Chapter 1: FUNDAMENTAL

CONCEPTS AND PRINCIPLE

 What is Accounting? Thus identifying; (1) External

 It is a systematic process of identifying, transactions (2) Internal transactions
recording, measuring, classifying,
verifying, summarizing, interpreting and 2 TYPES OF TRANSACTIONS
communicating financial information. (1) External transactions- transactions
 Step by step process of analyzing from creditors, debtors, banks.
financial data that is useful in making (2) Internal transactions- transactions
economic decisions within the company such as sales or any
 Quantitative information material transaction made by the
 Financial in nature company.
 Useful in decision making
2. Measuring – the computation of
4 Aspects of Accounting economic or financial data in terms of
money, hours, or other units.
1. Recording - writing down the business  Peso amounts
transaction chronologically in the books  Measurement bases: Historical
of account. cost, Current cost, Realizable
2. Classifying - sorting similar and relevant Value and Present Value
business transaction into the 3
categories of A, L and OE.  Historical Cost- value of an asset and
3. Summarizing - preparing the financial balance sheet recorded in its original
statements from the transactions acquisition cost
recorded in the books of accounts  Current cost- method where assets are
designed to meet the information record in actual or estimated current
needs of its user. market prizes
4. Interpreting - representing the  Realizable Value- net amount received
quantitative and qualitative financial from selling of assets
information about the business  Present Value- amount of cash TODAY
transactions in a language that is equivalent in value to a payment
comprehensible to the users of financial to be received in the future.
statements.
3. Communicating – Preparation and
3 Components of Accounting (IMA) distribution of accounting reports to the
1. Identifying – Identifying the economic users.
events relevant to the business.
Example of Economic Events: Sales,
Payments of Salaries and etc.
Parties interested in financial information 2. Trading/Merchandising - engaged in
buying and selling of goods.
1. Investors/Owners/Stockholders- These
people provide the financial resources to keep 3. Manufacturing - production of items to
the business going. be sold. It is involved in the purchasing
and converting of Raw Materials to
2. Government - Financial information is Finished Goods.
important for tax purposes and its compliance
with SEC requirements. Accounting system - comprises of methods
3. Financial institutions/Creditors used by the business to keep records in financial
-Financial institutions use financial information activities and to summarize these accounts in
to determine the capacity of the business periodic activities.
organization to pay its obligations and their
Transaction - completed action w/c can be
interests at the appropriate time.
expressed in monetary term.
4. Management- Organizational managers use
financial information to set goals for their Generally accepted accounting principles
companies. (GAAP)
5. Employees- Financial information provides
information of company stability which is  A general statement or rules and
important for the employees to determine if procedures that serves as a guide in the
they have a future in the company. practice of accounting.
 these are standards, assumptions and
3 Types of business Organization concepts with general acceptability.
1. Sole proprietorship - a business owned
and managed by only one person. ACCOUNTING VS BOOKKEEPING
2. Partnership - business organization  Accounting is conceptual and is
owned and managed by two or more concerned with the WHY, reason of
people who agree to contribute their justification for any action adopted.
assets to a common fund for the
purpose of earning profit.  Bookkeeping is the how of accounting.
3. Corporation - business organization
manage by an elected BOD. The ACCOUNTING VS ACCOUNTANCY
investors are called stockholders and  Accounting is used in reference only to
the unit of ownership is called share of a particular field of accountancy such as
stock. public accounting, private accounting
and government accounting.
3 Types of business Operations
 Accountancy refers to the profession of
1. Service - business operation engaged in accounting practice
the rendering of service.
FINANCIAL ACCOUNTING VS MANAGERIAL comparison of results between time
ACCOUNTING periods.

 Financial accounting is primarily Fundamental Concepts

concerned with the recording of
 Entity Concept - regards the business
business transactions and the eventual
enterprise as separate and distinct from
preparation of financial statements.
its owner and from other business
Intended for internal and external
enterprise.
users.
 Periodicity - concept behind economic
 Managerial accounting is the area of
activities of an enterprise for specified
accounting that emphasizes developing
time period.
accounting information for use WITHIN
AN ENTITY. A. Calendar year - 12-month, starts on
Jan 1 and ends on Dec 31
BASIC PRINCIPLES
B. Fiscal year - 12-month, starts on any
1. Objectivity principle - All the business
month of the year other than January
transactions that will be entered in the
and ends 12 months after the start
accounting records must be duly
period.
supported by verifiable evidence.
 Going concern - a concept which
2. Historical cost - all properties and
assumes that the business enterprise
services acquired by the business must
will continue to operate indefinitely.
be recorded at its original
acquisition cost.

3. Accrual principle - states that income

should be recognized at the time it
earned such as when goods are
delivered or services
have been rendered.

4. Adequate disclosure - all material facts

that will significantly affect the financial
statements must be indicated.

5. Materiality - financial reporting is only

concerned with information
significant enough to affect decisions.

6. Consistency - approaches used in

reporting must be uniformly employed
from period to period to allow
 _____________11. Value of an asset and
balance sheet recorded in its original acquisition
QUIZ NO. 1 cost.
Chapter 1: FUNDAMENTAL ____________12. Amount of cash today that
is equivalent in value to a payment to be
CONCEPTS AND PRINCIPLE
received in the future.
____________13. Identifying the economic
Identification events relevant to the business.
_____________1. Systematic process of ____________14. Transactions within the
identifying, recording, measuring, classifying, company such as sales or any material
verifying, summarizing, interpreting and transaction made by the company.
communicating financial information. ____________15. Transactions from creditors,
_____________2. Define accounting as art of debtors, banks.
recording, classifying and summarizing in a ____________16. Preparation and distribution
significant manner under terms of money, of accounting reports to the users.
transactions and events.
_____________3. Define accounting as a ____________17. Financial information
service activity, provide quantitative provides information of company stability
information. which is important for the employees to
_____________4. Writing down the business determine if they have a future in the company.
transaction chronologically in the books of
____________18. Financial information is
account.
important for tax purposes and its compliance
_____________5. Representing the
with SEC requirements.
quantitative and qualitative financial
____________19. These people provide the
information about the business transactions in a
financial resources to keep the business going.
language comprehensible to the users of
financial statements. ____________20. Organizational managers use
_____________6. Preparing the financial financial information to set goals for their
statements from the transactions recorded in companies.
the books of accounts designed to meet the ____________21. These people provide the
information needs of its user. financial resources to keep the business going.
_____________7. Sorting similar and relevant
business transaction into the 3 categories of ____________22. Business operation engaged
Assets Liabilities and Owner’s Equity. in the rendering of service.
_____________8. The computation of
____________23. Production of items to be
economic or financial data in terms of money,
sold. It is involved in the purchasing and
hours, or other units.
converting of raw materials to finished goods.
_____________9. Net amount received from
selling of assets ____________24. Engaged in buying and selling
_____________10. Method where assets are of goods.
record in actual or estimated current market
prizes.
____________25. In corporation investors are ____________37. All properties and services
called. acquired by the business must be recorded at
its original acquisition cost.
____________26. In corporation unit of
ownership is called ____________38. All material facts that will
significantly affect the financial statements
____________27. A business owned and must be indicated.
managed by only one person.
____________39. States that income should be
____________28. Business organization owned recognized at the time it earned such as when
and managed by two or more people who agree goods are delivered or services have been
to contribute their assets to a common fund for rendered.
the purpose of earning profit.
____________40. Approaches used in reporting
____________29. Completed action which can must be uniformly employed from period to
be expressed in monetary term. period to allow
____________30. Comprises of methods used ____________41. Financial reporting is only
by the business to keep records in financial concerned with information significant enough
activities and to summarize these accounts in to affect decisions.
periodic activities.
____________42. Approaches used in reporting
____________31. These are standards, must be uniformly employed from period to
assumptions and concepts with general period to allow.
acceptability.
____________43. Concept behind economic
____________32. Used in reference only to a activities of an enterprise for specified time
particular field of accountancy such as public period.
accounting, private accounting and government
accounting. ____________44. 12-month, starts on any
month of the year other than January and ends
____________33. Refers to the profession of 12 months after the start period.
accounting practice
____________45. Regards the business
____________34. Primarily concerned with the enterprise as separate and distinct from its
recording of business transactions and the owner and from other business enterprise.
eventual preparation of financial statements.
____________46. 12-month, starts on Jan 1 and
____________35. All the business transactions ends on Dec 31.
that will be entered in the accounting records
must be duly supported by verifiable evidence. ____________47. a concept which assumes
that the business enterprise will continue to
____________36. Area of accounting that operate indefinitely.
emphasizes developing accounting information
for use within an entity.
A.List the 3 Components of Accounting G. List the Fundamental Concepts in Accounting

1.
2.
3.

B. 4 Aspects of Accounting

1.
2.
3.
4.
Chapter 7: What is GAAP?
C. List the Measurement Bases
Question 1: Who is required to follow GAAP?



 Question 2: Who creates the rules for GAAP?
D. Types of Business Organization

E. What are the Basic Principles. Question 3: What is the purpose of Generally
Accepted Accounting Principles (GAAP)?

F. Bookkeeping Vs Accounting
 c) Expected to be realized within
CHAPTER 2 FINANCIAL STATEMENT FOR SERVICE BUSINESS AND FUNDAMENTAL
twelve months of the balance
ACCOUNTING sheet date

TYPES OF FINANCIAL STATEMENT d) Cash or cash equivalent unless it is

restricted from being exchanged or
 Statement of Financial Position or used to settle a liability for at least
Balance Sheet twelve months after the balance
 Statement of Comprehensive sheet date
Income or Income Statement
 Statement of Changes in Owner’s Classification of Current Assets:
Equity or Statement of Owner’s  Cash – items readily available for use
Equity in the operation
 Statement of Cash Flows  Cash equivalent – short-term
 Notes on Financial Statements investment readily convertible to
known amounts of cash
Real Accounts: Assets, Liabilities and Equity  Marketable Securities – stocks and
Nominal Accounts: Revenue, Expenses bonds purchased by the enterprise
-Bought when there is an excess
Statement of Financial Position or cash.
Balance Sheet  Trade and other Receivables –
(Assets, Liabilities and Owner’s Equity) include Accounts Receivable, Notes
It shows the financial condition/ position of Receivable, Interest Receivable,
a business as of a given period. Advances to Employees, Accrued
Assets Income
 Inventories – unsold goods at the
 These are economic resources owned
end of accounting period.
and controlled by the business
 Prepaid expenses – goods or services
expected for future gain.
paid in advance
 Property and rights of value owned by
the business. Contra-Asset Account – accounts
deducted from related asset account
1. Current Assets – presented according  Allowance for Bad Debts – losses
to liquidity due to uncollectible accounts
IAS 1, classifies assets as current -deduction from accounts receivable
assets when it is: in order to get REALIZABLE VALUE
a) Expected to be realized in, or is  Accumulated Depreciation – expired
intended for sale or consumption cost of property, plant and
in, the entity’s normal operating equipment 'as a result of usage and
cycle passage of time in order to get the
b) Held primarily for the purpose of book value of asset
being traded 2. Non- Current Assets- residual definition
of current assets
  Accounts Payable – acquisition of an
Classification of Non-current Assets asset on account
 Long-Term Investments – assets held  Notes Payable – acquisition of an
by an enterprise, intended to be asset on account evidenced by a
held for an extended period of time promissory note
 Property, Plant, Equipment –  Loan Payable – liability to pay the
tangible assets held for use in the bank
production or supply of goods or  Utilities Payable – obligation to pay
services, or for administrative utility companies
purposes and which are expected to  Unearned Revenues - advance
be used for more than one period payments received before goods or
Examples of PPE: services are provided to customers.
 Land  Accrued Liabilities - expenses already
 Building incurred but not yet paid
 Equipment
 Furniture and Fixture
 Intangible Assets 2. Non-current Liabilities
These are long term liabilities or
obligations which are payable for a period
1. Current Liabilities -presented on their of longer than one year.
maturity
Classification of Non-current Liabilities
International Accounting Standards 1,
classifies liability as a current liability Mortgage Payable – collateral in the form of
when it is: real properties
Bonds Payable – certificate of indebtedness
a. expected to be settled in the entity’s under the seal of a corporation
normal operating cycle -account used by the entity for borrowing of
b. Held primarily for the purpose of
money with huge amount.
being traded
c. due to be settled within twelve
months after the balance sheet date;  OWNER’S EQUITY
or the entity does not have an includes the interest of the owners;
unconditional right to defer  claims of the owners on the assets
settlement of the liability for at least  investment of the owner or minus
twelve months after the balance sheet the results of operations.
date
Capital an account bearing the name of
the owner representing original and
additional investment of the owner of the
business increased by the amount of net
income earned during the year.
Classification of Current Liabilities
 Trade and Other Payables
 It is decreased by the cash or other assets Utilities Expense – expense related to the
as well as the net loss incurred during the use of electricity, fuel, water and
year. telecommunications.
“bayad sa kuryente, tubig, internet etc”
Drawing- represents the withdrawals
made by the owner Supplies Expense – covers office supplies
Income Summary “bumili ng mga gamit for business like for
-temporary account used at the end of the laundry business mga hanger.”
accounting period to close income and Insurance Expense – expired portion of
expense account. premiums paid on insurance
-Closing Entry “insurance ito for your employees, sagot
din ito ng business”
FORMS OF BALANCE SHEET
1. Account Form Depreciation expense – annual portion of
- assets are listed on the left-hand the loss of a tangible asset
column of the report with the “washing machine every year
liabilities and owner’s equity listed magbabawas ang halaga nito”
on the right-hand column
2. Report Form Uncollectible Accounts Expense/Doubtful
shows in one straight column the Accounts Expense/Bad Debts Expense –
assets, followed by the liabilities and receivables estimated to be doubtful of
owner’s equity. collection
“-nag-utang si customer pero hindi
nagbayad”
Statement of Comprehensive Income
or Income Statement FORMS OF INCOME STATEMENT
(Revenues, Expenses)
-The Income Statement shows the result of 1. Natural Form
operations for a given period - presents expenses according to nature
- used in a service business
-Total Revenue- Total Expense= Net Profit
Service Income – revenues earned or -Single Step
generated by the business in performing -no reallocation of rent expense,
services for a client. depreciation and etc.
“nag-offer ka ng service mo then
binayaran ka ng cash” 2. Functional Form
Example : Laundry Services by a laundry - presents expenses according to function
shop - used in a merchandising business (Big
Salaries or Wages Expense – payments Companies)
made to employees -Group according to function
“sweldo ng employees” -more than one subtraction
STATEMENT OF CHANGES IN
OWNER’S EQUITY C. Financing activities - the cash inflows
(receipts) and cash outflows (payments)
-changes in original capital due to from the owners and creditors of the
additional investment or withdrawals business

STATEMENT OF CHANGES IN Receipts of cash

- original and additional investments by
OWNER’S EQUITY
owner
STATEMENT OF CASH FLOWS - proceeds of loan
(Operating, Investing and Financing
Activities) Payments of cash
Total Receipt- Total Payments= Net Cash - cash withdrawal of owner
*Note: Ending Cash in Cash Flow must be - payment for the principal balance of loan
equal in Balance Sheet

NOTES ON FINANCIAL STATEMENTS

A. Operating activities – the cash inflows
-Computations of some accounts are
(receipts) and cash outflows (payments)
disclosed here.
arising from the normal
-Accounts that is not important for the user
of the business
states here.
-For Transparency
Receipts of Cash (inflows)
All calculations should have full disclosure
- collections from customers
for you not to be questioned.
- royalties, fees, commissioned received
Payments of Cash (outflows)
- to suppliers for services and goods
acquired FUNDAMENTAL ACCOUNTING
- employee’s salaries EQUATION
- government licenses and taxes ASSETS = LIABILITIES + OWNER’S EQUITY
- interest expense
-selling, administrative and other
expenses

B. Investing activities - the cash inflows

(receipts) and cash outflows (payments)
from the purchase and sale of property and
equipment, investment in debt or trading
securities

Receipts of cash (inflow)

-sale of PPE
Payments of Cash (Outflow)
-payments to acquire property
QUIZ NO. 2 ___________________17. advance
payments received before goods or services
________________1. These are economic
are provided to customers.
resources owned and controlled by the
business expected for future gain. ___________________18. These are long
________________2. presented according to term liabilities or obligations which are
liquidity payable for a period of longer than one
___________________3. Cash or cash year.
equivalent unless it is restricted from being _____________________19. collateral in
exchanged or used to settle a liability for at the form of real properties
least twelve months after the balance sheet ____________________20. certificate of
date indebtedness under the seal of a
___________________4. items readily
corporation.
available for use in the operation
___________________5. stocks and bonds ____________________21. claims of the
purchased by the enterprise. Bought when owners on the assets. Investment of the
there is an excess cash. owner or minus the results of operations.
__________________6. unsold goods at
______________19. an account bearing the
the end of accounting period.
__________________7. goods or services name of the owner representing original
paid in advance and additional investment of the owner of
__________________8. accounts deducted the business
from related asset account _________________20. temporary account
__________________9. losses due to used at the end of the accounting period to
uncollectible accounts
close income and expense account.
__________________10. residual
definition of current assets _________________21. represents the
______________11. assets held by an withdrawals made by the owner
enterprise, intended to be held for an _________________22. shows in one
extended period of time straight column the assets, followed by the
__________________12. presented on liabilities and owner’s equity.
their maturity _________________23. shows the result of
__________________13. advance operations for a given period
payments received before goods or services _________________24. expense related to
are provided to customers. the use of electricity, fuel, water and
___________________14. acquisition of an telecommunications.
asset on account evidenced by a promissory _________________25. payments made to
note employees
___________________15. acquisition of an _________________26. expired portion of
asset on account. premiums paid on insurance
___________________16. expenses already _________________27. annual portion of
incurred but not yet paid the loss of a tangible asset
_________________28. receivables 7.
estimated to be doubtful of collection 8.
_________________29. presents expenses 9.
according to function
10.
_________________30. changes in original
capital due to additional investment or
withdrawals
5 Examples of Current and Non-Current
_____________31. the cash inflows
Liabilities
(receipts) and cash outflows (payments)
from the purchase and sale of property and
1.
equipment, investment in debt or trading
securities 2.
_________________32. the cash inflows 3.
(receipts) and cash outflows (payments) 4.
arising from the normal 5.
of the business 6.
_________________33. the cash inflows 7.
(receipts) and cash outflows (payments)
8.
from the owners and creditors of the
business 9.
__________________34. Computations of 10.
some accounts are disclosed here.
__________________35. revenues earned Real Accounts
or generated by the business in performing
services for a client.

Nominal Accounts

List the different types of Financial Statements

Question 1: Categorize the following
accounts as to whether they’re Asset,
Liability, of Owners’ Equity accounts.

5 Examples of Current and Non-Current Assets  Common Stock

1.  Accounts Receivable
2.  Retained Earnings
3.  Cash
4.  Notes Payable
5.
6.
Question 2: For each of the following assets
or liabilities, state whether it is current or
non-current:

 Accounts Payable
 Cash
 Property, Plant, and Equipment
 Note Payable
 Inventory

Question 3: Calculate Net Income, given the

following information:

 Consulting Revenue: $50,000

 Rent Expense: $5,000
 Software Licensing Fees: $3,000
 Dividends Paid: $6,000
 Advertising Expense:$20,000

Question 4: Using the following information,

calculate the ending balance in Retained
Earnings:

 Beginning Retained Earnings: $10,000

 Net Income: $5,000
 Dividends Paid: $4,000
 CHAPTER 3 THE ACCOUNTING EQUATION

ASSETS=LIABILITIES + OWNER’S EQUITY The business borrowed ₱50’00 from

Metrobank.
Assets (what it owns) = Liabilities (what it
owes to others) + Owners Equity (the ASSETS = LIABILITIES + OWNER’S EQUITY
difference between assets and liabilities) + Cash = + Loan Payable + 0
The fundamental accounting equation ₱50K ₱50K
explains that the value of a company’s
assets will always be equal to the sum of The business bought office equipment and
the borrowed funds and own funds. paid ₱20,000 cash.
ASSETS = LIABILITIES + OWNER’S EQUITY
EXPANDED
-Cash = 0 +0
INCOME- increase in the economic benefit
during the accounting period in the form of ₱20K + Equipment ₱20K
an inflow or increase of asset or decrease of The business bought ₱25,000 furniture on
liability that results in increase in equity, credit.
other than contribution from equity
participants. ASSETS = LIABILITIES + OWNER’S
EQUITY
EXPENSE- is decrease in economic benefit
+ Furniture = + AP +0
during the accounting period in the form of
an outflow or decrease of asset or increase ₱25K ₱25K
of liability that results in decrease in equity,
other than distribution to equity Customer Peter Co. paid ₱50,000 for car
participants. painting service.
ASSETS = LIABILITIES + OWNER’S EQUITY
Examples of effects in the Accounting
Equation: + Cash = 0 + Service Income

Owner Mary Ligon invest ₱100,00 in ML ₱50K ₱50K

Company.
ASSETS = LIABILITIES + OWNER’S EQUITY
+ Cash = 0 + Mary Ligon Capital

₱100K ₱100K The Machine Shop promised to pay ₱20,000

rent for the shop space rented from the
owner of the lot and building.
ASSETS = LIABILITIES + OWNER’S 1. The total asset of ABC Company is 1,
EQUITY 500,000 and its total equity are equal
to one-third of assets. What is the
0 = + Rent Payable + (- Rent Expense)
liability of ABC Company?
₱20K ₱20K

2. The total asset of XYZ Inc. and its total

liabilities are equal to three-fourth of
its total assets. What is the total
owner’s equity?

3. Show how the following transactions

would affect the Accounting Equation.

a.  James purchases a $5,000 piece of

equipment.

b. James writes his monthly check for

rent: $3,000.

c. James takes out a $25,000 loan with

his bank.

Show that the accounting equation is

satisfied after taking into consideration
each of the following transactions in the
books of Mr. N.

1. Started business with capital

1,00,000

2. Bought furniture 25,000

QUIZ NO 3

3. Bought goods for cash 20,000

4. Bought goods from Ram on Credit
5,000

5. Sold goods for cash for 15,000

6. Sold goods to Shyam on credit 8,000

7. Paid cash to Ram 4,000

8. Received cash from Shyam 5,000

9. Paid Cash into Bank 25,000

10. Withdrawn from bank 10,000

CHAPTER 4 RECORDING BUSINESS TRANSACTION

(DOUBLE ENTRY SYSTEM)
The Accounting Cycle (b.) Subsidiary Ledger - Shows the details of
those transactions classified in the general
1. Identifying and Analyzing ledger.

 Recognizing economic events that EX. Accounts Receivable P1,000,000 in

have taken place and determining different customers. In subsidiary detailed
their effects on the business. breakdown of 1,000,000 is seen.
 transactions must always be
T-account - Represented by the capital
supported by documentary
letter T, there's a left and right side to the
evidences or proofs.
vertical bar. On the top of the horizontal bar
is where the account title is written.
2. Recording
4.Summarizing
 The process of writing the effects of
the transaction, also known as  process of grouping together various
journalizing accounts referred in classifying
 The recording includes the inputting process.
of information in the accounting  This is where the accounts are
books called journals. grouped into Assets, Liabilities,
A. General Journals Owner's Equity, Revenue and
-Accruals and Deferral Expenses.
B. Special Journals
 Cash receipts book 5. Reporting - The preparation of the
 Cash disbursement book following financial summaries:

Sales book No yet cash involve PAS 1- Financial Statement

Purchases book AR and AP PAS 7- Cash Flow
 Results of the operation ( Income
Statement )
3. Classifying - The sorting or grouping of
 Financial position (Balance Sheet )
transactions that are a like to their specific
 Cash Flow Statement
account titles.
*communicated to the users of
(a.) General Ledger information and this may be further
supported by schedules.

6. Interpreting
  last step in accounting process, e. Credit
this involves the computation of The Simple and Compound Entry
relationship of figures from the Simple entry, only two accounts are
financial reports and schedules. affected. But in some cases, a
 combination of figures and transaction would require the usage
narrations based on the figures of more than three accounts which
presented. we call as a compound entry.
 The relationship may be in
percent or in ratios; and may be 2. Posting – Transferring journal
within the financial report or one entries to the ledger accounts is
report in relation to another called posting.
report.
 Interpretation how effective and This phase of the recording process
accumulates the effects of
efficient is your entity
journalized transactions into the
Double Entry - Value received and value individual accounts.
parted with, it means that for every
economic event there are at least two Ledger
affects the financial position of the entity
The entire group of accounts
Debit - The left side of a T-account. maintained by a company is the
ledger.
Credit - The right side of a T-account.
Ledger provides the balance in each
Account Title - Descriptive name that
of the accounts as well as keeps
indicates the kind of transactions that are
track of changes in these balances.
recorded in the T-account.

Steps in Accounting Cycle

1. Journalizing – Chronological Chart of Accounts

recording of economic transactions  chart lists the accounts and
showing all the effects of each the account numbers that
transaction in terms of debits and identify their location in the
credits. ledger.
A journal entry should contain the
following:
 The numbering system that
a. Date YYYY/MM/DD
identifies the accounts
b. Account Titles and Explanation
usually starts with the
c. Posting Reference
balance sheet accounts and
d. Debit
 follows with the income  Close or transfer the income and
statement accounts expenses accounts to “Income and
Expense Summary account” and the
3. Trial Balance latter account to Owner’s Equity.
 A necessary checkpoint for  Zero Nominal
uncovering certain types of errors.

 They list accounts in the order in 7. Post-Closing Trial Balance

which they appear in the ledger.  Make a trial balance of all
Assets, Liabilities, and Owner’s
 trial balance proves the Equity accounts after closing the
mathematical equality of debits and income and expense accounts.
credits after posting.  The balance will be the
beginning balance in next
 A trial balance may also uncover accounting period
errors in journalizing and posting.

The steps for preparing a trial balance are: 8. Reversing – Reverse some adjusting
entries to prepare them for a new
a. List the account titles and their balances
accounting period.
in the appropriate debit or credit column.

b. Total the debit and credit columns.

c. Prove the equality of the two columns.

10 STEPS OF ACCOUNTING CYCLE:

4. Adjusting – Adjust the ledger  Identifying and analyzing

balances.  Journalizing
 Posting
5. Financial Statements – Make  Unadjusted Trial Balance
income statement and balance  Adjusting Entries
sheet from the adjusted trial
 Adjusted Trial Balance/Worksheet
balance.
 Financial Statements
 Closing Entries
 Post-Closing trial balance
 Reversing Entries

6. Closing
QUIZ NO 4 100,000, pays Rs. 25,000 cash and signs a
note for the balance.
Problem 1: Journal Entry, Ledger and Holz Golf Course was opened on March 1 by Ian
Trial Balance Holz. The following selected events and
transactions occurred during March.

On April 01, 2016 Anees started business

Mar. 1 Invested P20,000 cash in the business.
with Rs. 100,000 and other transactions for
the month are: 3 Purchased Rainbow Golf Land for P15,000
2. Purchase Furniture for Cash Rs. 7,000. cash. The price consists of land P12,000, shed
8. Purchase Goods for Cash Rs. 2,000 and P2,000, and equipment P1,000. (Make one
for Credit Rs. 1,000 from Khalid Retail Store. compound entry.)
14. Sold Goods to Khan Brothers Rs. 12,000 5 Paid advertising expenses of P900.
and Cash Sales Rs. 5,000. 6 Paid cash P600 for a one-year insurance
18. Owner withdrew of worth Rs. 2,000 for policy.
personal use. 10 Purchased golf discs and other equipment
22. Paid Khalid Retail Store Rs. 500. for P1,050 from Stevenson Company payable in
26. Received Rs. 10,000 from Khan 30 days.
Brothers. 18 Received P1,100 in cash for golf fees (Holz
30. Paid Salaries Expense Rs. 2,000 records golf fees as service revenue).
19 Sold 150 coupon books for P10 each. Each
book contains 4 coupons that enable the holder
Problem 2:
to play one round of disc golf.
Prepare general journal entries, ledger and
trial balance for the following transactions 25 Withdrew P800 cash for personal use.
of a business called Pose for Pics in 2016: 30 Paid salaries of P250.
30 Paid Stevenson Company in full.
Aug. 1: Hashim Khan, the owner, invested 31 Received P2,700 cash for golf fees.
Rs. 57,500 cash and Rs. 32,500 of
photography equipment in the business. Holz Disc Golf uses the following accounts:
      04: Paid Rs. 3,000 cash for an insurance Cash, Prepaid Insurance, Land, Buildings,
policy covering the next 24 months. Equipment, Accounts Payable, Unearned
      07: Services are performed and clients Service Revenue, Owner’s Capital, Owner’s
are billed for Rs. 10,000. Drawings, Service Revenue, Advertising
      13: Purchased office supplies for Rs. Expense, and Salaries and Wages Expense.
1,400. Cash paid Rs. 400 and remaining
outstanding. Instructions:
      20: Received Rs. 2,000 cash in 1. Journalize the transactions. Include
photography fees earned previously. explanations.
      24: The client immediately pays Rs.
15,000 for services to be performed at a 2. to the ledger of accounts
later date.
       29: The business acquires photography 3. Prepare a trial Balance on March 30,2020
equipment. The purchase price is Rs.