to the

COURSE on

What is the common definition of Bookkeeping and Accounting?

Record Keeping

Management
Bookkeeping & Accounting are means of channeling financial information

Members / Owners Creditors

Government Public

What is Accounting?
Accounting is the art of recording, classifying and summarizing in a significant manner and in terms of money transactions and events which are in part at least of financial character and interpreting the results thereof.

Based on the definition of Accounting, two functions are derived:

CONSTRUCTIVE FUNCTION Recording of transactions in the journal, classification in the ledger and the summarization in the financial statements ANALYTICAL FUNCTION Examination and interpretation of financial statements as an aid to management in the formulation of policies and to guide and inform other interested parties

Through the two-fold function of Accounting, the following objectives are accomplished:
Accumulate economic data;
Communicate the results to interested parties;

What are the principles which serve as guides in selecting accounting procedures and conventions to be used in actual practice?

CONSERVATISM
Anticipate no profit and provide for all losses Never overstate a profit or understate a loss Never overstate an asset or understate a liability

REVENUE PRINCIPLE

Revenue should be taken up as realized either in cash basis, sales basis or production basis.

OBJECTIVITY

Recorded date should possibly be supported by business documents (formal and verifiable)

FULL DISCLOSURE

Complete recording in the accounting records of all significant information to avoid misleading financial statements.

CONSISTENCY Accounting procedures should be maintained from period to period to achieve comparability of financial data between accounting periods. COST

Assets and all future acquisitions should be recorded at cost.

REVENUE

Revenue should be recognized when realization is reasonably assured.

MATERIALITY

Item of small significance may not be accorded strict theoretical treatment.

What is Bookkeeping?
It is the recording phase of accounting. It is the chronological recording of financial transactions of the business in suitable records.

What is the Importance of Bookkeeping?

Accounting systems provide a network of internal procedures which tends to minimize fraud.

Cost figures are bases in determining relative success of the business.

DOUBLE ENTRY SYSTEM

Views a transaction as having a two-fold effect in accounting values and which reflects this two-fold effect in the accounting records.

SINGLE - ENTRY SYSTEM

A system which recognizes only transactions involving cash and personal accounts.

Based on the Double Entry Bookkeeping System, what Common Concept has been Derived?
DEBIT
Value Received

CREDIT
Value Parted With

What shall be the Basis in Recording Various Transactions and in Preparing the Financial Statements?

Real Accounts

Nominal Accounts

REAL ACCOUNTS
ASSETS Property owned by the business

NOMINAL ACCOUNTS
INCOME Revenues realized by the business

LIABILITIES
Financial obligations / Debts CAPITAL Equity of the Owners EXPENSES Deduction from income

Where Do We Record the Transactions of A Business?

In the

Books
of Accounts

TWO TYPES OF RECORDS

journal
book of original entry General Journal;
Cash receipts Journal; Cash Disbursement Journal; Sales Journal; Purchase Journal

ledger
book of final entry Group of accounts
consisting of assets, liabilities, capital, income and expense accounts; All entries in the journal are classified in the ledger;

What are the Steps in the Accounting Cycle?

JOURNALIZATION

Act of recording transactions from business forms to appropriate journals

POSTING

Act of transferring peso amount & other information from journal to ledger

PREPARING THE TRIAL BALANCE PREPARING THE FINANCIAL STATEMENTS RECORDING OF ADJUSTING ENTRIES

Balances of the general accounts are proved as to equality of debits and credits General Accounts are presented in the appropriate financial statement

Correction of accounting errors

CLOSING THE BOOKS TAKING A POSTCLOSING TRIAL BALANCE

Involves journalization and posting closing entries and ruling the ledger

Proving of balances after adjusting entries are made

PREPARING, ENTERING AND POSTING OF REVERSING ENTRIES

How are Journal Entries Made?

Indicate the:
Date Account Titles to be Debited & Amounts; Accounts to be Credited and Amounts; Brief Explanation;

Posting References/Optional;

TYPES OF JOURNAL ENTRIES AS TO TIME MADE

Opening Entry
Entry beginning a new system of accounts of an enterprise;

Current Entries
Entries to record transactions completed by the business during a given period of time;

Adjusting Entries
Made at the end of an accounting period to update certain amounts so as to reflect correct balances as of a certain period of time

TYPES OF JOURNAL ENTRIES AS TO TIME MADE

Closing Entry
Entry made at the end of the accounting period after books have been adjusted by means of closing nominal accounts to a clearing account;

Reversing Entries
Entries made with reference to previous adjusting entries;

Correcting Entries
Entries made to correct an error;

TYPES OF JOURNAL ENTRIES AS TO TIME MADE

Reclassification Entry Entries that transfer one account to another that more clearly describes the nature of the items transferred; Working Paper Entries Auditor-purpose-proper financial statement presentation; not recorded and posted;

TYPES OF JOURNAL ENTRIES AS TO FORM

Single Journal Entry Contains a single debit and credit; Compound Journal Entry An entry having three or more elements and often representing several transactions;

RULES OF DEBIT & CREDIT

DEBIT
Increase in Assets; Decrease in Liabilities; Decrease in Proprietorship; Decrease in Investment; Personal Withdrawals or Payment of Dividends; Decrease in Income; Increase in Expenses

CREDIT
Decrease in Assets; Increase in Liabilities; Increase in Proprietorship; Increase in income; Decrease in Expenses;

Where do We Record Journal Entries?

Simple or General Journal

JOURNALS

Special Journals

What are the Types of Special Journals?

CASH RECEIPTS BOOK used to CASH DISBURSEMENTS BOOK
used to record all transactions involving disbursements of cash; record all transactions involving cash receipts;

SALES JOURNAL used to record all

transactions involving sales of merchandise intended for sale to customers on account;

After Journal Entries are Made, What Should be Undertaken? POSTING

It is the process of transferring data or information from the journal to the appropriate accounts in the ledger.

What are the Records Used in Posting? GENERAL LEDGER

SUBSIDIARY LEDGER

ACCOUNTS RECEIVABLE

ACCOUNTS PAYABLE SHARE CAPITAL SAVINGS DEPOSIT LOANS RECEIVABLE

What are the Advantages of Maintaining a Subsidiary Ledger?

The General Ledger is relieved of too

much detail;

The Trial Balance is Shorter; The preparation of the Financial Statements is facilitated;

Work could be divided between several persons;

How is Posting Done?

Locate the ledger page on which the account is written;
On the debit or left hand side under the date column, enter the date of transaction, under item column a short explanation and under folio column, the page of the journal from which the entry was taken and under the amount column, the amount involved.

Repeat the same procedure under the credit column.

After the Accounts are Posted in the Ledgers, what is the Next Step?
The Trial Balance is Prepared as Follows:
Prepare the Heading;

Determine the Footings and Balances in the General Ledger;

List the Accounts and their Corresponding Balances; Add the Debits and Credits and Double Rule the Totals;

After the Equality of the Debits and Credits is Proven, the Financial Statements may be Prepared through the Preparation of the Worksheet.

STEPS IN PREPARING THE WORKSHEET

1. Write the Heading of the Form; 2. Copy the Trial Balance in the First Two Money Columns and Add Them; 3. Enter the Amount of the Merchandise Inventory end in the Income Statement Credit Column and in the Balance Sheet Column;

STEPS IN PREPARING THE WORKSHEET

4. Enter one by one the other adjusting entries in the adjustments column then add;

5. Take the Adjusted Trial Balance;

6. Extend the balances to the appropriate financial statement columns; 7. Add income statement column; 8. Extend net income/loss to debit of balance sheet column; 9. Write final totals of balance sheet and income statement;

If there are adjustments that need to be made in the Financial Statements, What Remedy May be Undertaken?

ADJUSTING ENTRIES MAY BE MADE TO REFLECT:

Accruals

Accrued expenses expenses incurred but not yet paid;

Accrued income income earned but not yet collected Prepayments Prepaid Expenses expenses paid in advance but not yet incurred; Deferred Income income collected but not yet earned;

ADJUSTING ENTRIES MAY BE MADE TO REFLECT:

Others

Bad Debts estimate of uncollectible accounts;

Depreciation portion of the cost of fixed assets charged as an expense for the period due to wear and tear, use, inadequacy and obsolescence; Merchandise Inventory goods remaining unsold at the end of the period;

What are the End Products of the Accounting Process?

FINANCIAL STATEMENTS COMPOSED OF THE FOLLOWING:

BALANCE SHEET
- a formal statement showing the financial condition of a cooperative/comp any as of a given date;

INCOME STATEMENT - a formal statement showing the operating results of a cooperative/compa ny for a given period of time;

STATEMENT OF CHANGES IN FINANCIAL POSITION - shows how resources were applied or used during the year;