ACCT11_2_IntroductiontoAccountingContinuation.pptx
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This document provides an introduction to accounting concepts including the accounting cycle and financial statements. It covers 10 steps in the accounting cycle: 1) identifying transactions, 2) journalizing transactions, 3) posting to ledgers, 4) preparing a trial balance, 5) making adjustments, 6) preparing a worksheet, 7) preparing financial statements, 8) closing entries, 9) a post-closing trial balance, and 10) reversing entries. It also discusses classifying, recording, and interpreting business transactions and defines assets, liabilities, and equity in the accounting equation. Examples are provided to illustrate the effects of transactions on the accounting equation.
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ACCT11_2_IntroductiontoAccountingContinuation.pptx
- 1. ACCT 11 Module Title: Introduction to Accounting Developer: Mrs. Sarah Joy D. Martin Materials: Eugene A. Ruano, CPA
- 2. cont. Introduction to Accounting 1 Accounting cycle 2 Value received and value parted with 3 Accounting Equation 4 Elements of Accounting 5 Five Major Accounts TOPICS
- 3. CLASSIFYING business transactions RECORDING 1. Identifying transactions and events – Source of Documents JOURNAL 2. Journalizing Transactions Groupings 3. Posting to the ledger- General Ledger 4. Trial Balance LEDGERS SUMMARIZING Financial Statement 5. Adjusting journal entries 6. Preparing the worksheet 7. Preparing financial statements 8. Closing Entries TRIAL BALANCE BALANCE SHEET INCOME STATEMENT INTERPRETING Meaning or significance for users PROFITABILITY- How much is the increase in capital as a result of business operation 9. Post-Closing Trial Balance 10. Reversing entries LIQUIDITY- Are there available funds to finance the business operation SOLVENCY – Can the business pay its long- term obligations to other? NOTE: Steps 1 to 10 is the ACCOUNTING CYCLE
- 4. Purchased tools for cash
- 5. Purchased office supplies on credit
- 6. Completed repair work for S. Andolong and received cash Cash
- 7. Completed repair work for R. Guirre on credit Receivables
- 8. Paid for Advertising in Local Paper Advertising Services
- 9. Paid the account in the purchased office supplies on credit Cancellation of Debt
- 10. Received payment from R. Guirre Cash
- 11. Paid the monthly salary of secretary
- 12. Paid the rent of shop space
- 13. Paid monthly telephone bill
- 15. LIABILITIES business resources ASSETS attributable to the amount owed to creditors EQUITY capital invested by the owners = + cash AR Inventory Office Supplies Equipment Bldg. Land Goodwill AP Notes Payable Loan Payable Bonds Payable Unearned Revenue Capital Drawing Common Stocks Additional paid in capitals Net income Net Loss Current Non Current
- 16. •The business, NOY Company, has total assets amounting to P1,000, amount of debt and capital totaling P250 and P750, respectively. Assets Liability Equity = + 1,000 250 750 = + 1,000 1,000 = Note: Total amounts on both sides are equal.
- 17. •Noynoy, sole proprietor of NOI Company, invested cash amounting to P10,000 to start and operate his accounting software company. Assets Liability Equity = + Cash 0 Capital = + 10,000 10,000 = 10,000 0 10,000 = +
- 18. XYZ Company was granted a bank loan from ABC Bank amounting to P4,000. Assets Liability Equity = + Cash Loans Payable 0 = + 4,000 4,000 = 4,000 4,000 0 = +
- 19. Yosef Carreon withdraws cash amounting to P500 from the business for his personal use. Assets Liability Equity = + Cash 0 Capital = + (500) (500) = (500) 0 (500) = + •Parenthesis () represents decrease in amount or value.
- 20. XYZ Company paid in cash the partial amount of its loan to ABC Bank amounting to P2,500. Assets Liability Equity = + Cash Loan Payable 0 = + 2,500 2,500 = 2,500 2,500 0 = +
- 21. •XYZ Company purchased office supplies amounting to P250 paid on cash. Assets Liability Equity = + Cash | Office Supplies 0 0 = + 0 0 = (250) 0 0 = + 250 0 0 = +
- 22. Transaction 1 Mr. Gil opened a motor repair shop and invested P100, 000 cash. EFFECTS L A E = + Increased in asset, Cash-P100, 000 Increased in capital, Gil’s Capital P100, 000 Cash 0 Gil’s Capital = + 100,000 0 100,000 = + 100,000 = 100,000
- 23. EFFECTS L A E = + Increased in asset, Repair Supplies -P25, 000 Increased in Liability, Accounts Payable-De Mesa Trading P25, 000 Repair Supplies AP,De Mesa Trading 0 = + 25,000 25,000 0 = + 25,000 = 25,000 Transaction 2 Purchased repair supplies worth P25, 000 on credit from De Mesa Trading
- 24. EFFECTS L A E = + Cash 0 Salaries Expense = + (10,000) 0 (10,000) = + (10,000) = (10,000) Decreased in asset, Cash-P10, 000 Decreased in Capital, Salaries Expense P10, 000 Transaction 3 Paid the salary of assistant, P10, 000 cash
Editor's Notes
- Basic Accounting Equation states that the business resources (assets) are attributable to the amount owed to creditors (liabilities) and capital invested by the owners (equity). It is formulated as follows: ASSET = LIABILITY + EQUITY Note: Green current | Pink NonCurrent Asset pertains to the resources available and used in sustaining the operation of the business. It includes cash, accounts receivable, inventory, office supplies, equipment, building, land, goodwill, patent, etc. Liability refers to the amount of debts owed to outside person or entity, known as creditors. It represents the claim of creditors in the assets of the business. It includes accounts payable, loans payable, notes payable, bonds payable, unearned revenue, etc. Equity is the amount of capital or resources invested in the business by the owner(s). It represents the claim of owners in the assets of the business. It consist of capital, drawing, common stock, additional paid in capital, preferred stock, retained earnings, net income, net loss.
- For every valid business transaction recorded should affect or change two accounts. It means that in every value received, another value is given up. This is also referred to as double-entry recording. Look at the following instances: a. Increase in asset account should have an equivalent increase in liability or equity account. As shown in Example 1 and 2.
- Note: The cash invested affected two accounts which are cash (asset) and capital (equity) account.
- Note: The cash loan received from bank affected two accounts which are cash (asset) and loans payable (liability) account.
- Note: The cash withdrawal of Yosef indicates that it was used for personal purposes, as such, it is considered as capital withdrawal. Parenthesis () represents decrease in amount or value.
- Note: The amount of cash paid to ABC Bank represents payment of bank loans. As such, there will be an equivalent decrease on both cash (asset) and loans payable (liability) account
- Increase or decrease may affect two accounts on one side of the equation. As shown in Example # 5.