Documente Academic
Documente Profesional
Documente Cultură
MATERIAL
Sector:
Health, Social and Other Community Development Services
Qualification:
Bookkeeping NC III
Unit of Competency:
Journalize transactions
Module Title:
Journalizing Transaction for Single Proprietorship
MODULE OF INSTRUCTION
Unit of Competency:
1 Date Developed: Document No. BPPNCII - 001
CBLM August 2013 Issued by:
Date Revised:
BOOKKEEPING NC III AICS-SF
Journalize Transactions Developed by:
MARY-ANN VILLAR REVISION # OI
JOURNALIZE TRANSACTIONS
Module Title:
JOURNALIZE TRANSACTIONS
Module Description: This unit covers the knowledge, skills, and attitudes
in logging/recording business transactions in an
accounting journal.
Nominal Duration 72 hours
Certification Level: BOOKKEEPING NC III
Summary of Learning LO1. Prepare chart of accounts
Outcomes: LO2. Analyze documents
LO3. Prepare journal entry
MODULE TITLE
JOURNALIZING TRANSACTIONS FOR SINGLE PROPRIETORSHIP
MODULE DESCRIPTOR:
This module covers the knowledge, skills, and attitudes in preparing chart of accounts,
analyze documents and preparing journal entries for Single Proprietorship.
NOMINAL DURATION:
72 hours
LEARNING OUTCOMES:
At the end of this module you MUST be able to:
1. Prepare chart of accounts
2. Analyze documents
3. Prepare journal entry
Contents:
Assessment Criteria
1. List of asset, liability, equity, income and expense account titles are prepared in
accordance with Generally Accepted Accounting Principles.
2. Chart of Accounts is coded according to industry practice.
Conditions
1. Calculator
2. Paper
3. Learning Materials
4. Pencil
5. Eraser
Assessment Method:
1. Written examination
2. Demonstration
3. Observation
2. Answer self check for 1.1-1 Compare your answer to the answer key.
Learning Objective: After reading this INFORMATION SHEET, YOU MUST be able to
differentiate Bookkeeping from Accounting.
HISTORY OF ACCOUNTING
Once upon a time, Luca Pacioli wrote a math book. It was just a little survey and should
have been treated like ordinary books of the time and read and then disappeared into
historical archives and forgotten. A few brief chapters on practical mathematics made this
one special.
The time was 1494. Columbus had discovered America just two years before. The author
was a Franciscan monk.
If everything was done right, then the bookkeeper could do a trial balance (summa
summarium). Add up all the debits and then add up all the credits, he said. If everything
had been done right, the totals should match. If not, that would indicate a mistake in your
Ledger, which mistake you will have to look for diligently with the industry and intelligence
God gave you. He wrote.
Double-entry bookkeeping was so simple and met the needs of business so well that it
caught on immediately.
WHAT IS ACCOUNTING?
1. Recording the process of putting into writing the financial activities of the
enterprise chronologically. The term chronologically would mean that financial
activities are recorded in the order of their actual happening. This is technically
referred to as BOOKKEEPING. Bookkeeping is defined as the systematic and
chronological recording of business transactions and events.
2. Classifying the process of grouping into specific classifications similar or alike
transactions.
3. Summarizing the process of preparing financial reports (interchangeably used
to means financial statements) from the recorded and classified transactions and
events of the enterprise.
4. Interpreting the process that supplies answers to questions about the
profitability, stability, solvency and liquidity of an enterprise.
a. Profitability the ability of the enterprise to generate profit from its
operations.
b. Stability refers to the ability of the enterprise to stay viable, i.e.; generate
profit for the owners, sustain operations and pay for long term financial
obligations.
c. Solvency should mean that the enterprise is capable of paying its short
term obligations.
d. Liquidity refers to the enterprise having sufficient cash.
FIELDS OF ACCOUNTING
BOOKKEEPING DEFINED
The term bookkeeping literally means keeping of the books. The books being
referred to are the journal and the general ledger.
Hence, bookkeeping is basically the recording of the transactions and events in
the journal, and these transactions and events being classified in the general ledger.
Bookkeeping Versus Financial Accounting
Bookkeeping is just a part of accounting as the latter encompasses the entire
process of recording, classifying, summarizing and interpreting transactions and events.
Matching Type (1 Point Each). Match Column A with Column B. Write the Letter of the
correct answer in column B to the space provided in column A.
Column A Column B
A. Bookkeeping
_____ 1.The recording and reporting of financial
transactions, including the origination of the transaction,
its recognition, processing, and summarization in the
Financial Statement.
B. Accounting
_____ 2. The recording of all financial transactions
undertaken by a business (or an individual). A
bookkeeper (or book-keeper), sometimes called an
accounting clerk; a person who keeps the books of an
organization. The organization might be a business, a
charity or even a local sports club.
C. Summarizing
_____ 3. Technically called bookkeeping.
D. Classifying
_____ 4. Items are sorted and group.
E. Recording
_____ 5. These reports are submitted to the
management at the end of each accounting period or as
the need arise.
1. B
2. A
3. E
4. D
5. C
Supplies/Materials:
Calculator
Paper
Learning Materials
Pencil
Eraser
Equipment :
Steps/Procedure:
1.
2.
3.
4.
Assessment Method:
CRITERIA YES NO
Did you.
1. Can the student define Accounting
3.
4.
According to Ownership
1. Single or Sole Proprietorship.
A sole proprietorship is a business formed by one person. This form od business
gives individual a means of controlling the business apart form his ot her personal
interest. Legally however, the proprietorship is the same economic unit as the
individual received all profits or losses and is liable for all obligations of the
proprietorship. The life of a proprietorship ends when the owner wishes it to, or at
the owners death or incacity.
2. Partnership.
This is a business organization with two or more owners. The owners, called
partners, agree on the capital contributions, managemement or the firm,
distribution of profit or losses, anfd other matters pertaining to the operation of the
firm.
3. Corporation.
This is a business organization of not less than five persons. It is organized by
operation of law. A corporation is a business unit that is legally separate from its
owner. The owners whose ownership is represented by shares or stocks in the
corporation, do not directly control the operations of the corporation. Instead they
elect a board of directors who run the corporation for the benefit of the
stockholders. In exchange for limited involvement in the corporations actual
operations, stockholders enjoy limited liability. That is, they are liable only for the
amount paid for their shares. If they wish, stockholders can sell their shares to
other persons without affecting corporate operations. Because of this limited
liability, stockholders are often willing to invest in riskier, but potentially profitable
activities. Also because ownership can be transferred without dissolving the
corporation, the life of corporation is unlimited and not subject to the whims or
health of a proprietor or partner.
TRANSACTION
Transaction is the exchange of goods and services for a certain sum of money. It
is an exchange of monetary values. In everytranscation, there is value received and
value parted with.
a. Sales invoices
b. Purchase invoices
c. Official receipts
d. Cash vouchers
e. Journal vouchers
The following tabulation explains some common types of business transactions and the values involved:
3. It is a form of entity with one owner and the simplest possible form of
Business.
a. Sole Proprietorship
b. Partnership
c. Corporation
d. Business
e. None of the Above
1. E
2. D
3. A
Supplies/Materials:
Calculator
Paper
Learning Materials
Pencil
Eraser
Equipment :
Steps/Procedure:
5.
6.
7.
18 Date Developed: Document No. BPPNCII - 001
8. CBLM August 2013 Issued by:
Date Revised:
BOOKKEEPING NC III AICS-SF
Journalize Transactions
Assessment Method: Developed by:
MARY-ANN VILLAR REVISION # OI
Performance Criteria Checklist 1.1.1
CRITERIA YES NO
Did you.
5. Can the student define Accounting
7.
8.
Financing Activities
Investing Activities
Managers use capital from financing activities to acquire other resources used in the
transformation process that is, to transform resources from one form to a different form,
which is more valuable, to meet the needs of the people. Having the right mix of
resources is essential to efficient and effective operations.
An efficient business is one that provides goods and services at low costs relative to their
selling prices. An effective business is one that is successful in providing goods and
services demanded by the customers.
Investing activities involve the selection and management including disposal and
replacement of long-term resources that will be used to develop, produce, and sell goods
and services. Investing activities include buying of land, equipment, buildings, and other
resources that are needed in the operation of the business, and selling these resources
when they are no longer needed.
Operating Activities
Operating activities involve the use of resources to design, produce, distribute, and
market goods and services. Operating activities include research and development,
design and engineering, purchasing, human resources, production, distribution,
marketing and selling, and servicing. Organizations compete in supplier and labor
markets for resources used in these activities. Also, they compete in product markets to
sell the goods and services created by operating activities.
1. Entity Concept. The most basic concept in accounting is the entity concept. An
accounting entity is an organization or a section of an organization that stands
apart from other organizations and individuals as a separate economic unit.
Simply put, the transactions of different entities should not be accounted for
together. Each entity should be evaluated separately.
For the purpose of reporting to outsiders, one year is the usual accounting
period Pacioli, the first author of an accounting text, wrote in 1494: Books
should be closed each year, especially in a partnership, because frequent
accounting makes for long friendship.
3. Stable Monetary Concept. The Philippine peso is a reasonable unit measure and
that its purchasing power is relatively stable. It allows accountants to add and
subtract peso amounts as though each peso has the same purchasing power as
any other peso at any time. This is the basis for ignoring the effects of inflation in
the accounting records.
Matching Type (1 Point Each). Match Column A with Column B. Write the Letter of the
correct answer in column B to the space provided in column A.
Column A Column B
1. B
2. A
3. C
Supplies/Materials:
Calculator
Paper
Learning Materials
Pencil
Eraser
Equipment :
Steps/Procedure:
9.
10.
11.
23 Date Developed: Document No. BPPNCII - 001
12. CBLM August 2013 Issued by:
Date Revised:
BOOKKEEPING NC III AICS-SF
Journalize Transactions
Assessment Method: Developed by:
MARY-ANN VILLAR REVISION # OI
Performance Criteria Checklist 1.1.1
CRITERIA YES NO
Did you.
9. Can the student define Accounting
11.
12.
b. Fixed or Long-term Liabilities are those which mature beyond one year
from the balance sheet date.
3. Capital. Capital represents the owners equity or investment in the business. Other
terms which can be used synonymously are Owners Equity and Proprietorship.
The resources controlled by a business are referred to as its assets. For a new business,
those assets originate from two possible sources:
Those who contribute assets to a business have legal claims on those assets. Since the
total assets of the business are equal to the sum of the assets contributed by investors
and the assets contributed by creditors, the following relationship holds and is referred to
as the accounting equation :
Initially, owner equity is affected by capital contributions such as the issuance of stock. Once
business operations commence, there will be income (revenues minus expenses, and gains minus
26 Date Developed: Document No. BPPNCII - 001
CBLM August 2013 Issued by:
Date Revised:
BOOKKEEPING NC III AICS-SF
Journalize Transactions Developed by:
MARY-ANN VILLAR REVISION # OI
losses) and perhaps additional capital contributions and withdrawals such as dividends. At the end
of a reporting period, these items will impact the owners' equity as follows:
+ Revenues
- Expenses
+ Gains
- Losses
+ Contributions
- Withdrawals
These additional items under owners' equity are tracked in temporary accounts until the
end of the accounting period, at which time they are closed to owners' equity.
The accounting equation holds at all times over the life of the business. When a
transaction occurs, the total assets of the business may change, but the equation will
remain in balance. The accounting equation serves as the basis for the balance sheet, as
illustrated in the following example.
To better understand the accounting equation, consider the following example. Mike Peddler
decides to open a bicycle repair shop. To get started he rents some shop space, purchases an initial
inventory of bike parts, and opens the shop for business. Here is a listing of the transactions that
occurred during the first month:
Date Transaction
P9325 = P9325
Note that for each date in the above example, the sum of entries under the "Assets"
heading is equal to the sum of entries under the "Liabilities + Owner's Equity" heading. In
most of these cases, the transaction affected both sides of the accounting equation.
However, note that the Sep 25 transaction affected only the asset side with an increase
in cash and an equal but opposite decrease in accounts receivable.
At the end of the month of September, the net income (revenues minus expenses) is
closed to capital and the balance sheet for the business would appear as follows:
Peddler's Bikes
Balance Sheet
September 30, 20xx
Liabilities &
Assets
Owner's Equity
Cash 6825 Accounts Payable 2000
Accounts Receivable 275 Peddler, Capital 7325
Bike Parts 2225
Summary
The foregoing illustrations show the most common effects of transactions in the
accounting equation. They emphasize the fact that transactions do not affect the equality
of the sides of the equation.
In as much as there are only three major items (assets, liabilities and
proprietorship) in the accounting equation, and knowing that all transactions may affect
or involve only these values, then, it may be concluded that all transactions can be
grouped into nine (9) types of effects as follows:
a. Increase in Assets = Increase in Proprietorship
b. Increase in Assets = Increase in Liabilities
c. Increase in Some form of Assets = Decrease in other forms of Assets
d. Decrease in Assets = Decrease in Proprietorship
e. Decrease in Assets = Decrease in Liabilities
f. Increase in Liabilities = Decrease in Proprietorship
g. Increase in some form of Liabilities = Decrease in other form of Liabilities
h. Increase in Proprietorship = Decrease in Liabilities
i. Increase in some from of Proprietorship = Decrease in other form of
Proprietorship
State the accounting equation in the following selected transactions of Dr. J. Alvares
Supplies/Materials:
Calculator
Paper
Learning Materials
Pencil
Eraser
Equipment :
Steps/Procedure:
13.
14.
15.
30 Date Developed: Document No. BPPNCII - 001
16. CBLM August 2013 Issued by:
Date Revised:
BOOKKEEPING NC III AICS-SF
Journalize Transactions
Assessment Method: Developed by:
MARY-ANN VILLAR REVISION # OI
Performance Criteria Checklist 1.1.1
CRITERIA YES NO
Did you.
13. Can the student define Accounting
15.
16.
Note that the balance sheet has a heading consisting of three lines, the name of
the company, the title of the financial statement, and the date for which it was prepared.
Note also that the balance sheet consists of three segments, the assets section, the
liabilities section, and the owners equity section. Finally observe that the information is
expressed in monetary terms and that the total (indicated by a double ruled line) of the
assets(P200,000) is equal to the sum of the liabilities (P77,000 plus the owners equity
(P123,000). The balance sheet is so named, in fact, because both sides must be in
balance (equal to each other).
Assets: Assets are economic resources of a company that are expected to provide
future benefit to the company. A business may own many assets, some of which are
cash, accounts receivable, merchandise inventory, prepaid supplies, prepaid insurance,
land, building, and investment made in other companies.
Liabilities: Liabilities are economic obligations (debts) of the company. The external
parties to whom the economic obligations are owed are referred to as the creditors of the
company. Usually, although not exclusively, a legal documents serve as evidence of
liabilities. These documents establish a claim (equity)by the creditors (the creditors
equity)against the assets of the company. Liabilities include such items as amounts owed
to suppliers (accounts payable), taxes payable, and mortgages owed on the companys
property. A company may also borrow money from the bank on a short or long-term
basis by legal document called a note, which specifies the terms of the loan. Amounts of
loan would be listed as notes payable.
Owners Equity: the owners equity of a company is the owners current investment in
the assets of the company. (For partnership, the owners might be referred to as the
partners equity, for corporation, stockholders equity). The owners equity is affected by
the capital invested into the business by the owner, by the companys earnings from its
operations, and by withdrawals of capital by the owner from the business. For a sole
proprietorship, the owners equity is shown by listing the owners name, the word capital,
and the amount of the creditors have first legal claim to a companys assets. Once the
creditors claims have been satisfied, the owner is entitled to the remainder (residual) of
the assets. Sometimes the total of the liabilities (creditors equity) is combined with the
owners equity and the result is referred to as the total equity of the company.
Revenues:
Advertising Revenues P 88,000
Expenses
Rent Expense P 19,200
Salaries Expense 23,400
Office Supplies Expense 4,600
Utilities Expense 3,600
Total Expenses 50,800
Net Income P 37,200
Statement of Retained Earnings presents net income (as shown in the income
statement) and items such as dividends and adjustments of the net income of prior
periods.
1. Assess the enterprises ability to generate positive future net cash plows.
2. Assess the enterprises ability to meet its obligations, its ability to pay dividends,
and its needs for external financing.
3. Assess the reasons for differences between net income and associated cash
receipts and payments.
4. Assess the effects of an enterprises financial position of both its cash and
noncash investments and financing transactions during the period.
Financial Position
The basic elements of the financial position of an enterprise are assets, liabilities and
owners equity.
a. Assets economic resources of an enterprise that are recognized and measured
in conformity with generally accepted accounting principles. Assets also include
certain deferred charges that are not resources but that are recognized and
measured in conformity with GAAP.
b. Liabilities economic obligation of an enterprise that, are recognized and
measured n conformity with GAAP. Liabilities also include certain deferred credits
that are not obligations but that are recognized and measured in conformity with
GAAP.
c. Owners Equity the interest of owners in an enterprise which is the excess of
an enterprises assets over its liabilities.
Owners equity is defined in terms of assets and liabilities, just as residual interest
is defined in terms of economic resources and obligations. The relationship among
assets, liabilities and owners equity implicit in the definition of owners equity is:
Results of Operations
Financial Statements
The Following data were taken from the adjusted trial balance columns of the business of
Ana Reyes
36 Date Developed: Document No. BPPNCII - 001
CBLM August 2013 Issued by:
Date Revised:
BOOKKEEPING NC III AICS-SF
Journalize Transactions Developed by:
MARY-ANN VILLAR REVISION # OI
A. Reyes
Adjusted trial balance
December 31, 2013
Cash P 500.00
Accounts Receivable 200.00
Office supplies 100.00
Accounts Payable P 100.00
A. Reyes, capital 500.00
A. Reyes, drawing 100.00
Service Income 500.00
Rent expense 100.00
Wages expense 100.00 _________
Total P 1,100.00 P 1,100.00
======== ========
Financial Statements
A. Reyes
37 Date Developed: Document No. BPPNCII - 001
CBLM August 2013 Issued by:
Date Revised:
BOOKKEEPING NC III AICS-SF
Journalize Transactions Developed by:
MARY-ANN VILLAR REVISION # OI
Income Statement
For the month ended December 31, 2013
A. Reyes
Balance Sheet
December 31,2013
Current Assets:
Cash P 500.00
Accounts Receivable 200.00
Office supplies 100.00
Total current assets P 800.00
Liabilities
Current liabilities
Accounts Payable P 100.00
Owners Equity
Supplies/Materials:
Calculator
Paper
Learning Materials
Pencil
Eraser
Equipment :
Steps/Procedure:
17.
18.
19.
20.
Assessment Method:
CRITERIA YES NO
Did you.
17. Can the student define Accounting
19.
20.
Contents:
Assessment Criteria
1. Document are gathered, checked and verified in accordance with verification and
validation processes.
2. Account titles are selected in accordance with standard selection process.
Conditions
1. Calculator
2. Paper
3. Learning Materials
4. Pencil
5. Eraser
6. Sample Business Documents
Assessment Method:
1. Written test
2. Practical/performance test
3. interview
1. Analyse Documents
2. Answer self check for 1.2-1 Compare your answer to the answer key.
4. Answer self check for 1.2-2 Compare your answer to the answer key.
Source Documents
Merchandising businesses use various business forms and documents to help
identify the transactions tat should be recorded in the books. These source documents
contain vital information about the nature and amount of te transactions. The more
common source documents along with their descriptions are shown.
1. Sales Invoice is prepared by the seller of goods and sent to the buyer. This
document contains the name and address of the buyer, the date of sale and
information quantity, description and price about the goods sold. It also
specifies the amount of sales, and te transportation and payment terms.
2. The bill of lading is a document issued by the carrier a trucking, shippig or
airline that specifies contractual conditions and terms of delivery such as freight
terms, time, place, and the person named to receive the goods.
3. The statement of account is a formal notice to the debtor detailing the accounts
already due.
4. The oficial receipt evidences the recipt of cash by the seller or the authorized
representative. It notes te invoices paid and other details of payment.
5. Deposit slips are printed forms with depositors name, account number and
space for the details of the deposit. A validated deposit slip indicates that cash and
checks with the supplied details were actually deposited or credited to the account
holder.
6. A check is a written order to a bank by a depositor to pay the ampount specified
in the check from his checking account to the person named in the check. The
entity issuing the check is the payos while the receiver is the payee.
7. The purchase requisition is a written request to the purchaser of an entity from
an employee or user department of the same entity that goods are to be
purchased.
8. The purchase order is an authorization is a document containing information
about goods received from a vendor. It formally records the quantities and
description of the goods delivered.
9. Receiving report is a document containing information about goods received
from a vendor. It formally records the quantities and description of the goods
delivered.
10. A credit memorandum is a form used by the seller to notify the buyer that his
account is being decreased due to errors or other factors requiring adjustments.
1. A
2. A
3. A
4. A
5. A
Supplies/Materials:
Calculator
Paper
Learning Materials
Pencil
Eraser
Equipment :
Steps/Procedure:
21.
22.
23.
45 Date Developed: Document No. BPPNCII - 001
24. CBLM August 2013 Issued by:
Date Revised:
BOOKKEEPING NC III AICS-SF
Journalize Transactions
Assessment Method: Developed by:
MARY-ANN VILLAR REVISION # OI
Performance Criteria Checklist 1.1.1
CRITERIA YES NO
Did you.
21. Can the student define Accounting
23.
24.
Account titles are the terms used to identify the specific elements of accounting to
be used in the recording process. Appropriate identification is necessary right at the
recording phase because they are to be brought forward to accounting reports. When
wrong accounts are used, the users of accounting reports are apt to be misled and
consequently, make wrong decisions. Examples of accounts titles are given below:
ASSET TITLES
1. Cash currency (bills and coins), checks, postal money orders and treasury
warrants received by the business.
2. Notes Receivable amounts collectible from customers for goods and services
rendered on credit or from others for loans granted. Such claims are evidenced
by promissory note.
A promissory note is a written promise to pay a certain amount of money
on a specified or determinable future date.
3. Accounts Receivable claims from customers arising from goods sold or
services rendered on credit. It represents the debtors oral promises to pay.
4. Allowance for bad debts is a contra asset account to provide for uncollectible
amounts. It is deducted from Account Receivable to present the amount still
collectible from debtors.
5. Merchandise Inventory goods purchased by the business to be sold at a
profit.
6. Interest Receivable interest earned on notes on hand which has not been
received in cash.
7. Supplies Unused miscellaneous supplies which have been bought for office
use but are still unused as of the balance sheet date. Other account titles which
can be used are Supplies on Hand, Office Supplies, Store Supplies and Factory
Supplies.
8. Prepaid Insurance already paid insurance premiums which are applicable in
the future periods.
9. Furniture and Fixtures it includes tables, chairs, showcases, counters and
other similar assets owned and used by the business in its operation.
10. Office Equipment heavy metallic and movable items in an office that are
capable of performing certain functions. Examples are typewriters, posting
machines and fax/copier/printer/scanner machines other similar assets.
11. IT Equipment - computers
12. Delivery Equipment includes assets used for transporting merchandise.
13. Tools handy, small and usually metallic items used in performing certain
functions such as saws, hammers, pliers, scissors, screw drivers and jacks.
Tools, in general, have long useful life but do not have significant value.
47 Date Developed: Document No. BPPNCII - 001
CBLM August 2013 Issued by:
Date Revised:
BOOKKEEPING NC III AICS-SF
Journalize Transactions Developed by:
MARY-ANN VILLAR REVISION # OI
14. Accumulated Depreciation it is a valuation account that reduces the total cost
of the fixed asset. It is another contra-asset account that represents the total
amount of depreciation expenses charged in the past and current periods.
15. Land land owned by the business used for building sites and other business
purposes.
16. Building building owned and used by the business in its operation.
LIABILITY TITLES
1. Notes Payable amounts due to the creditors which are supported by a
promissory note.
2. Accounts Payable amounts used for the creditors for the goods or services
bought on credit and supported by promissory notes. It is often referred to as
arising from purchases on open account
3. Expenses Payable (accrued expenses) obligations for expenses already
incurred but not yet paid. Examples are taxes payable, salaries payable, and
accrued power and light expense.
4. Loans Payable obligations arising from loans obtained.
INCOME TITLES
1. Sales total sales of merchandise sold
2. Professional Fee Income amounts earned by professionals such as CPAs,
doctors, lawyers, etc. for services render.
3. Rent Income amounts of rental earned for the period.
4. Service Income amounts of income earned from services rendered of a service
concern business.
5. Interest Income amounts earned for lending money.
EXPENSE TITLES
1. Cost of Sales cost of goods purchased and sold or materials manufactured and
sold.
2. Advertising Expense expenses incurred to promote the product of the
business.
3. Salesmens Salaries compensation given to sales agents.
4. Salesmens Commissions compensation given to sales agents based on the
amount of their sales.
5. Salesmens Travelling Expenses travelling allowance given to sales agents.
6. Office Salaries compensation of administrative employees.
1. Notes Receivables
2. Building
3. Capital
4. Drawing
5. Prepaid Expense
6. Notes Payable
7. Accounts Receivables
8. Cash
9. Accounts Payable
10. Office Supplies
1. A
2. A
3. C
4. C
5. A
6. B
7. A
8. A
9. B
10. A
Supplies/Materials:
Calculator
Paper
Learning Materials
Pencil
Eraser
Equipment :
Steps/Procedure:
25.
26.
27.
28.
Assessment Method:
CRITERIA YES NO
Did you.
25. Can the student define Accounting
27.
28.
Contents:
Assessment Criteria
Conditions
1. Calculator
2. Jouranl Paper
3. Learning Materials
4. Pencil
5. Eraser
6. Philippine Financial Reporting Standards
Assessment Method:
1. Written test
2. Practical/performance test
3. interview
Learning Activities
55 Date Developed: Document No. BPPNCII - 001
CBLM August 2013 Issued by:
Date Revised:
BOOKKEEPING NC III AICS-SF
Journalize Transactions Developed by:
MARY-ANN VILLAR REVISION # OI
Learning Outcome
GAAP are conventional that is, they become generally accepted by agreement (often
tacit agreement) rather than by formal derivation from a set of postulates or basic
concepts. The principles have developed on the basis of experience, reason, custom,
usage, and to a significant extent, practical necessity.
5. Historical Cost
Another important concept related to the monetary concept is the historical
cost or simply, the cost concept. The historical cost concept means that
transactions are recorded on the basis of the peso exchange (i.e. the cost)
in the transaction. Once a transaction is recorded, the cost involved in the
transaction is retained in the accounting records regardless of whether the value
of the property or services owned increases (or decreases). For instance, a
company may acquire land for P100,000. Several years later the land may have
increased in value to P130,000. Under the historical cost concept, the company
would continue to show the land in its accounting records at P100,000, the
acquisition cost.
The increase in the value of any item may be due to the effects of inflation.
It may also be due to specific changes in the supply of and the demand for the
type of item. In the past the peso has been a relatively stable measuring unit. With
the recent high rates on inflation, however, everyone has experienced the
58 Date Developed: Document No. BPPNCII - 001
CBLM August 2013 Issued by:
Date Revised:
BOOKKEEPING NC III AICS-SF
Journalize Transactions Developed by:
MARY-ANN VILLAR REVISION # OI
reduction in the purchasing power of the peso. There has also been rapid
technological changes that have affected the supply of the demand for many
items. Inflation and technological changes have been so great in recent years that
accountants have modified both the monetary unit and the historical cost concept,
although not in the financial statements.
6. Materiality
Materiality is like relevance in that both concepts are defined in terms of
what influences or makes difference to a user of accounting information.
Materiality is the concept that accounting information is useful when the
monetary amount involved is large enough to make a difference in a users
decision. Only material accounting information should be accumulated and
communicated to users.
7. Accrual
Determination of periodic income and financial position depends on
measurement of economic resources and obligations and changes in them as the
changes occur rather than simply on recording receipts and payments of money.
Enterprise economic activity in a short period seldom follows the simple form of a
cycle from money to productive resources to product to money. Instead,
continuous production, extensive use of credit and long-lived resources, and
overlapping cycles of activity complicate the evaluation of periodic activities. As a
result, noncash resources and obligations change in time periods other than those
in which money is received or paid. Recording these changes is necessary to
determine periodic income and to measure financial position. This is the essence
of accrual accounting.
8. Matching Concept
the term matching is often used in the accounting literature to describe the entire process
of income determination. The term is also often applied in accounting, however, in a
more limited sense to the process of expense recognition or in an even more limited
sense to the recognition of expenses by associating costs with revenue on a cause and
effect basis.
1. A
2. A
3. A
4. B
5. B
Supplies/Materials:
Calculator
Paper
Learning Materials
Pencil
Eraser
Equipment :
Steps/Procedure:
29.
30.
31.
32.
Assessment Method:
CRITERIA YES NO
Did you.
29. Can the student define Accounting
31.
32.
Learning Objectives:
In the balance sheet, the total of the assets is equal to the total of the liabilities
plus the capital or owners equity. This I true for any balance sheet because a companys
economic resources are financed either by its creditors or by its owners.
This equality may be shown in equation form. The basic accounting equation
(sometimes referred to as the balance sheet equation) is a follows:
For instance, if the owner invested P50,000 into the business, assets (cash) would
be increased by P50,000 and owners capital (owners equity would be increased by
P50,000. The double entry rule is observed and the accounting equation is balanced.
Title of Accounts
P35,000 P
23,000
Important Rules
We have stated several important rules that must be followed in an aactual
accountingsystems. These rules are summarized as follows to help you remember them
and their relationship:
1. The accounting equation (assets equal liablities plus pwners equity) must always
remain in balance.
2. All increases in an account are recorded on one side of the account; all decreases
are reecorded on the other side of the account.
3. The debit and credit rule states that:
a. Asset accounta are increased by debit entries and decreased by credit
entries;
b. Liabilities and owners equity accounts are increased by credit entries and
decreased by debit entries.
4. The double entry rule states that for all recorded transactions, the total amount od
the debit entries must be equal to the total amount of the credit entries.
Balance of an Account
The balance of an account is the difference between the total increases and
decreases recorded in the account. Usually the balance of each account is computed
when the accounting information is to be communicated in an accounting report. Each
asset account normally has a debit balance because the total increases (debits) exceed
the total decreases credits) in the account. Each liability and owners equity account has
a credit balance because the total credits (increases) exceed the total debits (decreases)
in each account.
Concepts of Journalization
Once the information provided on business documents has been analyzed,
transactions are recorded in chronological order in the appropriate journals. In some
small business, all transactions are recorded in a single journal.
Journalization (or journalizing) is the act of recording transactions for the first time
in an accounting recordbook called the journal. The journal is often referred to as book
of original entry.
Journalizing is the first step in the accounting cycle. It is the process of recording
business transactions in a journal.
A journal is a book of accounts wherein business transactions are recorded for the
first time
Functions of Journals
1. To show al information about an accountable event in one place.
2. To provide a chroinological record of accoutnable events.
3. To facilitate posting transactions data to the ledger.
Types of Journals
1. General Journal is a business document in which transactions are recorded,
the date of transaction, the accounts to be debited and credited, thte amount of
debit or credit, entries and explanation of each transaction.
2. Special Journal a chronological recording of transactions possessing common
characteristics. Examples are:
a. Sales Journal
b. Purchases Journal
c. Cash Receipts Journal
d. Cash Disbursement Jopurnal
Procedures of Journalizing
It is important that you understand the form of the general journal and carefully
learn procedures for journalizing each transaction. Shown below is a partial page form of
a general journal.
GENERAL JOURNAL
Page No
Date Account Titles and Explanation F Debit Credit
Jan 1 - A. Dela Cruz established the A. Dela Cruz Repair Shop by investing P 50,000
cash.
Jan 5 - Purchased repair supplies on account P 1,000.
Illustration
Liabilities Expenses
111 Notes Payable 511 Salary Expenses
112 Accounts Payable 512 Supply Expenses
113 Interest Payable 513 Rent Expenses
114 Taxes Payable 514 Advertising Expense
115 Salaries Payable 516 Bad Debt
517 Depreciation
518 Light, Water and Telephone
519 Taxes and Licenses
520 Miscellaneous Expense
70 Date Developed: Document No. BPPNCII - 001
CBLM August 2013 Issued by:
Date Revised:
BOOKKEEPING NC III AICS-SF
Journalize Transactions Developed by:
MARY-ANN VILLAR REVISION # OI
USE OF ACCOUNT TITLES
Account titles are the terms used to identify the specific elements of accounting to
be used in the recording process. Appropriate identification is necessary right at the
recording phase because they are to be brought forward to accounting reports. When
wrong accounts are used, the users of accounting reports are apt to be misled and
consequently, make wrong decisions. Examples of accounts titles are given below:
ASSET TITLES
Cash currency (bills and coins), checks, postal money orders and treasury
warrants received by the business.
Notes Receivable amounts collectible from customers for goods and services
rendered on credit or from others for loans granted. Such claims are evidenced by
promissory note.
A promissory note is a written promise to pay a certain amount of money
on a specified or determinable future date.
Accounts Receivable claims from customers arising from goods sold or
services rendered on credit. It represents the debtors oral promises to pay.
Allowance for bad debts is a contra asset account to provide for uncollectible
amounts. It is deducted from Account Receivable to present the amount still collectible
from debtors.
Merchandise Inventory goods purchased by the business to be sold at a
profit.
Interest Receivable interest earned on notes on hand which has not been
received in cash.
Supplies Unused miscellaneous supplies which have been bought for office
use but are still unused as of the balance sheet date. Other account titles which can be
used are Supplies on Hand, Office Supplies, Store Supplies and Factory Supplies.
Prepaid Insurance already paid insurance premiums which are applicable in
the future periods.
Furniture and Fixtures it includes tables, chairs, showcases, counters and
other similar assets owned and used by the business in its operation.
Office Equipment heavy metallic and movable items in an office that are
capable of performing certain functions. Examples are typewriters, posting machines
and fax/copier/printer/scanner machines other similar assets.
IT Equipment - computers
Delivery Equipment includes assets used for transporting merchandise.
Tools handy, small and usually metallic items used in performing certain
functions such as saws, hammers, pliers, scissors, screw drivers and jacks. Tools, in
general, have long useful life but do not have significant value.
Accumulated Depreciation it is a valuation account that reduces the total cost
of the fixed asset. It is another contra-asset account that represents the total amount of
depreciation expenses charged in the past and current periods.
71 Date Developed: Document No. BPPNCII - 001
CBLM August 2013 Issued by:
Date Revised:
BOOKKEEPING NC III AICS-SF
Journalize Transactions Developed by:
MARY-ANN VILLAR REVISION # OI
Land land owned by the business used for building sites and other business
purposes.
Building building owned and used by the business in its operation.
LIABILITY TITLES
Notes Payable amounts due to the creditors which are supported by a
promissory note.
Accounts Payable amounts used for the creditors for the goods or services
bought on credit and supported by promissory notes. It is often referred to as arising
from purchases on open account
Expenses Payable (accrued expenses) obligations for expenses already
incurred but not yet paid. Examples are taxes payable, salaries payable, and
accrued power and light expense.
Loans Payable obligations arising from loans obtained.
INCOME TITLES
Sales total sales of merchandise sold
Professional Fee Income amounts earned by professionals such as CPAs,
doctors, lawyers, etc. for services render.
Rent Income amounts of rental earned for the period.
Service Income amounts of income earned from services rendered of a
service concern business.
Interest Income amounts earned for lending money.
EXPENSE TITLES
Cost of Sales cost of goods purchased and sold or materials manufactured
and sold.
Advertising Expense expenses incurred to promote the product of the
business.
Salesmens Salaries compensation given to sales agents.
Salesmens Commissions compensation given to sales agents based on the
amount of their sales.
Salesmens Travelling Expenses travelling allowance given to sales agents.
Office Salaries compensation of administrative employees.
Supplies Expense amount of supplies used.
Taxes duties incurred in the current period.
72 Date Developed: Document No. BPPNCII - 001
CBLM August 2013 Issued by:
Date Revised:
BOOKKEEPING NC III AICS-SF
Journalize Transactions Developed by:
MARY-ANN VILLAR REVISION # OI
Utilities Expense amount of light and water consumed by the business,
Repair and Maintenance expenses incurred for repairing the assets of the
business.
Bad Debts estimated amount of losses from uncollectible accounts of the
business.
Depreciation Expense allocated cost of fixed asset in the current period.