MODULE 1
Accounting Concepts and Principles
Functions of Accounting
The primary function of accounting is to "provide
financial reports to various end-users for economic
decision-making." (PAS #1)
1. Recording. This accounting function is used to
ensure that all business transactions are
systematically recorded in the accounting books.
2. Classifying. It concerns a systematic analysis of
recorded business transactions and events, with a
view to grouping those of a similar nature as a
single cluster in an accounting element called
Assets, Liabilities or Capital.
3. Summarizing. This involves the presentation of
classified data in a manner that is understandable
and useful to the end-users of accounting
information.
4. Analyzing and interpreting. That is the final
function of accounting. The financial data recorded
are analyzed and interpreted in such a way that
end-users can make a meaningful assessment of
the financial condition and profitability of the
business operations.
5. Communicating. After a meaningful analysis and
interpretation, the accounting information must be
communicated to the intended end-user.
6. Protecting the business property. Accounting
assesses the usefulness of business resources.
7. Preparation of legal requirements. Accounting
facilitates the preparation of government reporting
requirements and ensures timely reporting
compliance.
The basic function of accounting is described as the
process of identifying, measuring and
communicating economic information to allow
informed judgment on economic decisions.
The advanced or critical function of accounting is its
audit function – to test the reliability of financial
reports, track fraud transactions, and locate and
correct accounting errors.
Accounting Information Users
Accounting information users may be classified on
the basis of the extent of their participation in
business affairs – that is, internal users known as
the management group, external users known as
the financing group and public groups.
1. The Management Group. Internal users are
those who own and/or manage and manage
a business entity. In order to help them
make relevant economic decisions to
achieve the firm's goal, the management
group needs more detailed accounting
information. Internal financial reports are
usually prepared solely for the use of
internal users for efficient operation and
control.
2. The Finance Group & the Public Group.
External users (financial and public groups)
do not own and/or manage and control the
business entity. They do not have direct
access to business management, but use
financial reports to meet some of their
financial information needs. The external
users and their respective needs, as
reflected in the financial reports, shall
include:
3. Investors. The investors need information to
help them determine whether to buy, hold or
sell.
4. Lenders. Interested in the information that
enables them to determine whether their
loans and related interest will be paid in due
time.
5. Suppliers and other commercial creditors.
Interested in the information that enables
them to determine whether the amounts due
will be paid when due.
6. Customers. Customers have an interest in
information on the continuity of an
enterprise, especially when they have or are
dependent on a long-term commitment to an
enterprise.
7. It is the government and its agencies. They
are interested in the allocation of resources
and therefore in the activities of the
company.
 8. Public. Financial reports may assist people
by providing information on trends and
recent developments in the prosperity of the
enterprise and the range of its activities.
Branches of Accounting
Provides four (4) major specialized accounting
fields, namely (1) Public Accounting, (2) Private
Accounting, (3) Government Accounting, and (4)
Accounting Education.
Public Accounting (Public Accounting Practice) is
said to be in public accounting when accountants
offer their professional services to clients for a fee,
as do other professionals. An accountant who
engages in public accounting is not a client
company employee.
The following are the accounting divisions in this
category:
1. External auditing focuses primarily on the critical
review of the financial statements by an
independent CPA to express an opinion on the
fairness of the content of the financial statements.
2. Tax Services deals with the accounting officer
preparing the client's income tax, business and
transfer tax returns.
3. Management Advisory Services provides
management assistance.
Private Accounting (Practice in Commerce and
Industry) accountants are said to be in private
accounting when they are employed in a private
company or a non-profit organization. Large
companies divide their accounting staff into
departments according to specialized accounting
functions. The accounting divisions in this category
are as follows:
1. Financial Accounting focuses on the
recording of business transactions and the
periodic preparation of financial position and
operating results reports.
2. Internal Auditing is concerned with
determining the operational efficiency of the
company with regard to the protection of the
assets of the company, the accuracy and
reliability of the accounting data and
adherence to the management policies
prescribed. This process is known as
financial internal auditing.
3. Tax Accounting includes the preparation of
various tax returns and tax planning
necessary to minimize the impact of taxes
on the company. Tax accountants are
therefore specialists in both tax compliance
and tax planning.
4. Cost Accounting shall use these data as
soon as they have been extracted from the
cost books to provide management planning
and control information.
5. Budgeting involves the efficient
management of cash by anticipating or
predicting monetary objectives in future
periods.
6. Accounting system design primarily involves
the assessment of the company's control
system in order to identify any areas of
improvement.
7. Not-for-profit Accounting deals with special
accounting for charitable organizations,
philanthropic foundations, religious groups,
governmental agencies, hospitals, schools,
and cooperatives.
Government Accounting (Government Practice)
focuses mainly on the proper custody and purpose
of government funds.
Accounting Education (Practice in
Education/Academy) involves teaching accounting,
taxation and certain business subjects.
Forms of Business Organizations
The company assumes one of the three forms of
organization. The accounting procedures depend on
which type of organization it takes.
Sole Proprietorship – This business organization
has a single owner called the owner, who is
generally also the manager. Small-scale enterprises
and retail establishments tend to be the sole
proprietorship.
Partnership – a partnership is a business owned
and operated by two or more persons who are
bound to contribute money, property or industry to a
common fund, with a view to dividing the profits
between themselves. Each partner is personally
liable for any debts incurred by the partnership.
Corporation – a corporation is an entity owned by its
shareholders. It is artificially created by the
operation of the law, having the rights of succession
and the powers, attributes and properties expressly
authorized by the law or by an incident of its
existence. Shareholders are not personally liable for
the debts of the corporation. The corporation shall
be a separate legal entity.
Primary business activities
1. Serving to earn revenue, this business provides
services to clients in exchange for a fee.
2. Merchandising this business is engaged in the
"buying" and "selling" of goods.
3. Manufacturing this business converts raw
materials into finished goods, which are to be sold
at a selling price.
MODULE 2
Accounting Concepts and Principles
Accounting Concepts are important ideas that
accountants take into account when recording
business transactions.
Accounting principles are those of primary
importance, which broadly define actions that will
best achieve the objectives of accounting.
Basic Assumption in Accounting
Accounting assumptions provide the basis for the
rational and systematic formulation of principles and
for the development of procedures and methods for
the performance of accounting services.
Five basic assumptions form the basis of the
financial accounting structure, namely: (1) economic
entity (2) going forward (3) monetary unit (4)
periodicity (5) accrual basis.
1. Economic Entity Accountants regard a
business enterprise as a separate and
distinct entity from the person or persons
who own and operate it.
2. Going Concern Assumption is a concept that
assumes the business entity will continue to
operate indefinitely for a period of time
sufficient to meet its intended objectives,
plans, contracts and obligations, unless
liquidation of the entity is imminent.
3. Monetary Unit Assumption. This accounting
concept assumes that money is the common
denominator for measuring economic activity
4. Periodicity Assumption. Time period
assumes that the company's life is divided
into several periods.
a. A time period is usually referred to as the
accounting period. This is classified as
(a) calendar year, (b) fiscal year, or (c)
interim year.
b. The calendar year shall be a twelve-
month period beginning on 1 January
and ending on 31 December of the
financial year.
c. A fiscal year starts from any month other
than January and complete the 12
months period.
d. The interim period shall be the business
period within the accounting period.
When financial reports are prepared at
any date, even if the twelve-month
period is not yet due, they shall be
referred to as interim reports because
they are prepared within an interim
period.
5. Accrual-Base Assuming that the net profit of
a business enterprise differs between
revenue and expenditure for the accounting
period and not between cash receipts and
cash disbursements.
Basic Principles of Accounting

There are four basic accounting principles that are
used to record and report business transactions,
namely: (1) (2) recognition of revenue (3)
recognition of expenditure and (4) full disclosure.
Measurement Principles guide accountants on how
assets and liabilities are valued. Accounting uses
two principles of measurement:
1. Principle of cost (also known as historical
cost principle). As required by IFRS,
business entities are expected to account for
and report many assets and liabilities on the
basis of the acquisition price.
2. The principle of fair value is defined as 'the
amount for which the asset could be
exchanged, the liability could be settled, or
the equity instrument granted could be
exchanged between knowledgeable and
willing parties in an arm's length transaction.
Revenue Recognition Principle this is when
goods are delivered or services are rendered or
performed and should be recognized in the
accounting period
Expense Recognition The expenditure principle
should be recognized in the accounting period in
which goods and services are used up to produce
income and not when the entity pays for those
goods and services.
Full-Disclosure Principle requires the financial
statements to report all relevant information relating
to the economic affairs of a business undertaking,
including subsequent events.
Fundamental Qualities of Accounting
1. Relevance. Accounting information must be
relevant to be able to influence or make a
difference in economic decisions.
Information is of relevance when it
influences the economic decisions of users
by helping them to evaluate past, present or
future events or to adjust or correct their
past assessments.
2. Faithful representation. Main objective of
reliable representation is to build public trust
and confidence in the financial statements. It
means accounting information must be
complete, neutral and free from material
error.
Enhancing Qualities of Accounting
1. Understandability. A comprehensible
accounting information. Accountants must
provide understandable financial accounting
information by presenting data that can be
understood by different users of the
information.
2. Verifiability. It occurs when independent
measures use the same accounting
methods and still could arrive with the same
results. The information proved their faithful
representation as shown in the financial
reports through double-checking and
corroboration
3. Timeliness. Accounting information must be
available on time when needed. Timeliness
is crucial in making decisions. Lack of
timeliness reduces relevance.
4. Comparability. It Enables users to identify
similarities and differences of accounting
information between two, or more sets of
economic circumstances.
MODULE 3
The Accounting Equation
Basic Financial Statements
Financial Statements shall be the formal reports
prepared by the accountants. These statements
show the financial effects of transactions and other
events which are grouped into broad classes
according to their economic characteristics. These
broad classes are called financial statements
elements.
Based on the PAS No. 1, the basic financial
statements are the following:
1. Statement of Financial Position also
called the balance sheet shows the financial
 condition of the business entity at any given
time.
2. Statement of Comprehensive Income is
an accounting report called the income
statement. It shows the operating
performance of the business entity for a
given period.
3. Statement of Changes in Equity shows the
movement in the various elements of the
owner’s equity or capital for a certain period.
The following are the basic components
of this statement:
a. Owner’s investments to the business
b. Profit or Loss for the period
c. Owner’s personal withdrawals
d. Prior period adjustments
4. Cash Flow Statement. It is a financial
report that explains the changes of cash and
cash equivalents during an accounting
period.
5. Notes to the Financial Statements the
parenthetical disclosures and notes to the
financial statements. They are considered
part of the basic financial statements to
achieve proper understanding of the
financial reports.
Elements of Financial Statements
The IASB Framework provides five interrelated
elements used to measure the financial position and
the operating performance of business enterprise.
The elements directly used to the measurement
of financial position are the following:
1. Assets. These are resources owned or
controlled by an entity resulting from past
events and from them; future economic
benefits are expected to flow to the entity.
2. Liabilities. These are existing obligations of
the entity arising from past events; outflow of
assets from the entity are expected for their
settlements.
3. Equity. The residual interest in the assets of
the entity after deducting all entity’s
liabilities.
The elements that are used to measure
operating performance consist of the following:
4. Revenues. These are increase in assets or
decreases in liabilities arising from business
operation during an accounting period that
result to increase owner’s equity.
5. Expenses. These are decreases in assets
or increases in liabilities arising from
business operations during an accounting
period that result to the decrease in owner’s
equity.
Definitions, Classifications and Examples of
Accounts
Accounting uses several account titles to describe
economic transaction and events.
Account of assets
Assets are assets or valuables owned by an
enterprise. It may be a physical form (such as cash
and inventory) or not a physical form (such as
patents and copyrights). Future economic benefits
are expected to flow from them to the entity, and if
they are controlled by the entity, they are assets.
Asset accounts are classified as Current and
Current Assets.
The following are some of the current assets
commonly used:
1. Cash –any item on hand with monetary
value that a bank will accept for deposit and
all amounts currently on deposit with the
bank in the name of the business. This
includes coins and currencies, personal
checks, money orders, traveller’s checks
made payable to the business and bank
drafts.
2. Accounts Receivable – amounts to be
collected on the customer's open accounts.
These are the oral promise of the debtor to
 pay a certain amount to the business and
the right of the business to collect that
certain amount in peso.
3. Notes Receivable – a promissory note
received by the business from its debtors
and/or customers.
4. Accrued Interest Receivable – the interest
earned on note receivable but not yet
received in cash. Accrued interest
receivable increases the current asset
account on a company's balance sheet,
while interest revenue increases net
income.
5. Inventories – assets held for sale in the
normal operation of the business, in the
process of production for sale, or in the form
of materials or supplies to be consumed in
the production process or in the rendering of
services.
6. Prepaid Supplies – these are various
materials still unused at the end of the
accounting period.
Noncurrent Assets
1. Land – the site owned by the entity on which
the business building is constructed. This
plant asset is not subject to depreciation.
2. Building – the structure owned by the
business used in the operation and
production of the business.
3. Furniture and Fixture – Long-lived pieces
used by the firm, including shop furniture
such as showcases, counters, bins, display
racks, as well as furniture used for office
purposes such as desks, chairs and
cabinets.
4. Equipment – consist generally of
machineries for production of goods used in
the business.
Contra-Valuation Account
1. Allowance for Doubtful Accounts – refers
to an amount estimated uncollectible on
accounts and notes receivable in
compliance with the principle of
conservatism.
2. Accumulated Depreciation – the
aggregate periodic costs of using a
depreciable plant asset using various
depreciation method.
The Liability Account
Liabilities are present obligation to pay cash or cash
equivalents by an entity. It represents claims
against the assets of the business. It has a normal
credit balance. They are classified into current and
noncurrent liabilities.
Below are examples of current liabilities:
1. Accounts Payable – an obligation or debt
to creditors for money borrowed and other
assets bought on credit.
2. Notes Payable – it is an entity’s issued
promissory note to its creditors for money
borrowed or merchandise and other assets
bought on credit.
3. Accrued Interest Payable – the interest
incurred but not yet paid in the current
period.
4. Withholding Tax Payable – the amount of
income tax withheld from the salary of
employee in behalf of BIR that the employer
has to remit to BIR on the specified due
date.
All other liabilities should be classified as
noncurrent liabilities
Noncurrent liability is one that does not meet the
criteria of a current liability. Generally, it
compromises the portion payable beyond one year
of a long-term liability.
The Owner’s Equity Accounts
Owner’s Equity – the residual amount after
deducting liabilities from assets. It compromises the
capital contribution and withdrawals by the owner. It
is increased by capital contribution of the owner and
net income of the business, and decreased by the
owner’s withdrawals and net losses of the business.
Drawing– is a temporary account used to record
initially the amount taken by the owner from the
business.
Nominal Accounts
Nominal accounts are those that form the
components of the Comprehensive Income
Statement – the revenue and expense accounts.
These accounts are considered provisional since
they are closed or put to zero by the end of the
accounting cycle.
The Revenue Accounts
Revenue represents the earnings of the business
from sales of goods or service rendered. Revenue
accounts have a normal credit balance. These are:
1. Sales – an account used to summarize sale
of goods of a trade or a merchandising
business.
2. Service Income – the earnings derived from
services rendered by a servicing business to
its customers.
3. Professional Fees – the earnings derived
from services rendered by a professional or
professional servicing firm which could be in
cash or in collectibles to its clients.
4. Interest Income – the earnings representing
the time value of money derived from the
promissory notes received by the business,
whether in cash or collectibles in the future.
5. Rent Income – the income earned from
allowing others to use the property or facility
of the business.
6. Gain on Sales of Other Assets –the
income derived from the sales of assets
used in the business operation. There is
gain on sale if the proceeds exceed the book
value or cost of the disposed asset.
The Expense Accounts
Expenses are costs incurred in conducting the
business activities and operation. Expense
accounts have normal debit balances. Some
common expense accounts are as follows:
1. Cost of Sales – the value of merchandise
sold.
2. Supplies Expense – the amount of supplies
consumed or used by the business during
the period of operation.
3. Salaries and Wages Expense – the
amount paid to services rendered by the
employees in the operation of the business.
4. Insurance Expense – the amount of
insurance policy incurred during the current
period.
5. Taxes and License Expense – the cost of
local as well as national taxes that are
incurred and required to be in connection
with the conduct of business.
Estimated Expenses
1. Doubtful Accounts Expense – the
estimated amount of losses from
uncollectible accounts arising from credit
sales of the current period.
2. Depreciation Expense – represents the
current periodic cost for using depreciable
plant assets.
MODULE 4
Accounting Information System and Double
Entry System
Accounting Information Systems. The
information is entered into the system and the
system tracks and organizes the accounting
information. The accounting information system is
used also to provide detailed information about the
company, including financial statements. refer to
the whole range of records and special accounting
procedures use by the business in achieving the
objectives of financial accounting – the preparation
and communication of financial report.

Importance of the Accounting Information
System
1. The preservation of the business record
is mandated by law. Maintaining an
accounting record is not a choice. Business
companies are required by statute to
maintain books of accounts and other
accounts that can be checked.
2. It helps prevent unnecessary costs.
Without proper business records, the
enterprise might not be to collect
receivables, pay obligations correctly, and
protect its asset its asset effectively
3. It facilitates decision-making. Managers
are generally guided by the financial
information and reports in making sound
economic decisions.
Coverage of AIS
1. Financial Accounting Systems. FAS is an
accounting system where the financial data
of the organization is maintained. Financial
data contains any transaction which debits
or credits the account balance. It start at the
operational levels of the organization, where
the transaction processing systems capture
important business events such as normal
production, purchasing, and selling activities.
2. Cost Accounting Systems. These are
used in manufacturing and service entity. It
allow organizations to track the cost
associated with the production of goods
and/or performance of services.
3. Management Accounting Systems. A
organizational planning, monitoring and
controlling of various activities.
4. Tax Accounting Systems. These facilitate
the preparation of tax returns and its
reconciliation, tax planning, and updates.
5. Not-for-profit Accounting Systems. A
preparation of financial reports, budgets, and
maintaining financial records of government
agencies, churches, charitable institutions,
non-government organizations, school, etc.
Methods of Processing Accounting Information
The processing of accounting information may be
done through manual processing or
automated/computerized processing.
1. Manual processing. The entire process is
done by handwriting business transactions
to journal books and manually posting the
debit and credit values of the journal's
accounts to ledger books.
2. Automated or computer-based processing.
Often known as "electronic data
management" this uses computer
technologies to conduct transaction-oriented
data processing by an enterprise.
Company transactions and business activities
A company's many economic operations may be
categorized as transactions or incidents that are
reported in accounting books and non-accountable
activities that are not recorded in accounting books.
These business practices are listed as follows:
1. Business Transactions are generally sourced
from ordinary economic activities of a business
such as selling, purchasing, and producing.
2. Accounting Events refer to the occurrences
that might affect any of the basic accounting
elements. Events might be occasional to the
business such as losses due to theft, calamity,
and decline in market value of inventory.
The Double-Entry System vs. Single-Entry
Systems
The double-entry system of accounting is based
on the dual aspect concept that for every change in
financial transaction, there would always be an
effect to the extent of the same amount in the
accounting books. The first in the assets of the
business and the second is the claims against the
assets. From this, the basic accounting equation,
“Assets = Liabilities + Capital” was derived.
To credit is to record the value parted with in an
economic transaction.
For every transaction, the value of debit is always
equal to the value of credit

Debit (a debtor or a borrower) is the value received

in a business. The place of debit in the equation is
on the left-hand side. The word “charge” in
accounting would also mean debit. Classification of Journal Books
There are two classifications of journal books – the
general journal and special journal
Credit In every value received, there must be a
corresponding value parted with (a creditor or a
lender) is the value parted with or value given in a The general journal
transaction.. The place of credit in the equation is
on the right-hand side. The parts of the general journal are described as
follows:

The single-entry system. This system employed

commonly when the business records are
incomplete. Record keeping in this system does not
analyze and record business transactions and
events in double-entry. The debit and credit are not
used in single-entry system.
1. Date column. Is for recording the date on which
the transaction is journalize
2. Description column. Account titles to be debited
and credited and is for identifying the source
documents and the nature of transactions.

Worksheet on financial transfers

Any financial activity can be evaluated or expressed
in terms of its impact on the accounting equation.
Financial transfers can be evaluated by means of a
Financial Transaction Worksheet, a method used to
measure rises and declines in the properties,
liabilities or equity of a corporate organization.
3. Page number. Is pre-printed and will be used to
cross reference the account to the general ledger
page.
4. Posting reference. This column is used to cross-
reference the account to the general ledger.
5. Credit and Debit money columns. Are used to
record the amounts of the transaction.

The T – Account
An account may be expressed in a “T” device from
where the debits are recorded on the left-hand side
and the credits are recorded on the right-hand side
of the letter T. As implied in its form, this device is
called a “T-account”
Basically, a T-account has three parts, the account
title (name), the debit side, and the credit side.
To debit is to record the value received in an
economic transaction.
Flows of Accounting Activities
The flows of accounting activities are basically
shown in the following aspects of accounting:
1.Identifying is the accounting function that is
concerned in determining the economic activities
affecting the assets, liabilities, capital, revenues and
expenses of the business.
2. Measuring is an accounting function that
involves assigning monetary value to the business
economic activities.
3. Communicating involves the process of
preparation and distribution of accounting reports to
various interested users
4. Recording refers to the putting in writing of
economic transactions in chronological order after
they have been identified and measured.
5. Classifying is the process of grouping into a
specific category various economic transactions
which are similar and identical in nature.

MODULE 5
Analyzing and Summarizing Business
Transactions
The Normal Balance of Accounts
There are two sides of accounting equation (left and
right) which are accounted to always maintain a
balance amount.
The "two sides" of the accounting equation is the
implementation of the dual aspect principle, which
provides that each obtained value must have the
equivalent value parted from. This principle is the
basis of debit and credit in the documentation of
economic transactions and events.

To simplify, SFP is constructed immediately after The two equivalent sides describe the basis for the
each transaction, it should always be that the total laws on debit and credit.
assets must be equal to totals of the aggregate
liabilities and owner’s equity. The Rules of Debit and Credit

Rule 1- Assets: Debit to increase the amount

of asset.
Credit to decrease its amount
Rule 2 – Liability: Credit to increase the amount
of liability
Debit to decrease its
amount

Rule 3 – Owner’s Equity: Credit to increase the

capital account
Debit to decrease its
amount.
Rule 4 –Revenue: Credit to increase the
revenue account
Debit to decrease its amount
Rule 5 – Expense: Debit to increase expense
account
Credit to decrease its
amount
 Operating activities are those transactions which
are carried out in order to produce income for the
The Basic Accounting Equation
company. This include ordinary and required costs
incurred in order to effect sales and/or provide
utilities as sources of income.
Assets = Liabilities + Capital

The investing activities acquisition and disposal of

Capital (net assets to the owners) = Assets – assets other than inventory, which are needed in
Liabilities the operation of the business.

Liabilities (net assets to the creditors) =Assets – The financing activities refer to transactions
Capital between the business and its owner(s) and creditor
(lenders)

The Expanded Accounting Equation

The simple accounting equation reveals only the

elements of the Statement of Financial Condition.
This is because they represent actual (permanent)
accounts, which are generally preserved until the
end of the accounting cycle.

The revenue (profit/income) and expense (loss)

accounts, as elements of the statement of
comprehensive income, are only nominal
(temporary) accounts. They are usually closed to
the capital account at the end of the accounting
period.
The capital account is increased by any revenue
(profit or income) and decreased by any expense
(loss). Accordingly, the accounting equation can be
expressed in its expanded form as follows:

Assets = Liabilities + Capital + additional

investments+

Revenue or Income –
Withdrawals –

Expense or Losses

Business Activities
The economic activities of the business are
classified into operating activities, investing
activities, and financing activities.

Review:
Difference of cash and cash equivalents
Cash represents cash on hand and cash in banks
from the business transactions.
Cash Equivalent
Cash equivalents are investments that can readily
be converted into cash. The investment must be
short term, usually with a maximum investment
duration of three months or less. If an investment
matures in more than three months, it should be
classified in the account named "other investments."
Cash equivalents should be highly liquid and easily
sold on the market. The buyers of these
investments should be easily accessible.
The dollar amounts of cash equivalents must be
known. Therefore, all cash equivalents must have a
known market price and should not be subject to
price fluctuations. The value of the cash equivalents
must not be expected to change significantly before
redemption or maturity. Examples of cash
equivalents include:
Marketable Securities. This broad term covers any
investment security that can quickly be converted to
cash in a short amount of time. Many of the
examples below can also be referred to as a
marketable security, and companies often lump
these investments together on their balance sheet.
Treasury Bills. These debt instruments are issued
by the United States government and often have a
maturity date of one year or less.
Other Short-Term Government Bonds. These debt
instruments may be issued by any government
entity (city, state, or Federal). The creditworthiness
of the government agency must be considered
when evaluating the risk of the bond.
Banker's Acceptance. This is an agreement where
the bank has agreed to guarantee a future
agreement between two parties. This instrument is
a specified amount to be paid to the holder on a
specific date.
Commercial Paper. This is short-term bonds or debt
issued by corporations. Commercial paper has
maturity up to nine months (270 days). The interest
rate on commercial paper will vary based on the
creditworthiness of the issuing corporation.
Money Market Account. This interest-bearing
account is similar to a savings account; however,
they often require larger minimum deposits and
have some minor restrictions to the account.
Certificates of Deposits. CD's may be considered a
cash equivalent depending on the maturity date.
Preferred Shares of Equity. This may be considered
a cash equivalent if they are purchased shortly
before the redemption date and not expected to
experience material fluctuation in value.
To simply understand cash equivalents. Interest
income in your cash savings sa mga banks or
simply gcash. Are you familiar with the investment
item doon. If kumita yun ng interest yung investemt
nyo doon.m, that simply mean cash equivalents
kase di galing sa mismong business operation or
sales.
Review #2
Accounting period is an accounting year either fiscal
or calendar year.
If calendar year, the financial reports fall at
December 31, 2023
If fiscal year, the financial reports fall any months. It
can be january 31, 2023 or February or March or
April or so on.
Single entry System employs record incomplete.
Simply memorandum entries. No debit credit
analysis

Double entry system employs debit credit balances.

For every debet dare(should give) there’s debet
habere(should have)

For example: you purchase a mahine on cash. For

every payment of cash purchase, you should have
the machine.

Single Entry System:

Memo entry: to record the purchase of machine in

cash.

Double entry system:

Debit machine
Credit cash

Fundamental Equation:

1. A=L+E

It can be also be equate like this

2. L=A-E

3. E=A-L

E is the Equity. It also represent the Capital. Equity

or capital is the same meaning. Baka malito kayo.