FABM1 Lectures dated March 7, 2023

ACCOUNTING IS THE LANGUAGE OF BUSINESS

BUSINESS?

A. ANY ACTIVITY WITH THE PURPOSE OF EARNING, MAKE PROFIT AND HAVE SOURCE OF
LIVING.

CLASSIFICATION OF BUSINESS:

A. ACTIVITIES/ OPERATIONS?
a. Service – offering our talents, skills and labor = (SLP2 and SLP3)
b. Selling – offering our products or items
i. Buy and sell (merchandising/ trading) – item bought from supplier and
sold to customer = same (no change) = (SLP4)
ii. Buy, manufacture and sell (manufacturing/ production) – items bought
from the supplier, process the item and sold the processed item
1. Items sold is different from items bought from the supplier

B. FORMATION/ OWNERSHIP?
a. Sole Proprietorship – one source of capital; one owner, managed by one
person = (SLP2-4)
i. Advantages: Easy to form; full income and profit
ii. Disadvantages: No share in responsibility and payment of expenses;
unstable and limited life
b. Partnership = two or more owners; agreement; all will contribute
i.Advantages: Share in responsibility and payments of financial
obligations; more sources of capital
ii. Disadvantages: less share in income or profit; misunderstanding due to
conflict of interest; limited life
c. Corporation = 5 to 15 people; contract; managed by board of directors; capital
can come from the creator or from outside.
i. Advantages = capital can come from the outsider called investor; each
investor will be given stock certificate; investor is stockholder
ii. Disadvantages = many requirements to create; strictly monitored by the
government; more taxes

1/MGC
FABM1 Lectures dated March 7, 2023

ASSIGNMENT 5

IN YOUR NOTEBOOK, LIST TEN (10) COMPANY/ BUSINESS NAME – SERVICE OR SELLING, AND
THEN GIVE THREE (3) PRODUCTS OR SERVICES THEY OFFER

NUMBER COMPANY/ BUSINESS NAME TYPE OF PRODUCTS OR SERVICES

(full name) BUSINESS
1 Jollibee Foods Corporation Selling Chicken Joy, Jolly Spaghetti,
Jolly Hotdog
2 Three Sisters’ Grocery Selling ?
3 Super Beauty Parlor Service Haircut, Hair rebond,
Manicure
4 Best Laundry Service Washing, ironing

To submit on Tuesday, March 14, 2023 at 8:20am.

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ACCOUNTING – processes?

o Identify business activities or transactions

 Non-business or business activities?
 Non-financial or financial = peso value or monetary amounts
o Record all financial business activities
 Increase or decrease?
 How much?

2/MGC
FABM1 Lectures dated March 7, 2023

ACCOUNTING EQUATION
ASSETS = LIABILITIES + OWNER’S EQUITY
10 = 4 + 6
ASSETS – LIABILITIES = OWNER’S EQUITY
10 – 4 = 6

A = L + OE
 ASSETS LEFT SIDE OF THE EQUALITY SIGN
o LEFT SIDE = DEBIT SIDE
o ASSET IS FOUND ON THE DEBIT SIDE
 L + OE RIGHT SIDE OF THE EQUALITY SIGN
RIGHT SIDE = CREDIT SIDE
L & OE ARE FOUND ON THE CREDIT SIDE

A = L + OE
DEBIT = CREDIT

ASSETS NORMAL POSITION IS DEBIT

 NORMAL POSITION MEANS INCREASE
 INCREASE IN ASSET = DEBIT
o DECREASE = REVERSE POSITION = CREDIT

ASSETS = CASH AND PROPERTIES, OWNED BY THE BUSINESS, USED IN BUSINESS

OPERATIONS
Example: Pedro bought table for the canteen, Super Canteen, for P1,000, in
cash.

 Increase? Asset = Table P1,000 = DEBIT

 Decrease? Asset = Cash P1,000 = CREDIT
o Debit Table P1,000 and Credit Cash P1,000

3/MGC
FABM1 Lectures dated March 7, 2023

Example: Pedro bought stove for the canteen, P2,000, cash.

 Increase? Asset = Stove P2,000 = DEBIT

 Decrease? Asset = Cash P2,000 = CREDIT
o Debit Stove P2,000 and Credit Cash P2,000

LIABILITIES = UTANG OF THE BUSINESS; PAYABLES; FINANCIAL

OBLIGATIONS TO PAY
INCREASE IN L = CREDIT; DECREASE IN L = DEBIT
A = L + OE
DEBIT = CREDIT
Example: Pedro bought electric fan for the canteen, P2,000, on account.

 Increase? Asset = Electric Fan P2,000 = DEBIT

 Increase? Liabilities = Payables P2,000 = CREDIT
o Debit Electric fan P2,000 and Credit Payables P2,000

L & OE NORMAL POSITION IS CREDIT

 NORMAL POSITION MEANS INCREASE
 INCREASE IN L & OE = CREDIT
o DECREASE = REVERSE POSITION = DEBIT

4/MGC