This document provides an overview of basic accounting concepts including: - Forms of business organizations like sole proprietorships, partnerships, and corporations. - Accounting activities like financing, investing, and operating. - Underlying assumptions, qualitative characteristics, financial statements, elements of financial statements like assets, liabilities, equity, income and expenses. - The accounting equation, debit and credit analysis, the accounting cycle and adjusting entries.

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Introduction to Basic
Accounting 2
(Review of Basic
Accounting)
By: Mara Dominique AnneM. Domingo

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Forms of Business Organizations
 Sole Proprietorship
 Partnership
 Corporation

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Activities in Business
Organizations
 Financing Activities
 Investing Activities
 Operating Activities

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Nature of Accounting
 Accounting is a service activity.
 Accounting is the language of business.
 Accounting is an art and discipline.

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Underlying Assumptions
1. Business Entity
2. Going Concern
3. Time Period
4. Monetary

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SLIDESMANIA.COM
Qualitative
Characteristics
1. Understandability
2. Relevance
 Quality
 Materiality
 Timely
3. Reliable
 Objective
 Faithfully Represented
 Neutrality
 Prudence
4. Comparability
 Uniformity

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SLIDESMANIA.COM
Financial Statements
1. Statement of Comprehensive Income
2. Statement of Owner’s Equity
3. Statement of Financial Position (Balance Sheet)
4. Statement of Cash Flow

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SLIDESMANIA.COM
Elements of Financial
Statements
1. Asset – Cash, Cash equivalents, Notes receivable,
Accounts receivable, Inventories, Prepaid expenses,
Property, plant and equipment, Investments, Intangible
Assets and other assets.
2. Liabilities – Notes payable, Accounts payable, Accrued
Liabilities, Unearned Revenues, Mortgage payable,
Bonds payable and other debts of the enterprise.
3. Equity – Capital and Drawings.

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SLIDESMANIA.COM
Elements of Financial
Statements
4. Income – Revenue and Gains.
5. Expenses – Cost of goods sold, Distribution or Selling
expenses, Administrative expenses or Other operating
expenses and Losses.

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Accounting Equation
Assets = Liabilities + Owner’s Equity

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Accounting Equation
Assets = Liabilities + Owner’s Equity

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SLIDESMANIA.COM
Debit and Credit
Analysis
The use of T-account aids to
analyze the effects of
adjustments made in the
account.

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SLIDESMANIA.COM
Accounting Cycle
Also called “accounting process,” this refers to a series of
repetitive activities of recording, summarizing and reporting
economic transactions from the beginning to the end of the
accounting period.
The accounting process involves the following aspects:
1. Identifying
2. Measuring
3. Communicating
 Recording
 Summarizing

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SLIDESMANIA.COM
Recording Phase
of Accounting
1. Documentation
2. Recording
a. Recording to the general journal
b. Posting to the general ledger

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SLIDESMANIA.COM
Summarizing Phase
of Accounting
1. Preparation of trial balance
2. Preparation of working paper
3. Preparation of post-closing trial balance
4. Preparation of financial statements

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Adjusting
Entries
• Journal entries which bring some accounts to their current
and correct value.
• It should be made every time financial statements are
prepared.
• It makes possible for the enterprise to report a Financial
Statement in proper amount at the statement date.
• The following adjusting entries are usually made at the end
of the period:
1. Accruals 5. Uncollectible accounts
2. Prepayments 6. Ending Inventory
3. Precollections 7. Bank account
4. Depreciation and amortization reconciliation

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SLIDESMANIA.COM
Types of Accounting Errors
1. Errors due to omission
2. Errors on amount recorded
3. Errors on account title
4. Errors on accounting treatment

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Perpetual
vs.
Counter-
Balancing
Errors
Perpetual Accounting Errors
These errors are non-counter balancing errors because
if they are not corrected, they will continuously affect the
current accounting period and will continue to exist in
subsequent accounting periods.
Counter-Balancing Errors
These errors are self-correcting errors because if not
corrected in the first year and second year, they will
automatically be corrected in the third year.

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