Basic Accounting)

1. The Financial
Statements
Fundamentals of Accountancy, Business, and Management 1

2. The Financial
Statements
Fundamentals of Accountancy, Business, and Management 1
- Key product or end
product of the
accounting process.

3. Types of Financial
Statements
1. Statement of Financial
Position or Balance
Sheet
2. Income Statement
3. Statement of Owner’s
Equity
4. Statement of Cash
Flow
Fundamentals of Accountancy, Business, and Management 1

4. Balance Sheet
-Shows the financial
condition/position of a
business of a given period.
- Consists of Asset,
Liabilities & Capital
Fundamentals of Accountancy, Business, and Management 1

5. Income Statement
-Shows the result of
operation for a given
period.
- Consists of Revenue,
Cost & Expenses.
Fundamentals of Accountancy, Business, and Management 1

6. Statement of Owner’s
Equity
-Shows the changes in
capital or owner’s equity as
a result of additional
investment or withdrawals
of the owner.
Fundamentals of Accountancy, Business, and Management 1

7. Statement of Cash Flows
-Summarizes the cash
receipts & cash
disbursements for the
accounting period.
- Cash inflows (receipts)
- Cash Outflows (payments)
Fundamentals of Accountancy, Business, and Management 1

8. Typical Account
Titles Used in
Balance Sheet
Fundamentals of Accountancy, Business, and Management 1

9. Assets
- Economic resources
owned by business
expected for future
gains.
- Property & Rights of
value owned by the
business.
Fundamentals of Accountancy, Business, and Management 1

10. Liabilities
- Includes Debts,
Obligations to pay &
claims of the creditors
on the assets of the
Business.
Fundamentals of Accountancy, Business, and Management 1

11. Owner’s Equity or Capital
- Includes the interests of the
owners on the business; claims
of the owners on the assets,
and the investment of the
owner +/- the result of
operation.
- 2 sources (investment/earnings
of business)
Fundamentals of Accountancy, Business, and Management 1

12. The Fundamental
Accounting Equation
Fundamentals of Accountancy, Business, and Management 1

13. Fundamentals of Accountancy, Business, and Management 1
ASSET LIABILITIES
OWNER’S
EQUITY
FUNDAMENTAL ACCOUNTING EQUATION

14. Given liabilities of Php. 50,000
and Owner’s Equity of Php.
150,000. Find the value of assets.
Fundamentals of Accountancy, Business, and Management 1
Assets = Liabilities + Owners
Equity

15. Given assets of Php. 180,000 and
Owner’s Equity of Php. 110,000.
Find the Liabilities
Fundamentals of Accountancy, Business, and Management 1
Liabilities = Assets - Owners Equity

16. Given assets of Php. 250,000 and
Liabilities of Php. 90,000. Find the
Owner’s Equity
Fundamentals of Accountancy, Business, and Management 1
Owner’s Equity = Assets - Liabilities

17. Drill 1
Fundamentals of Accountancy, Business, and Management 1

18. Drill 1
Fundamentals of Accountancy, Business, and Management 1
ASSETS LIABILITIES OWNER’S EQUITY
Php. 650, 000 Php 340,000
Php. 295,000 Php. 305,000
Php. 967,000 Php. 660,000
Php. 788,000 Php. 345,000
Php. 845,000 Php. 533,000

19. Drill 2

20. For every
transaction, the
accounting
equation should
always balance

21. Sample Transactions:
July 1 - Paolo Reyes started a delivery service on July 1, 2013. The following
transactions occurred during the month of July. He invested
PHP800,000 cash and Cars amounting to PHP200,000
July 2 – Reyes borrowed PHP100,000 cash from PNB for use in his business.
July 7 – Bought tables and chairs from Orocan and paid PHP45,000 cash
July 15 – Various equipment were purchased on account from Fortune for
PHP55,000
July 18 – Reyes made a cash withdrawal of PHP5,000 for personal use
July 20 – The account due to Fortune was paid in cash

23. Determining Profit through Operations:
July 21 – A customer hired the services of Reyes. Cash of PHP15,000 was
received from the customers.
July 22 – Cash was paid for the following : gas and oil, PHP500 and car repairs,
PHP1,000.
July 24 – Another customer hired the services of Reyes and promised to pay
PHP16,000 on July 31.
July 25 – Paid PHP500 for telephone bill.
July 27 – Another customer hired the services of Reyes. A bill was issued to them
for PHP20,000, 50% of which was collected
July 30 – The customer on July 24 paid 50% of his account in cash.
July 31 – Paid PHP10,000 for rental of office space, and salaries of PHP9,000

24. Concept Check:

25. Concept Check:

26. Analyzing Transactions:

27. Types of Major
Accounts
Fundamentals of Accountancy, Business, and Management 1

28. Types of Major
Accounts
Fundamentals of Accountancy, Business, and Management 1

29. ASSETS:
Current
Assets
are assets that can be realized
(collected, sold, used up) one year
after year-end date. Examples include
Cash, Accounts
Receivable, Merchandise Inventory,
Prepaid Expense, etc.
Non-Current
Assets
are assets that cannot be realized
(collected, sold, used up) one year after
year-end date. Examples include Property,
Plant and Equipment (equipment,
furniture, building, land), long term
investments, etc.

30. ASSETS:
Tangible
Assets
are physical assets such as
cash, supplies, and furniture
and fixtures.
Non-Current
Assets
are non-physical assets such
as patents and trademarks

31. Account Titles – Asset Accounts
Cash
is money on hand, or in banks,
and other items considered as
medium of exchange in business
transactions.
Accounts
Receivable
are amounts due from customers
arising from credit sales or credit
services.

32. Account Titles – Asset Accounts
Supplies
are items purchased by an
enterprise which are unused
as of the reporting date.
Prepaid
Expenses
are expenses paid in advance. They
are assets at the time of payment and
become expenses through the
passage of time.

33. Account Titles – Asset Accounts
Notes
Receivable
are amounts due from
clients supported by
promissory notes.
Inventories
are assets held for
resale

34. Account Titles – Non-Current Assets
Property, Plant
and Equipment
are long-lived assets which
have been acquired for use in
operations.
EXAMPLES - LAND, BUILDINGS, EQUIPMENT,
FURNITURE & FIXTURES

35. Account Titles – Non-Current Assets
Long term
Investments
are the investments made by
the company for long-term
purposes.
Intangible
Assets
are assets without a physical
substance. Examples include
franchise and copyright.

36. LIABILITY
LIABILITY
are the debts and
obligations of the
company to another
entity.

37. Current Vs. Non-Current Liabilities
Current
Liabilities
Liabilities that fall due (paid, recognized
as revenue) within one year after year-
end date.
Examples include Accounts
Payable, Utilities Payable and Unearned
Income.
Non-current
Liabilities
are liabilities that do not fall due (paid,
recognized as revenue) within one year
after year-end date. Examples include
Notes Payable, Loans Payable, Mortgage
Payable, etc.

38. Account Titles – LIABILITIES
Accounts
Payable
are amounts due, or payable to,
suppliers for goods purchased
on account or for services
received on account.
Notes
Payable
are amounts due to third
parties supported by
promissory notes.

39. Account Titles – LIABILITIES
Accrued
Expenses
are expenses that are incurred
but not yet paid (examples:
salaries payable, taxes payable)
Unearned
Income
is cash collected in advance;
the liability is the services to
be performed or goods to be
delivered in the future.

40. OWNER’S EQUITY
OWNER’S
EQUITY
is the residual interest of
the owner from the
business. It can be
derived by deducting
liabilities from assets.

41. Account Titles – OWNER’S EQUITY
Capital
is the value of cash and other
assets invested in the business
by the owner of the business.
Drawing
is an account debited for
assets withdrawn by the
owner for personal use from
the business.

42. INCOME VS. EXPENSE
INCOME
is the Increase in resources
resulting from performance of
service or selling of goods.
Expense
is the decrease in resources
resulting from the operations
of business

43. Chart of Accounts:
• A chart of accounts is a listing of the
accounts used by companies in their
financial records.
• The chart of accounts helps to identify
where the money is coming from and
where it is going.
• The chart of accounts is the foundation of
the financial statements.

44. EXAMPLE -
CHART OF
ACCOUNTS

45. DRILL
LIABILITIES
P.P.E.
INTANGIBLE ASSETS
OWNER’S EQUITY
CASH
RENT EXPENSE
ASSETS
NOTES PAYABLE

49. GENERAL
JOURNAL
Fundamentals of Accountancy, Business, and Management 1

50. GENERAL JOURNAL
Is the most basic journal. Typically, a journal
has space for:
• DATES
• ACCOUNT TITLES &
EXPLANATIONS
• REFERENCES
• TWO AMOUNT COLUMN

52. RULES OF DEBIT
AND CREDIT

53. The Normal Balance is the
expected balance each
account type maintains,
which is the side that
increases.
NORMAL BALANCE OF ACCOUNTS

54. 6 MAJOR ACCOUNTS
ASSET
EXPENSE
DRAWINGS
LIABILITY
EQUITY
(CAPITAL)
REVENUE