months and 3 ● Used to reduce the

STATEMENT OF weeks overall value of

FINANCIAL POSITION ● Convertible to the assets
amount of cash
● Also known as the
which is subject to Trade and other
“balance sheet”
an insignificant risk receivables
● Shows: the
to changes in value Accounts receivable
condition of the
Marketable securities ● The amount
company as of a
● These are stocks collectible from the
given period
and bonds customer to whom
● It is a clear
purchased by the sales have been
representation of
enterprise and are made or rendered
the accounting
to be held for only ● On account/ credit
equation
a short period or ● E.g. inutang ni
● Formula: A=L+OE
short duration customer anf
Trades and other goods (AR) cause
ASSETS
receivable walang natanggap
2 types of assets
● Collectible amounts si company
1. Current asset
Inventories Notes receivable
2. Non-current asset
● Unsold goods at ● The client issued a
Current asset
the end of the promissory note in
● Classified and
accounting period exchange for
presented
● Raw goods, in services or goods
according to
progress goods (in received as
liquidity
the process but not evidence
● Most liquid asset
yet finished) ● Obligation to pay
● Convertible to cash
Prepaid expenses ● A written pledge
within 1 year
● Supplies bought for that the customer
use in the business will pay a fixed
Classification of current
or service amount of money
assets
● Paid in advance on a certain date
Cash
● Expenses paid in Interest receivable
● Coins, currencies,
business in ● Amounts of interest
checks, bank
advance collectible on
deposits, bills, bank
● E.g. apartment promissory notes
balances, & money
rental you need to received from the
orders
pay in advance customer
● Available for use in
even if you have Advances to employees
the operations of
used it yet ● Amounts of money
the business
Contra-asset account loaned to
Cash equivalents
● Account deducted employees payable
● Investment
from the related in cash or through
securities for a
asset account salary deduction
short-term
maximum of 2
Accrued income property , plant and
● Income already equipment
earned but not yet ● Tangible assets
received or that held by an
recorded enterprise for use
in the production
Other current asset: ● Long-term assets
Supplies vital to business
operations & not
● Cost of supplies on
easily converted
hand to operate
into cash
● E.g. pen, paper, ink, ● E.g. land, building,
clip equipment,
furniture and
Contra-asset accounts fixture, and fixtures
1. Allowance for bad service vehicle
debts Intangible assets
● Losses due to ● Not physical in
uncollectible nature (can’t touch)
amounts ● E.g. brand name,
Accumulated patents, copyright
depreciation license franchise,
● Expired cost of trademark,
Property, pants, & subscription lists,
equipment as a secret processes,
result of usage and
non-competition
Classification of agreements
non-current assets
Non-current asset Liabilities
● Convertible to cash 1. Current liabilities
within a year 2. Non-current
Long-term investment liabilities
● Enterprise for Current liabilities
accretion of wealth ● Debt of a business
through capital that they have to
distribution pay in a short
● E.g. interest, period of time
royalties, dividends
and rentals for Classification of current
other benefits to liabilities
the inventing 1. Account payable
enterprise 2. Notes payable
3. Loan payable
4. Utilities payable
5. Unearned
revenues
Accounts payable
● Debts arising from
the purchase of an
asset of service on
account
● The money owned
by the business to
its supplier
● E.g. the supplier of
shoes so you have
a pair of shoes
then next time you
will pay the pair of
shoes in short,
supplies before
pay
Notes payable
● Evidence by a
promissory note
● Liability in writing
Utilities payable
● Obligation to pay
the utility company
for services
received from them
● A company owned
for utility
● E.g. electricity,
water, gas
● Explanation: a
company received
utility bill but hasn’t
paid it yet
Unearned revenues
● Company receives
payment from the
customer before
providing the goods
or services
● Advance payments
received before
 goods or services
Balance - Current the
are provided to the sheet assets business in
customer -Non its
● E.g. booking of current operation
ticket assets to produce
-liabilities revenues
Non-current liabilities (current
and non E.g. sell a
● Long term current) shirt of 600
liabilities/ and is the
obligations which cost of
are payable for the Owners Capital sales is
period longer than equity withdrawal 600
s
1 year
Salaries
Income Revenues expense:
Classification of statement expenses cost
non-current liabilities incurred to
pay
Mortgage payable employees
● Long term debt of
Utilities
the business with Owners Capital: expense:
security or equity original & cost
collateral in the additional incurred by
form of real investment using
of the utilities
property
owner of
● E.g. you lend a the Rent
money to a bank, business expense:s
the banks need a pace and
collateral (land) Withdrawa equipment
then the bank will ls: owners or other
give a money of the asset
business rentals
Bonds payable
removes
● Certificate of cash Insurance
indebtedness &other expense :
under the seal of a assets expired
corporation from the portion of
● Repayment and the business. insurance
rate of interest to For
personal Supplies
be charged expense:
use
expense of
expenses Cost of using
sales: supplies
Cost of
assets
used by
Week 3: why financial Transparency and 1. Entity concept
statement are important accountability 2. Periodicity
& the rules in financial ● Disclosing financial 3. Going concern
reporting information, Entity concept
ensuring ● Business separate
Financial statement accountability to from its owners and
● Crucial documents stakeholders, from other
that provide a regulators, and the business
snapshot of a public ● Business is
company's Basis for taxation and separated from
financial compliance personal money
performance ● Basis for tax Periodicity
● Important several calculations and ● Financial
reasons: decision regulatory accounting
making, compliance information about
performance ● Legal and standard the economic
evaluation, Financial reporting activities of an
transparency & ● Rules and principle enterprise
accountability, & to ensure 1. Fiscal year: feb to
basis for taxation accuracy, january * can start
and compliance consistency, and any months
Decision making comparability 2. Calendar year:
● Investors, Generally accepted january to
shareholders, use accounting principles( december
FS to make GAAP) ● Both have 12
informed decisions ● Rules and months
about investing, procedures Going concern
lending, or ● Serve as guides in ● Business
partnering with a the practice of enterprise will
company accounting continues to
Performance evaluation ● These are operate indefinitely
● Help to assess a standard, ● Infinity
company assumptions, and
profitability, concepts with Basic accounting
liquidity, solvency, general principle
and overall acceptability 1. Objectivity
performance over a ● It measure the principle
period techniques ans 2. Historical cost
● Allowing standards used in 3. Accrual principle
comparisons with the presentation 4. Adequate
industry standards and preparation of disclosure
and competitors financial 5. Materiality
statements 6. Consistency
Fundamental concepts Objectivity
 ● All business result between time single - step income
transactions that and periods statement
will be entered in ● It presents the
the accounting INCOME STATEMENT revenue, expenses
records must be ● It shows the and ultimately the
duly supported by company’s financial profit/ losses
verifiable performance during generated by a
evidence a particular period business
Historical cost ● It consist: revenue, ● Report information
● All properties and cost, & period by using 1 equation
services acquired ● FORMULA: to calculate profits
by the business REVENUE LESS: ● Straightforward
must be recorded EXPENSES= accounting of the
at their original PROFIT financial activity of
acquisition cost Revenue your business
Accrual principle ● Money a company ● Easy to understand
● Income should be actually receives & easy to prepare
recognized at the during a specific
time it is earned period
such as when Gains
goods are ● Increase in the
delivered or when value of an asset or
services have been property e.g.
rendered income from sale
Adequate disclosure of van Multi-step income
● All materials Expenses statement
facts that ● Economic costs a ● Same general
will affect business incurs in information
the financial order to revenue included in a
statements e.g. wages, rent, sing;e-step income
must be salaries, interest statement.
indicated paid ● Uses multiple
Materiality Losses equations to
● Financial reporting ● Portion of an determine the net
is only concerned insurance income, or profit of
with information company’s the company
that affects reserves for unpaid
decisions losses and costs of
Consistency investigation and
● Used in reporting adjustment losses
must be uniformly e.g. settlement
employed from cost of consumer
period to period to lawsuit
all comparison of
Net sales Salaries and wages
● The sum of a expense
company’s gross ● Compose of all the
sales minus its payments made to
return, employees or
allowances,& workers for rending
discounts services to the
company
Utilities expense
● Expenses related
Accounts in the single- to the use of
step income statement electricity, & water
1. Service income Supplies expense
2. Salaries or eagles ● Covers office
expenses supplies used by
3. Utilities expense the company in the
4. Supplies expense conduct of its daily
5. Insurance operation
expense Insurance expense
6. Depreciation ● Amount that the
expense company pays to
7. Uncollectible get an insurance
accounts cintract and any
expenses/ additional premium
doubtful account payments
expense/ bad ● Once they expire,
debts expense recorded as
8. Interest expense expense
Depreciation expense
Service income ● Annual portion of
● Revenue earned or the cost of tangible
generated by the assets such as
business in buildings,
performing service machineries, and
for a customer equipment charged
● E.g. laundry as expense for the
service by laundry year
shop (laundry ● E.g.
income), dental
services by dentist
(dental fees),
medical services by
doctores (medical
fees)