an argument.
Analyzing Arguments
To analyze any argument, first look for the conclusion. Ask yourself "What's the
point of this series of statements? What is the person trying to convince me
of? Often the conclusion will come at the end of the series of statements,
though sometimes it comes at the beginning or some place in the middle. It
is sometimes preceded by words like "so," "therefore," "thus," "in summary," or
sometimes even "in conclusion." Once you have identified the conclusion,
look at the premises. Premises are often preceded by words like "because,"
"for" or even "for the reason that." Next, ask yourself, "Are the premises
believable?" Are they known with a high degree of certainty? Next ask
yourself, "If these premises are true, do they make the conclusion likely to be
true, that is, do they support the conclusion? I they offer enough support that
a reasonable person would believe the conclusion on the basis of the
premises? If so, then the argument is good. If the premises are questionable
or, if true, don't sufficiently support the truth of the conclusion, then the
argument is weak or bad.
APPLICATION
What’s the importance of identifying arguments?
Being able to identify arguments is an important part of critical thinking. It

allows you to understand how people structure their thinking, and prepares
the ground for analysis and evaluation, so that you can formulate an
argument of your own.
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Lesson 13: Journal Entry
LEARNING OUTCOMES

1. Harmonize the different accounting policies.
2. Relate the knowledge into a meaningful lifelong learning
Introduction

ANALYSIS
What is a Journal Entry?
ABSTRACTION
A journal entry is used to record a business transaction in the accounting

records of a business. A journal entry is usually recorded in the general ledger;
alternatively, it may be recorded in a subsidiary ledger that is then
summarized and rolled forward into the general ledger. The general ledger is
then used to create financial statements for the business.
The logic behind a journal entry is to record every business transaction in at

least two places (known as double entry accounting). For example, when
you generate a sale for cash, this increases both the revenue account and
the cash account. Or, if you buy goods on account, this increases both the
accounts payable account and the inventory account.
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What is Included in a Journal Entry?

The structure of a journal entry contains the following elements:
A header line may include a journal entry number and entry date.
The first column includes the account number and account name into which
the entry is recorded. This field is indented if it is for the account being
credited.
The second column contains the debit amount to be entered.
The third column contains the credit amount to be entered.
A footer line may also include a brief description of the reason for the entry.
The structural rules of a journal entry are that there must be a minimum of two
line items in the journal entry, and that the total amount you enter in the
debit column equals the total amount entered in the credit column.
A journal entry is usually printed and stored in a binder of accounting

transactions, with backup materials attached that justify the entry. This
information may be accessed by the external auditors as part of their year-
end investigation of a company's financial statements and related systems.
Types of Journal Entries
There are several types of journal entries, which are noted below.
Adjusting Journal Entry
An adjusting entry is used at month-end to alter the financial statements to

bring them into compliance with the relevant accounting framework, such as
Generally Accepted Accounting Principles or International Financial
Reporting Standards. For example, you could accrue unpaid wages at
month-end if the company is on the accrual basis of accounting.
Compound Journal Entry
A compound journal entry is one that includes more than two lines of entries.
It is frequently used to record complex transactions, or several transactions at
once. For example, the journal entry to record payroll usually contains many
lines, since it involves the recordation of numerous tax liabilities and payroll
deductions.
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Reversing Journal Entry
A reversing entry is typically an adjusting entry that is reversed as of the

beginning of the following period, usually because an expense was to be
accrued in the preceding period, and is no longer needed. Thus, a wage
accrual in the preceding period is reversed in the next period, to be
replaced by actual payroll expenditure.
Journal Entry Best Practices
In general, do not use journal entries to record common transactions, such as

customer billings or supplier invoices. These transactions are handled through
specialized software modules that present a standard on-line form to be filled
out. Once you have filled out the form, the software automatically creates
the accounting record. Thus, journal entries are not used to record high-
volume activities.
When you create the same journal entry on a recurring basis, it makes sense
to set up a template for it in the accounting software. This template contains
the accounts normally debited and credited, so that you can easily fill it out
when creating a new entry. The use of templates is not only efficient, but also
reduces errors.
Journal entries and attached documentation should be retained for a

number of years, at least until there is no longer a need to have the financial
statements of a business audited. The minimum duration period for journal
entries should be included in the corporate archiving policy.
APPLICATION
What is the importance of Journal Entry in Accounting?
Journal entries and attached documentation should be retained for a

number of years, at least until there is no longer a need to have the financial
statements of a business audited. The minimum duration period for journal
entries should be included in the corporate archiving policy.
Reference
https://www.accountingtools.com/articles/what-is-a-journal-entry.html
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Lesson 14: Simple and Compound Journal Entries
LEARNING OUTCOMES

1. stimulate further research on the effects of interventions.
2. Explain each journal entries
Introduction

ANALYSIS
What are simple journal entries?
ABSTRACTION
There are so many rules to follow and calculations to do. But, it’s one of those
things you have to do for the sake of your business. So instead of diving
straight into the complicated stuff, start slowly with simple journal entries.
Simple accounting journal entries are relatively easy to create because they
only involve two accounts.
What are simple journal entries?
In double-entry bookkeeping, simple journal entries are types of accounting

entries that debit one account and credit the corresponding account. A
simple entry does not deal with more than two accounts. Instead, it simply
increases one account and decreases the matching account.
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Simple journal entries definition with visual of calculator
A simple journal entry typically includes the following information:
• 2 accounts
• 1 debit
• 1 credit
• Date
• Notes
Simple and compound entry in accounting
Not all journal entries are as easy as simple accounting entries. There are also
compound journal entries.
You’ll likely need to make both simple and compound entries when you
manage your business’s books.
Compound journal entries involve more than two accounts. A compound

journal entry could have as little as three accounts, or it could reach double
digits (e.g., payroll accounting entries).
Unlike simple journal entries, which only deal with one debit and one credit,
compound entries have two or more debits, credits, or both. Although you’re
dealing with multiple debits and credits in a compound journal entry, they still
need to equal one another.
APPLICATION
When do you need to use simple accounting entries?
A compound entry is actually a combination of two or more simple

journal entries but instead of recording numerous separate journal entries, it is
better to merge multiple journal entries of a single accounting event into a
single compound entry because it saves time and keeps the related debits
and credits in one.
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Reference
https://www.patriotsoftware.com/blog/accounting/simple-journal-
entries/#:~:text=Unlike%20simple%20journal%20entries%2C%20which,need%20
to%20equal%20one%20another.
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SUBJECT CODE - NAME OF SUBJECT

In partial fulfillment of the requirements in (Subject name here)

King Solomon Grant Zabate

Dr. Melchor Q. Bombeo, LPT, CPA, MBA

Month Completed here, 2022

INSTITUTIONAL STRATEGIC GOALS

2. Increase student’s population with evenly subscribed academic programs.

3. Upgrade human resource and employee productivity.

4. Establish quality assurance mechanisms in its operations.

INSTITUTIONAL CORE VALUES

PROGRAM EDUCATIONAL OBJECTIVES

STUDENT OUTCOMES PEOs

Facilitate LEARNING of the Allow student to PRACTICE Provide opportunity for

Lesson 1: Accounting Concepts and Principles

At the end of these lessons the students are expected to:

TIME FRAME: 2nd Week

The worldview of accounting and accountants may certainly involve

INSTRUCTION: ARRANGE THE JUMBLED LETTERS TO FORM WORDS

• ALL STUDENTS ARE REQUIRED TO PARTICIPATE.

From the word accounting itself, what do you mean by

8. Realisation concept: According to this concept, profit is recognised

These companies have thousands of stakeholders who have invested millions,

Therefore, accounting principles based on certain concepts, convention, and

The application of the principles by accountants ensures that financial

differences in the application of accounting rules and procedures depending

Accounting principles involve both accounting concepts and accounting

What are the advantage in knowing the concepts and principles of

The ultimate goal of any set of accounting principles is to ensure that a

Lesson 2: Basic Accounting Concepts

At the end of these lessons the students are expected to:

TIME FRAME: 2nd Week

Theory Base of Accounting consists of accounting concepts, principles,

Direction: Complete the words by using the missing letters.

DO YOU WANT TO PLAY WITH ME?

1. _RI_IC_LT_I__I_G ANSWER: CRITICAL THINKING

What are the Basic Accounting Concepts?

Basic Accounting Concepts

Business Entity Concept

drawings. Therefore, assets and liabilities of a business are the business’s

simple words, two accounts will be affected by a single transaction. This

How can we integrate this lesson in to meaning life experience?

Knowing the Basic Accounting concepts improves the quality of

Lesson 3: Accounting Standards

At the end of these lessons the students are expected to:

TIME FRAME: 2nd Week

Accounting standards relate to all aspects of an entity’s finances,

Direction: Complete the words by using the missing letters.

DO YOU WANT TO PLAY WITH ME?

1. P_I_C_P_E_S ANSWER: PRINCIPLES

What Is an Accounting Standard?

• An accounting standard is a set of practices and policies used

Accounting standards relate to all aspects of an entity’s finances,

Accounting standards specify when and how economic events are

Why Are Accounting Standards Useful?

Accounting standards improve the transparency of financial reporting

Lesson 4: The Conceptual Framework for Financial Reporting

At the end of these lessons the students are expected to:

TIME FRAME: 2nd Week

Accounting standards relate to all aspects of an entity’s finances,

2. Lie Abilities LIABILITIES

3. Lee Tea Race Seas LITERACIES

4. Inn Tag Greet INTEGRATE