ADD TITLE

[Virtual Presenter] Add Title Add Subtitle. Add Title Add Subtitle.

[Virtual Presenter] Do you agree with this statement? Explain..

[Virtual Presenter] Why is accounting important? What information does accounting try to communicate? What skills do you need in understanding the accounting process?.

[Virtual Presenter] Account:. Account:. ACCOUNT:.

[Virtual Presenter] Account. Account. ACCOUNT. 6.

[Virtual Presenter] Accounting. Accounting. Accounting is the process of keeping track of all financial transactions within a business, such as any money coming in and money going out. It's not only important for businesses in terms of record keeping and general business management, but also for legal reasons and tax purposes..

[Virtual Presenter] The basic accounting equation Financial accounting is based upon the accounting equation. Assets = Liabilities plus Owners' Equity This is a mathematical equation which must balance. If assets total P30000 and liabilities total P200000, then owners' equity must be P100000..

[Virtual Presenter] assets Give some examples of assets of a business.

[Audio] Sample of assets Cash Short term Investments Accounts Receivable Allowance for Doubtful Accounts (a contra asset account) Accrued Revenues/Receivables Prepaid Expenses Inventory Supplies Long term Investments Land Buildings Equipment Vehicles Furniture and Fixtures Accumulated Depreciation (a contra asset account).

[Audio] liabilities Liabilities are present obligations of the firm. They are probable future sacrifices of economic benefits which arise as the result of past transactions or events. Give some examples of liabilities of a business.

[Audio] Sample of liabilities Short term Loans Payable Current Portion of Long term Debt Accounts Payable Accrued Expenses Unearned or Deferred Revenues Installment Loans Payable Mortgage Loans Payable.

[Audio] Owner’s Equity Owners' equity represents the owners' residual interest in the assets of the business. Residual interest is another name for owners' equity. Owners may make a direct investment in the business or operate at a profit and leave the profit in the business..

[Audio] Owner’s Equity Yet another name for owners' equity is net assets. Indicates that owners' equity results when liabilities are subtracted from assets. Owners’ Equity = Assets – Liabilities.

[Audio] Sample of OWNER’S EQUITY Sole proprietor: Mr Y, Capital Mr Y, Drawings Partnership: Mr X, Capital Mr X, Drawings Mr Y, Capital Mr Y, Drawings Mr Z, Capital Mr Z, Drawings Corporation: Stockholder’s Equity Paid In Capital Common Stock Paid in Capital in Excess of par Value Retained Earnings.

[Audio] Revenues and expenses Revenues increase owners' equity. Expenses decrease owners' equity..

[Audio] revenues Revenues are inflows of assets (or reductions in liabilities) in exchange for providing goods and services to customers. A retail store such as Wal Mart earns revenues by selling goods to customers. A CPA firm earns revenues by providing services such as tax return preparation or auditing. Critically important point: Cash need not be received in order for revenue to be recorded. Revenues are earned when a company does what it is supposed to do according to a contract..

[Audio] EXPEnses Expenses occur when resources are consumed in order to generate revenue. They are the cost of doing business. Examples include rent, salaries and wages, insurance, electricity, utilities, and the like. A critically important point similar to that for revenues holds true for expenses. A business need not pay out cash in order to have to record that an expense has occurred..

[Audio] Identify and analyze transactions Journal entries for transactions Post journals to ledgers Prepare an unadjusted trial balance Prepare worksheet Record adjusting journal entries Adjusted trial balance Prepare financial statements Closing entries Post closing trial balance.

[Audio] Memorize the accounting cycle:. Memorize the accounting cycle:.

[Audio] Simple balance sheet and income statement The end result of the accounting process is the preparation of financial statements. Balance Sheet Statement of Owner’s Equity Income Statement Statement of Cash Flows.

[Audio] The balance sheet The balance sheet shows a firm's assets, liabilities, and owner's equity at one point in time. The date on the balance sheet will be a single date, such as December 31 or June 30..

[Audio] Sample Balance Sheet. SAMPLE BALANCE SHEET.

[Audio] The Income Statement The income statement summarizes a firm's revenues and expenses for a period of time. The date on the income statement will be a phrase such as, "For the month ended July 31," or "For the year ended December 31." If revenues exceed expenses, then the result is net income. If expenses exceed revenues, then the result is a net loss..

[Audio] Only revenues and expenses appear on the income statement. Students sometimes think that cash is a good thing and should appear on the income statement. Cash is an asset and so will appear on the balance sheet..

[Audio] Sample income statement. Sample income statement.

[Audio] The statement of owner’s equity The statement of owners' equity summarizes the changes that took place in owners' equity during the period under review. It will have the same date as does the income statement. It shows results over a period of time, not just at one point in time..

[Audio] The statement starts with the beginning balance of owners' equity and adds in any owner investment and net income. If there are withdrawals, then they are subtracted, as is a net loss. A business will either have a net income or a net loss, not both..

[Audio] Sample statement of owners’ equity. Sample statement of owners’ equity.

[Audio] exercises caconuts vecreibales shac nevtoinsire rpidpea pexesens iduglbin.

[Audio] dobns baplaye latipac cresive niomec pedietcriaon stinertet.

[Audio] Generally accepted accounting principles GAAP these principles are not laws, but are guidelines determined primarily by the Financial Accounting Standard Board (F-A-S-B-) and its predecessor, the Accounting Principles Board (A-P-B--). Provide the general framework for determining what information is included in financial statements and how this information is to be prepared and presented..

[Audio] Generally Accepted Accounting Principles GAAP these principles are not laws, but are guidelines determined primarily by the Financial Accounting Standard Board (F-A-S-B-) and its predecessor, the Accounting Principles Board (A-P-B--). Provide the general framework for determining what information is included in financial statements and how this information is to be prepared and presented..

[Audio] Accounting Entity Principle An accounting entity consists of people, assets, liabilities and activities devoted to a specific economic purposes. Accounting information is developed for clearly identified accounting entities such as sole proprietorships, partnerships, and corporations. In any of these arrangements, nonrelated business interests are accounted for separately. In corporations, accounting entity coincides with the legal entity. In proprietorships, it is the accounting entity but the proprietor is the legal entity liable for both personal and business obligations..

[Audio] Going Concern Principle Assumes that an accounting entity will continue to operate indefinitely, thus allowing a business to defer certain costs that are to be charged against the revenues of future periods. Examples of such costs are undepreciated assets, ending inventories, prepaid expenses. For firms about to liquidate, the going concern principle is ignored , with assets being reported at the current liquidating value and liabilities at the amount required to settle debts immediately..

[Audio] Time Period Principle Financial statements are prepared for specific relatively brief accounting periods, ordinarily one year, in order to assists in decision making and for tax purposes. The year chosen for financial measurement is referred to as the fiscal year which does not necessarily correspond to the calendar year but corresponds to the natural cycle of business activity. In addition to one year, shorter time periods for example one month, months and year to date also may be used for presenting financial reports..

[Audio] Monetary Principle States that money is the basic unit of measurement for financial reporting. The principle gives accountants a common denominator for adding and subtracting heterogeneous transactions occurring at various times during the life of an accounting entity The principle also allows for the comparison of financial statements between and within firms. The monetary principle assumes that money is a stable unit of value over time. However this assumption is unrealistic because money loses its value over time. Another difficulty with this principle is that not all things of value to the organization can be measured in monetary terms..

[Audio] Historical Cost Principle Involves valuing assets at the original cost of acquiring them But should consider adjustments for price level changes. These involves the use of price level indices, e.g prescription price indices. An Rx drug P5.00 in 2021 (the base year) 5.25 in 2022 5.50 in 2023 The price index in 2023 is 5.50/5.00 x 100=110%.

[Audio] Objectivity Principle Requires unbiased verifiable measurements. The accountant seeks the most objective evidence available in order to support financial statements. This may include invoices, cancelled checks, bank statements, inventory counts, deeds and contracts and use of historical costs. Despite this goal, however, it is not possible to prevent accounting data from being subject to some bias primarily because of the existence of alternative accounting method and future uncertainties..

[Audio] Consistency Principle Related to the objectivity principle. It requires that a particular accounting technique not be changed from period to period, thus facilitating comparison of financial statements over time On occasion, however, the management will change to a different accounting method when the change will serve the needs of the user’s of the statement e.g change in depreciation method from linear to sum of years digit method..

[Audio] Conservatism Principle Related to the objectivity principle Requires the selection of accounting method that neither overstate nor understate the facts. However, accounting takes place in an environment of uncertainty. Thus where doubt exists, the accountant selects the option that produces the lower net income and less favorable financial position, Use of historical cost is an example of conservatism..

[Audio] Materiality Principle Refers to the relative importance of an item. An item is considered to be material if it significantly affects the financial statements, thus influencing the decisions of prudent users of the statements. Accounting transactions too small or insignificant to affect user actions are recorded as is most expedient, thus saving the expense of initiating a more expensive accounting procedure. Materiality of an item depends not only on the amount but also on the nature of the item. Purchase of a spatula is an expense not a asset for depreciation..

[Audio] Full Disclosure Principle Requires that all relevant facts concerning the financial position of a business be presented in the financial statements. Even significant events occurring after the end of the fiscal period, but before release of the financial statements should be included in the reports Full disclosure can be accomplished either in the body of a financial statement or in its footnotes..

[Audio] Realization Principle Fundamental in the accrual basis of accounting States that revenue is recognized when it is realized ,in other wordswhen the earning process is complete and when objective evidence exists as to the amount of revenue earned Thus revenue is recognized at the time goods are sold or services rendered..

[Audio] Matching Principle The measurement of an expense occurs in two phases. The first stage involves measuring the cost of goods and services consumed or expired in the process of generating revenue. The second phase considers matching cost and revenue and involves determining when the goods and services acquired have contributed to revenue, at which time their cost becomes an expense..

[Audio] Which of the principles can you easily remember? Quiz Time  Prepare for a test next meeting. Next week’s lesson: Analyzing business transactions Rules of Debit and Credit Journalizing.

[Audio] What do we need?. What do we need?. 47. "IVNunor.

[Audio] Syllabus & textbook. Syllabus & textbook.

[Audio] Study account titles. ACCOUNT CLASSIFICATION AND PRESENTATION Account Title Accounts Payable Accounts Receivable Accumulated Depreciation—Buildings Accumulated Depreciation—Equipment Advertising Expense Allowance for Doubtful Accounts Amortization Expense Bad Debt Expense Bonds Payable Buildings Cash Common Stock Copyrights Cost Of Goods Sold Classification Current Liability Current Asset Plant Asset—Contra Plant Asset—Contra Operating Expense Current Asset—Contra Operating Expense Operating Expense Long-Term Liability Plant Asset c Current Asset Stockholders' Equity Intangible Asset Cost Of Goods Sold Financial Statement Balance Sheet Balance Sheet Balance Sheet Balance Sheet Income Statement Balance Sheet Income Statement Income Statement Balance Sheet Balance Sheet Balance Sheet Balance Sheet Balance Sheet Income Statement Normal Balance Credit Debit Credit Credit Debit Credit Debit Debit Credit Debit Debit Credit Debit Debit.

[Audio] I can do it!. I can do it!. Nothing is impossible, the word itself says 'I'm possible'! Audrey Hepburn BruinyQJ0te.