The document outlines the accounting process, detailing the steps involved in recording, classifying, summarizing, and reporting financial transactions, including various financial statements such as the income statement, cash flow statement, and balance sheet. Key components of the accounting cycle, journal entries, trial balances, and budget statements are also described, emphasizing the importance of double-entry bookkeeping and the preparation of adjusted and post-closing trial balances. It highlights analytical techniques for assessing financial health and decision-making based on financial data.

1. The Accounting
Process
Is a systematic method for recording, classifying,
summarizing, and reporting financial transactions.

2. Understanding the Accounting Cycle
1
Analyze Business
Transactions
2
3
4
5
6
7
8
9
Journalize
the Transactions
Post to Ledger
Prepare Financial
Statements
Prepare an Adjusted
Trial Balance
Journalize and Post
Adjusting Entries
Prepare a Trial Balance
Prepare a Post-Closing
Trial Balance
Journalize and Post
Closing Entries

3. Analyze Business Transactions
1. Which accounts are affected?
2. Are the accounts increasing or decreasing?
3. By how much?
Ex. On September 3 2024, the business received 1,000 peso for
services performed.
 Cash increases by 1,000
 Service Revenue increases by 1,000

4. Journalize the Transactions
Based on the transaction analysis:
1. Which account is debited?
2. Which account is credited?
Date Account Title PR Debit Credit
9/3 Cash 101 1,000
Service Revenue 102 1,000
GJ1
Debit Credit
Liability
Equity
Revenue
Withdrawal
Expense
Asset
Double-Entry Bookkeeping System

5. Post to Ledger
Post the journal entries into the ledger or T-accounts.
Date Account Title PR Debit Credit
9/3 Cash 101 1,000
Service Revenue 102 1,000
Cash 101
Date Account Title PR Debit Credit Balance
9/3 Cash GJ1 1,000 1,000
102
Date Account Title PR Debit Credit Balance
9/3 Service Revenue GJ1 1,000 1,000
Service Revenue

6. Post to Ledger
Post the journal entries into the ledger or T-accounts.
Cash
1,000
Service Revenue
1,000
Date Account Title PR Debit Credit
9/3 Cash 101 1,000
Service Revenue 102 1,000
9/3
1,000
9/3
1,000

7. Prepare a Trial Balance
3 steps for preparing a trial
balance:
1.List the account titles and their
balances in the debit or credit
column.
2.Add up the debit and credit
columns.
3.Prove that the total debits
equal to the total credits.
ABC Company
Trial Balance
September 2024
Account Title Debit Credit
Cash 25,000
Accounts Receivable 4,000
Supplies 500
Prepared Rent 4,000
Equipment 15,000
Accounts Payable 6,500
Owner’s Capital 30,000
Owner’s Drawings 1,000
Service Revenue 15,000
Service Expense 2,000
51,500 51,500

8. Journalize & Post Adjusting Entries
One income statement account AND one
balance sheet account.
Debit an expense OR credit a revenue.
NEVER includes Cash.
Rules for adjusting entries:

9. Prepare an Adjusted
Trial Balance
3 steps for preparing an adjusted
trial balance:
1.List the account titles and their
adjusted balances in the debit
or credit column.
2.Add up the debit and credit
columns.
3.Prove that the total debits
equal to the total credits.
ABC Company
Adjusted Trial Balance
September 2024
Accounts Debit Credit
Cash 25,000
Accounts Receivable 4,000
Supplies 500
Prepared Rent 4,000
Equipment 15,000
Accounts Payable 6,500
Unearned Service Revenue 2,000
Owner’s Capital 30,000
Owner’s Drawings 1,000
Service Revenue 15,000
Service Expense 2,000
Rent Expense 1,900
Supplies Expense 200
53,100 53,100

10. Preparing Financial Statements
1 Income Statement
2
3
4 Statement of Cash
Flows
Balance Statement
Owner’s Equity
Statement
Net Income/Loss
Ending Owner’s Capital
Cash Balance

11. Journalize & Post Closing Entries
Steps for Closing Entries:
Owner’s
Capital
Owner’s
Drawings
Income
Summary
Revenues Expenses

12. Prepare a Post-Closing
Trial Balance
Preparing a post-closing trial
balance:
1. Only shows permanent
accounts (Assets, Liabilities,
Owner’s Capital).
2. Use updated balance for
Owner’s Capital after
closing entries.
3. Total Debits = Total Credits
ABC Company
Post-Closing Trial Balance
September 2024
Accounts Debit Credit
Cash 35,000
Accounts Receivable 4,850
Supplies 500
Prepaid Rent 4,000
Equipment 15,000
Accumulated Depreciation
Equipment
125
Accounts Payable 8,500
Unearned Service Revenue 8,000
Salaries Payable 1,800
Owner’s Capital 40,925
59,350 59,350

13. FINANCIAL
STATEMENTS
is a report that shows the financial activities
and performance of a business.

14. Key Characteristics of
Financial Statements
1 Understandable
.
2 Relevant
3 Reliable
.

15. Four Basic Financial Statements in Accounting
Income Statement Balance Sheet
Cash Flow Statement Statement of
Changes in Equity

16. Income Statement (Profit and
Loss Statement)
Revenue/Sales
Operating Expenses
Operating Income

17. Balance Sheet (Statement of Financial Positio
Assets
Resources owned by
the company that have
economic value.
Liabilities
Financial obligations or
debts owed by the
company to others.
Equity
The residual interest in
the assets after
deducting liabilities.

18. Cash Flow Statement
Operating Activities
Investing Activities
Financing Activities

19. Statement of Changes in
Equity
Key Elements
Opening Balance
Additions
Deductions
Closing Balance

20. Income Statement
also known as the profit and loss (P&L)
statement, is a financial report that
summarizes a company's revenues,
expenses, and profits over a specific period.

21. What Is An Income
Statement?
It presents a clear picture of a company's
financial health by revealing how much
money they made, how much they spent,
and ultimately, how much profit they
generated.
1 Performance Indicator
2 Decision Making
3 Investor Analysis

22. Key Components
The income statement is structured in a way
that breaks down the key financial elements,
providing a detailed view of revenue,
expenses, and profitability.
Revenue
.
Expenses
Net Income

23. Revenue
Represents the total income generated by the company's core business
activities. It encompasses the amount earned from selling goods, providing
services, or other revenue-generating operations.
1. Sales Revenue
Income from selling products.
2. Service Revenue
Income from providing services.
3. Subscription Revenue
Recurring income from
subscriptions.
4. Other Revenue
Income from miscellaneous sources.

24. Cost Of Goods Sold
This represents the direct costs associated with producing the goods or
services that the company sells. It includes the cost of materials, labor, and
manufacturing overhead.
Raw Materials Cost of materials used in production.
Direct Labor Wages paid to workers directly involved in
production.
Manufacturing Overhead Indirect costs related to production, such as
factory rent, utilities, and maintenance.

25. Gross Profit
This is the profit generated after deducting
the cost of goods sold from revenue. It
represents the company's ability to generate
profit from its core business operations.
Revenue 100,000
Cost of Goods Sold 60,000
Gross Profit 40,000

26. Operating Expenses
These are the costs incurred in running the day-to-day operations of the
business, excluding the cost of goods sold. It includes expenses like salaries,
rent, utilities, marketing, and administrative costs.
Salaries & Wages Rent & Utilities Marketing &
Advertising
Administrative Expenses

27. Net Income
This represents the company's profit after all expenses are deducted from revenue.
It indicates the company's overall profitability and financial health.
1
Revenue
Total income from sales, services, etc.
2 Cost of Goods Sold
Direct costs of producing goods or services.
3
Gross Profit
Profit after deducting cost of goods sold.
4 Operating Expenses
Costs of running the business.
5
Net Income
Profit after all expenses are deducted.

28. Cash Flow
Statement

29. What Is a Cash Flow Statement (CFS)?
1 Definition
A CFS tracks the inflow and outflow of
cash, providing insights into a
company's financial health and
operational efficiency.
2 Purpose
The CFS measures how well a company
manages its cash position, meaning how
well the company generates cash to pay its
debt obligations and fund its operating
expenses.
3 Importance
As one of the three main financial
statements, the CFS complements the
balance sheet and the income
statement.
4 Analysis
In this article, we'll show you how the
CFS is structured and how you can use it
when analyzing a company.

31. How the Cash Flow Statement Is Used
Operational Insights
The cash flow statement
paints a picture as to how
a company's operations
are running, where its
money comes from, and
how money is being spent.
Financial Health
Assessment
Also known as the
statement of cash flows,
the CFS helps its creditors
determine how much cash
is available (referred to as
liquidity) for the company
to fund its operating
expenses and pay down its
debts.
Decision Making
By analyzing the CFS,
investors and creditors can
make informed decisions
about the company's
financial stability and
future prospects.

32. Structure of the Cash Flow
Statement
Component
1. Cash flow from
operating activities
2. Cash flow from
investing activities
3. Cash flow from
financing activities
4. Disclosure of non-cash activities

33. Balance Sheet
It summarizes what the company owns (assets),
what it owes (liabilities), and the value of its
shareholders' equity.

34. Basic Structure of a Balance Sheet
Assets: What the company owns.
Liabilities: What the company owes.
Equity: The residual interest after liabilities are
deducted from assets.
Formula:
Assets = Liabilities + Owners Equity

35. Assets
Divided into two categories:
•Current Assets (expected to be converted to cash within a year)
Ex: Cash, accounts receivable, inventory.
•Non-Current Assets (long-term investments)
Ex: Property, plant & equipment (PP&E), intangible assets like patents, goodwill.
Liabilities
Divided into two categories:
• Current Liabilities (due within a year):
Ex: Accounts payable, short-term
loans.
• Non-Current Liabilities (long-term
obligations)
Ex: Long-term debt, bonds payable.
Shareholders’ Equity
Common Components:
• Paid-In Capital: Money invested by
shareholders.
• Retained Earnings: Profits that have
been reinvested in the business.
• Treasury Stock: Shares repurchased
by the company.

36. Example of a Balance Sheet
Present a simplified Balance Sheet:
Assets: $500,000
Liabilities: $300,000
Owners Equity: $200,000
Formula Verification:
Assets = Liabilities + Equity
$500,000 = $300,000 + $200,000
$500,000 = $500,000

37. Budget Statement
is a crucial financial planning tool used by
organizations to estimate income and
expenses over a specific period.

38. Components of a Budget Statement
1 Income
Expected revenues
from various sources.
2 Expenses
Predicted costs and
expenditures.
3 Net Income
Difference between
total income and total
expenses.
4 Cash Flow
Projected cash inflows and outflows.
5 Adjustments
For variances between budgeted and
actual figures.

39. Types of Budgets
Operating Budget
Covers day-to-day
expenses and revenues.
Capital Budget
Involves long-term
investments and major
capital expenditures.
Cash Flow Budget
Focuses on cash inflows
and outflows to ensure
liquidity.
Static vs. Flexible Budget
Static is fixed, while flexible adjusts to activity levels.

40. Preparing a Budget Statement
1 Define Goals
Understand the financial goals and objectives.
2 Gather Data
Collect historical data on income and expenses.
3 Estimate Income
Forecast future revenues based on trends and market conditions.
4 Project Expenses
Estimate future costs, including fixed and variable expenses.
5 Review and Adjust
Regularly compare actual performance with the budget and adjust as needed.