ACCTG 114 Lecture (March 3, 2022)

Accounting Cycle/Accounting Process is not the same as the Operating Cycle.

Operating Cycle is the normal business activities. On the other hand, Accounting Cycle is the steps to
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Service Business:

What are the normal business activities?

- Turning inputs to outputs.

- The CAPITAL is the main Input

- The SERVICE is the OUTPUT in which it is the rendering of the services, followed by collections
of cash and/or collections of payments for customers.

Trading Business:

What are the normal business activities?

- Turning inputs to outputs.

- The CAPITAL is the main INPUT

- Buy Goods which will be turned to merchandise inventory

- The MERCHANDISE/INVENTORY is the OUTPUT in which it is selling of the merchandise

inventory, followed by collection of cash and/or collections of payments for customers.

Manufacturing Business:

What are the normal business activities?

- Turning inputs to outputs

- The CAPITAL is the main INPUT

- The FINISHED GOODS is the OUTPUT in which it is selling the finished goods, followed by
collection of cash and/or collections of payments for customers.

Sample Problem on VAT transactions:

1st Case: We are NON-VAT, the supplier is VAT Registered, so there is involvement in VAT.

2nd Case: We are NON-VAT, the customer is VAT Registered, so there is no involvement in VAT.