What are the legal forms of

business organization?

Sole Proprietorship-This the good type business because your are just the one
who owns and work for your business.

Partnership-It composes of 2 or more persons inside of the specific business like

multi-level marketing companies.

Corporation This is the one of most popular kind of business because it has 5
persons but not more than 15 incorporators but ofcourse their shares of stocks is
divided.

Cooperatives-Their process is like in corporation and cooperatives also has its

board of directors that being voted among the members and a patronage who
gives support to those business activities.

The (5) five elements of financial statements are:

Balance sheet account

1,)Assets-Are things that business must have and owned by the business.

Current Assets-It can be exchange into cash as soon as possible.

Cash-This is the medium that you must give to an certain thing when you’re about
to pay something.

Petty Cash Fund-This is the reserved money for small expenses that you have.

Notes Receivable-This is a note from the customer when they receive a service.

Accounts Receivable-This is the accumulation or your collected sales.

Allowance for Bad Debts-Is the exchange of your payments from uncollected
accounts.
Interest Receivable-This is your interest or add-ons on your notes receivable but
still not yet collected.

Advances to Employees-Employees use this thing sometimes when they have

something to but the company gives his/her a minimum fare.

Inventories-This is the company’s stock for their materials and supplies.

Prepaid Expenses-Your expenses that are paid in advanced but not yet expired,the
good example for this is your insurance.

Supplies-These are the company’s purchased for the business but not yet taken.

Plant Assets or Fixed Assets-These assets are the ones who exist in this world
before the mankind.

Land-Is where your building of your business constructed/landed.

Building-This is where your business,transactions,operations,etc will be

conducted.

Equipment-These are the modern things and technology inside of your company
like computers,calculators,printer,cabinets,etc.

Furnitures and Fixtures-Like tables,ladders,chairs,etc.

Accumulated Depreciation-Your deduction from plant assets except land.

2,)Liabilities-This is your never ending responsibilities like your finance for the
business to credtors.

Current Liabilities-Responsibilities of your business to be done without reaching

a year.

Accounts Payable-An oral deal that promise to pay.

Accrued Expenses-For better meaning,these are your expenses in your business

but not yet paid.
SSS Premium Payable-These are your payment/amount to the social security
system.

Philhealth Premium Payable- These are your payment/amount to the Philhealth

Health Insurance Corporation.

Pag-Ibig Premium Payable- These are your payment/amount to the home

development mutual fund.

Witholding Tax Payable- These are your payment/amount to the bureau of

internal revenue for the tax withheld from employees.

Unearned Income-Your collected money but not yet on hand.

Long Term Liabilities-Your continuous responsibilities as year goes by.

Notes Payable-This is the note that promise to pay in this year or more than a
year and it composes of interest.

Mortgage Payable-It must have a done property to ensure the payment.

3)Owner’s Equity or Capital-Is handled by the owner like more in Sole

Proprietorship.

Drawing or Personal Use-Withdrawn by the owner for his/her personal use

outside of his/her business.

4,)Income or Revenue-The money that you’ve earned.

Sales-The cost of merchandise that is being acquired.

Service Income-All of the income you’ve earned from a service.

Professional Income-Income for those professionals earned from their service.

Rental Income-Money earned in a certain building like commercial

industrial,high rise building,etc.

Interest Income-It’s more like lending a money but as the due of payment didn’t
payed,interest will increase based on the person you borrowed that money.
5,)Expenses-All of your total acquired in a certain business.

Cost of Sales or Costs of Goods Sold-Cost of product and selling those goods.

Rent Expenses-Cost of your property.

Repairs and Maintenance-More on like repairing the needs of business like

technology,furnitures,vehicles,etc.

Supplies Expense-These supplies are already used like ballpens,bond

papers,envelopes,clips,and many more.

Salaries Expense-The reward of their hardship in the company.

Bad Debts-Unexpected loss in the business.

Now we’re done about the 5 Elements of Financial Statements and right away
we’re going to our next topic in accounting and that’s

JOURNALIZING
What is Journalizing?You are just recording some tasks like business transactions
and Journalizing contains Double Entry Bookkeeping System for us to compile
some things that must be at that point.

You must be creative and sensitive in labelling some records in journalizing,the

example of this is right next to this page.
 Iverson Company
(Information in September 2018)

1,)Iverson invested 5,000,000 cash and 1,000,000 equipment in business.

3,)Returned part of equipment purchase in cash 500,000.

4,)Purchased furniture 650,000 on credit.

5,)Paid rent in advance for 4 months 3,250,000.

6,)Purchased automobile 2,500,000 on credit.

7,)Paid insurance in advance 500,000.

8,)Purchased supplies 380,000 on credit.

10,)Collected 450,000 from customers on account.

11,)Paid wages of employees 600,000.

13,)Supplies used for the month 1,000,000.

The table for this is on the second one…..

 DATE DESCRIPTION DEBIT CREDIT
September 1, 2018 Cash 5,000,000
Equipment 1,000,000
Iverson Capital 6,000,000
Invested Cash and
Equipment
September 3, 2018 Cash 500,000
Equipment 500,000
Returned Part of
Equipment
September 4, 2018 Fixture and Furniture 650,000
Accounts Payable 650,000
Purchase Furniure on
Credit
September 5, 2018 Rent Expense 3,250,000
Cash 3,250,000
Paid Rent in Advance
September 6, 2018 Automobile 2,500,000
Accounts Payable 2,500,000
Purchased
Automobile on Credit
September 7, 2018 Prepaid Insurance 550,000
Cash 550,000
Paid Insurance in
Advance
September 8, 2018 Supplies 380,000
Accounts Payable 380,000
Purchased Supplies
on Credit
September 10, 2018 Cash 450,000
Accounts Receivable 450,000
Collected from
Account
September 11, 2018 Wages Expense 600,000
Cash 600,000
Paid Wages
September 13, 2018 Supplies Expense 1,000,000
Supplies 1,000,000
Supplies Used for the
Month
That is what we call Journalizing but is it done?No it’s not yet done because we have to
go on to the next part and that’s:

T-ACCOUNT
What’s the purpose of T-Account in Journalizing?

This is the graphic representation of account that is placed above the “T” .Debit entries
are placed to the left “T” while credits are place to the right of the “T” and the total
balance for each “T” account appears at the bottom of it.T-Account is the basic tool in
this kind of entry.

Now,I’ll show to you the T-Account of the example of journalizing that i gave:

CASH EQUIPMENT
Debit Credit Debit Credit

5,000,000 3,250,000 1,000,000 500,000

500,000 550,000 500,000
450,000 600,000
5,950,000 4,400,000

IVERSON CAPITAL FIXTURE AND FURNITURE

Debit Credit Debit Credit

6,000,000 650,000
6,000,000 650,000
 Accounts Payable RENT EXPENSE
Debit Credit Debit Credit

650,000 3,250,000
2,500,000 3,250,000
380,000
3,530,000

PREPAID
AUTOMOBILE INSURANCE
Debit Credit Debit Credit

2,500,000 550,000
2.500.000 550,000

ACCOUNTS
SUPPLIES RECEIVABLE
Debit Credit Debit Credit

380,000 1,000,000 450,000

620,000 450,000

WAGES EXPENSE SUPPLIES EXPENSE

Debit Credit Debit Credit

600,000 1,000,000
600,000 1,000,000
Now we’re done doing the T-ACCOUNT,I’ll start discuss to you the next topic and it’s
about…..

TRIAL BALANCE
What is Trial Balance?

It’s a list of balances in an account for a certain date,this is the preparation of your
financial statements.Assets and expenses appear only at the debit side while the capital
and income accounts used to be at credit side.When your entries are all correct,the total
of it’s debit will appear in the trial balance and we must equal to the sum of those credit
balances,in other terms for me,this is your first step in the making of Financial
Statements.

Examples below will see how Trial Balance was done correctly.

Iverson Company
Trial Balance
(September, 2018)

DEBIT CREDIT
Cash 1,550,000
Accounts Receivable 450,000
Equipment 500,000
Supplies 620,000
Fixture and Furniture 650,000
Automobile 2,500,000
Accounts Payable 3,530,000
Iverson Capital 6,000,000
Prepaid Insurance 550,000
Wages Expense 600,000
Supplies Expense 1,000,000
Rent Expense 3,250,000
10,600,000 10,600,000