Brand Name – Identifies a specific company, product or Expenses - Are the decreases in economic benefits during the

service and differentiates it from similar brands within a accounting period in the form of outflows or depletion of
category. assets or incurrences of liabilities that result in decrease in
Prototype – Is an early sample, model, or release of a equity, other than those relating to disturbance to equity
product built to test a concept or process or to act as a participants.
thing to be replicated or learned from. Loses - represent other items that meet the definition of
Partnership – A partner business consists of at least two expense and may or may not, arise in the course of the
individual owners. ordinary activities of an enterprise. Losses represent decrease
in economic benefits and as such are no difference in nature
Corporation – A corporation is a legal entity that is from other expenses.
separated and distinct from its owner or incorporations.
THE ACCOUNT
4Ms of Operations
– The basic summary device of accounting is the
1. Method – A particular form of procedure for ACCOUNT. A separate account is maintained for each
accomplishing or approaching something, element that appears in the balance sheet (asset,
especially a systematic or established one. liabilities and equity) and in the income statement
2. Manpower – The number of people working or (income and expenses). Thus, an account may be
available for work or service. defined as a detailed record of the increases,
3. Machine – An apparatus using or applying decreases and balance of each element that appears
mechanical power and having several parts, each in an entity’s financial statements. The simplest form
with a definite function and together performing of the account is known as the “T” account because of
a particular task. its similarity to the letter “T”. The account has thee
4. Materials- The matter from which a thing is or parts as shown in the next slide
can be made
DEBITS AND CREDITS
Accounting – Is an Information system that measures,
processes and communicates financial information about An account is DEBITED when an amount is entered on
economic entity. the left side of the account and CREDITED when an
amount is entered on the right side of the account
Elements of Financial Statement
TYPES AND EFFECTS OF TRANSACTIONS
Asset – Is a source controlled by the enterprise as a
result of past events and from which future economic 1. Source of Assets (SA). An asset account increases and
benefits are expected to flow to the enterprise. a corresponding claims (liabilities or owner’s equity)
account increases.
It involves cash, accounts receivable, prepaid expenses, Example: Purchase of supplies on account.
property, land, equipment, and investment. 2. Exchange of Assets (EA). One asset account increases
Liabilities – Are obligations of the entity to outside and another asset account decreases.
parties who have furnished resources. Example: Acquired equipment for cash.
3. Use of Assets (UA). An asset account decreases and a
It involves accounts payable, accrued liabilities, and corresponding claims (liability or equity) account
mortgage payable. decreases.
Example: Settled accounts payable, Paid salaries of
Equity – Is a residual interest in the assets of the
employee.
enterprise after deducting all its liabilities. Equity may
4. Exchange of Claims (EC). One claims (liabilities or
pertain to any of the following depending on the form of
owner’s equity) account increases and another claims
the business.
(liabilities or owner’s equity) account decreases.
a. In Sole proprietorship, there is only one owner’s Example: Received utilities bill but did not pay.
equity account because there is only one owner.
CURRENT ASSETS
b. In partnership, an owner’s equity account exist
for each partner. a. Cash is any medium of exchange that a bank
c. In a corporation, owner’s equity or stockholders’ will accept for deposit. It includes coins,
equity consists of share capital, retained currency, checks, money orders, bank deposit
earnings and reserves representing and drafts.
appropriations of retained earnings among b. Cash equivalents these are short-term , highly
others. liquid investment that are readily convertible
to known amounts of cash.
Income – Is increase in economic benefits during the
c. Notes Receivable is a written pledge that the
accounting period in the form of inflows or
customer will pay the business fixed amount
enhancement of assets or decreases of liabilities that
of money on a certain date.
result in increases in equity
d. Accounts Receivable these are claims against
customers arising from sale of services or
goods on credit.
NON-CURRENT ASSETS a. – INCOME STATEMENT
A. INCOME revenues earned by performing services
A. Property, Plant and Equipment these are tangible
for a customer or client.
assets that are held by an enterprise for use in the
B. SALES revenues earned as a result of sale of
production or supply of goods or services.
merchandise.
B. Accumulated Depreciation
C. Intangible Assets these are identifiable, EXPENSES
nonmonetary assets without physical substance
A . COST OF SALES cost incurred to purchase or to produce
held use in the production or supply of goods or
the products sold to customers during the period; also
services, for rental to others, or for administrative
called cost of goods sold.
purposes. These includes goodwill, patents,
copyrights, licenses, franchise, trademark, brand C. SALARIES AND WAGES includes all payments as a
names, secret processes, subscription list and result of employer-employee relationship.
non-competition agreement. D. TELECOMMUNICATIONS, ELECTRICITY, FUEL AND
WATER EXPENSES
LIABILITIES
E. RENT EXPENSE rentals of space, equipment and
CURRENT LIABILITIES other assets
– INCOME STATEMENT
A. ACCOUNTS PAYABLE account represents the
F. SUPPLIES EXPENSE using supplies in the conduct of
reverse relationship of the accounts receivable.
daily business.
B. NOTES PAYABLE a note payable is like a note
G. INSURANCE EXPENSE portion of premiums paid on
receivable but in reverse sense.
insurance coverage.
C. ACCRUED LIABILITIES amount owed to others for
H. INTEREST EXPENSE an expense related to use of
unpaid expenses. This account includes salaries
borrowed funds.
payable, utilities payable, interest payable and
I. DEPRECIATION EXPENSE the portion of the cost of a
taxes payable.
tangible asset (e.g. buildings and equipment)
D. UNEARNED REVENUES when the business entity
allocated or charged as expense during an
receives payment before providing its customers
accounting period.
with goods or services, the amounts received are
J. INTEREST EXPENSE an expense related to borrowed
recorded in the unearned revenue account
funds
(liability mode). When the goods or services are
K. UNCOLLECTIBLE ACCOUNT EXPENSE the amount of
provided to the customer, the unearned revenue
receivables estimated to be doubtful of collection
is reduced and income is recognized
and charged as expense during an account period.
E. CURRENT PORTION OF LONG-TERM DEBT these
are portion of mortgage notes, bonds and other CASH FLOW
long term indebtedness which are to be paid
The amount of money being transferred into and out of a
within one year from the balance sheet date.
business, especially as affecting liquidity
NON-CURRENT LIABILITIES
Revenue arises in the course of the ordinary activities of
A. MORTGAGE PAYABLE this account records long
an enterprise and is referred to by a variety of
term debt of the business entity for which the
names including sales, fees, interest, dividends,
business entity has pledged certain assets as
royalties, and rent.
security to the creditor.
B. BONDS PAYABLE a business organization often
obtain substantial sums of money from lenders to
finance the acquisition of equipment and other
needed assets.

OWNERS EQUITY

A. CAPITAL this account is used to record the original