Accounting Notes

– What is accounting?
– Accounting Standards Council (ASC) definition
– a service activity

– provides quantitative information, primarily

financial in nature about economic entities

– meant to be useful in making economic

decisions
– American Accounting Association (AAA)
– process of identifying, measuring and

communicating economic information to

permit informed judgement and decision by
users of the information
– Accountancy profession
– Republic Act No. 9298 is the law regulating the

practice of accountancy in the Philippines

– “Philippine Accountancy Act of 2004”

– 4 Main areas
– Public

– individual practitioners, small accounting

firms and large multinational organizations

– usual services offered
– auditing

– primary service offered by most

practitioners
– includes examination of financial
 –

statements by independent
accountant
– taxation

– includes preparation of annual income

tax returns and determination of tax

consequences of certian proposed
business endeavors
– management advisory services
– includes advice on computer system

installation, quality control,

accounting system installation and
modification, budgeting, forecasting,
design or modification of retirement
plans and even entity mergers and
takeovers
– Private
– major objective to assist management in

planning and controlling the entity’s

operations
– highest accounting officer in an entity is

known as the controller

– Government
– encompasses the process of analyzing,

classifying, summarizing and disposition of

transactions involving the receipt and
disposition of government funds and
property
– focused on the custody and administration

of public funds
 – Academe
– accountants who are into teaching, training,

research and development

– pursue careers as school faculty members,

authors of accounting books, researchers,

trainers or reviewers
– Accounting cycle
– holistic process that records a business’s

transactions from start to finish, helping

businesses stay organized and efficient
– Transaction/Event
– Journalize
– Post
– Unadjusted Trial Balance

– Adjustments
– Adjusted Trial Balance
– Financial Statements
– Closing
– Post Closing Trial Balance
– Chart of Accounts
– Assets

– Resources owned by a business

– Current
– resources the business owns and expects

to convert into cash before date of new

balance sheet
– inventories, accounts receivable, notes

receivable, cash
– Non-current
 – resources the business owns and expects
to use for a period of more than one year
– Liabilities
– debts of the business that will have to be paid

sometime in the future

– Current

– short term debts expected to be paid within

the year
– A/P, N/P, salaries payable, tax payable
– Non-current
– long term debts not expected to be paid

within the year

– long-term loans, mortgage

– Equity
– amount of money invested by owners into the

business
– Common stock
– Preferred stock
– Income
– amount earned from the sale of products or

rendering of services
– sales/revenue
– Expenses
– day-to-day operating expenses of a business
– Rent expense, Utilities expense,

Miscellaneous expense
– Journalizing
– process of recording and tracking any

transaction performed by your business

 – Steps
– figure out accounts affected
– translate changes into debit and credit
– enter date, reference number and

description
– Value received is debit (Dr)
– Value parted with is credit (Cr)
– Normal balance of accounts
– Asset - Debit
– Liabilities - Credit
– Equity - Credit
– Income - Credit

– Expense - Debit