- 1% if 1500 (min contribution)

- 2% if more than 1500

PAYROLL ACCOUNTING AND OTHER ➔ Membership due if employee is a member of
SELECTED TRANSACTIONS a labor union or association
➔ EC or EMPLOYEE’S COMPENSATION -
entitles employees to additional benefits with
● PAYROLL - Compensation paid to employees and
regard to work connected sickness or injury
workers. sahod
resulting in disability or death of an
● PAYROLL ACCOUNTING - maintaining records of
employee. (10-30)
its employees and workers where their personal
● INTERNAL CONTROL - procedure intended to
data, work experience, among others, are noted
protect the assets of the business and to ensure
● PAYROLL SHEET - tabular form prepared by the
compliance not only with company policies but
accounting department to determine take home pay
also contracts and government regulations
of employees and workers. It consists of 5 columns
● CURRENT OR CHECKING ACCOUNT - used by
listing the following:
business when it pays using a bank check
1. Employee’s or worker’s name
Account title: cash in bank-current
2. Gross pay representing compensation
● IMPREST SYSTEM - internal control procedure
(salary or wage) earned for a certain period
for cash transactions
of time
● SAVINGS ACCOUNT - a business deposits all
3. Deduction for payroll liabilities (income tax,
extra cash which earns interest
SS premiums, health insurance, pag-ibig)
Account title: cash in bank-savings
4. Net pay or take home pay - net amount ng
● CASH ON HAND - money in the hands of the
sahod na-less na ang taxes, benefits, and
company’s officer
voluntary contributions
● MARKET VALUE - amount for which the asset
5. Signature of employee or worker
could be sold or bought in its present condition
● EMPLOYEES - paid salaries based on a monthly or
● EXCHANGE PRICE or PRICE CONCEPT -
semi-monthly rate
acquired assets should be recorded at the actual
● WORKERS - paid wages based on a daily, hourly,
price established on acquisition date which is
or piece rate
measured in cash or equivalents amount
● BUREAU OF INTERNAL REVENUE - government
● BOOK VALUE - original cost that represents the
agency tasked to collect different taxes from all
unexpired cost or remaining utility value of the
earners
asset. Cost less accumulated depreciation
● GROSS PAY - not the actual amount to be received
● CAPITAL EXPENDITURES - incidental expenses
by an employee or worker (kabuuang sahod ng
incurred in transporting the asset to the place of
isang employee w/o deducting the payroll liabilities)
the buyer such as taxes, import duties, storage,
because of the following payroll liabilities which are
insurance while in transit and freight
deducted from their pay as required by law:
● REBATE - discount granted for paying an
➔ Income tax - ang nagbabayad lang neto ay
account promptly
yung mga kumikita ng 250,000 anually
● ALLOWANCE - reduction on the price given to
based sa TRAIN act
the buyer to cover up for defects or spoilage on
➔ Social security or SS premium
the asset purchased without returning the asset
- required bayaran monthly. Benefits:
● OBSOLESCENCE - when a better model is
education loan, salary loan, disability benefit,
invented or produced than what was originally
maternity benefit, calamity loan, pension,
acquired
and retirement pay.
● INADEQUACY - the asset can no longer meet
- 4000-30000 salary
the demands of the business
- employer (9.5%) and employee (4.5%)
● PROMISSORY NOTE - a written promise made
by the maker or debtor promising to pay the
➔ Health insurance
payee or creditor a sum certain in money due at
- required for hospitalization benefits
a fixed or determinable future time
- 10000-80000 salary
● NON-INTEREST BEARING NOTE - one which
- 4% equal to employee and employer
face value is the same as its maturity value
➔ Home development mutual funding or
Pag-ibig
- RA 9679 or HDMF law 2009
 ● INTEREST BEARING NOTE - one where the ● DIRECT WRITE OFF METHOD - recognizes bad
maturity value is higher than its face value or debts expense only when it is certain that the
principal company will not be able to collect the account
● MATURITY DATE - due date anymore
● ALLOWANCE METHOD - provides for bad debts
or doubtful accounts during the period of the sale
COMPLETING THE ACCOUNTING CYCLE of service is recorded
FOR A SERVICE PROVIDER ● ALLOWANCE FOR DOUBTFUL ACCOUNTS - a
contra asset account which is deducted from the
principal amount
● CALENDAR - accounting period is a 12 month
● NET REALIZABLE VALUE - the difference
period ending on december 31
between the accounts receivable and the
● FISCAL - accounting period is a 12 month period
allowance for doubtful accounts
that ends on any month other than december 31
● SCRAP VALUE - the amount remaining when the
● ACCRUED INCOME - income already earned
asset has been fully depreciated and is not
but not yet collected, receivables
subject to depreciation
● ACCRUED EXPENSES - expenses already
● ACCUMULATED DEPRECIATION - a
expired but not yet paid, payable
contra-asset account, is deducted from the cost
● UNEARNED INCOME - advance collection
price to arrive at net book value
recorded as a liability, but a portion of which has
● Three factors to consider in determining
already been earned
depreciation: COST, USEFUL LIFE, and SCRAP
● PREPAID EXPENSE - advance payment
VALUE
recorded as an asset but a portion of which has
● Formula for depreciation:
already been earned
COST - SCRAP VALUE / USEFUL LIFE
● BAD DEBTS - may not be collected anymore or
● WORKSHEET - to gather and “workout” the
are doubtful of collection
adjustments. A columnar paper where the first 2
● DEPRECIATION EXPENSE - declining utility
columns are provided for the trial balance. The
value of asset cost that should be expensed
next 2 columns are for the adjustments and from
● ADJUSTING ENTRIES - entries prepared at the
which adjusted balances are determined. From
end of the accounting period to update some
the adjusted balances, the income statement and
accounts and ensure their accuracy before
the statement of financial positions are prepared.
preparing the financial statements
● MATCHING PRINCIPLE - expenses should be
matched against the income BOOKS OF ACCOUNTS AND
● PREPAYMENT - opposite of accrual
● PREPAID EXPENSE - advance payment for
DOUBLE-ENTRY SYSTEM
service to be received
● ASSET METHOD - advance payment is recorded JOURNAL
as an asset. The preferable method since it - Book of original entries
follows the conceptual flow of cost - Accounting record where business
● EXPENSE METHOD - to record advance transactions are first recorded
payment is to immediately debit it to an expense
account JOURNAL ENTRIES
● LIABILITY METHOD - advance collection is - Business transactions recorded in the journal
credited to a liability account. The preferable
method since it follows the conceptual flow of JOURNALIZING
recognizing first the liability until the amount is - Recording process
earned
● UNEARNED or DEFERRED REVENUE - a TYPES OF JOURNALS:
liability of the company to render service for cash 1. SPECIAL JOURNAL - to record transactions of a
that was advance by the client similar nature. Common examples:
● INCOME METHOD - to record the advance
collection immediately with a credit to an income a. SALES JOURNAL - to record sales on
account account
 b. PURCHASES JOURNAL - to record value parted with, and each transaction is
purchases of inventory on account recorded using at least two accounts
c. CASH RECEIPTS JOURNAL - to record all
transactions involving receipts of cash CONCEPT OF EQUILIBRIUM
d. CASH DISBURSEMENTS JOURNAL - to - Requires that each transaction is recorded in
record all transactions involving payments of terms of equal debits and credits
cash
CONTRA ACCOUNTS
2. GENERAL JOURNAL - all other transactions that - Presented in the financial statements as
cannot be recorded in the special journals. deduction to their related accounts
LEDGER
- A systematic compilation of a group of ADJUNCT ACCOUNTS
accounts. - Presented in the financial statements as
- To classify the effects of business addition to their related accounts
transactions on the accounts.
- Book of secondary entries / book of final
entries BUSINESS TRANSACTIONS AND THEIR
ANALYSIS
POSTING
- Process of recording in the ledger
ACCOUNTING CYCLE
- The steps or procedures used to record
KINDS OF LEDGERS:
transactions and prepare financial
a. GENERAL LEDGER - contains all the
statements.
accounts appearing in the trial balance.
- Implements the accounting processes of
b. SUBSIDIARY LEDGER - provides a
identifying, recording, and communicating
breakdown of the balances of controlling
economic information
accounts.

STEPS IN THE ACCOUNTING CYCLE

CONTROLLING ACCOUNT
1. IDENTIFYING AND ANALYZING BUSINESS
- Consists of a group of accounts with similar
DOCUMENTS OR TRANSACTIONS. - the
nature.
accountant gathers information from source
documents and determines the effect of the
DATE COLUMN
transactions on the accounts.
- The recording dates of the transactions,
2. JOURNALIZING - the identified accountable
recorded chronologically.
events are recorded in journals.
3. POSTING - information from the journal is
ACCOUNT TITLES COLUMN
transferred to the ledger.
- Accounts affected by a business transaction
4. PREPARING THE UNADJUSTED TRIAL
BALANCE - the balances of the general ledger
ACCOUNT NUMBERS COLUMN
accounts are proved as to the equality of debits
- Corresponding numberings of the accounts
and credits.
affected by the transaction are listed here
UNADJUSTED TRIAL BALANCE - basis for
adjusting entries
POSTING REFERENCE
5. PREPARING THE ADJUSTING ENTRIES -
- To cross-reference journal entries to the
accounts are updated as of the reporting date on
ledger
an accrual basis by recording accruals, deferrals,
estimations, and other events often not signaled
JOURNAL ENTRY NUMBER
by new source documents.
- To number the journal entries
6. PREPARING THE ADJUSTED TRIAL
BALANCE (OR WORKSHEET PREPARATION)
CONCEPT OF DUALITY
- the equality of debits and credits are rechecked
- Views each transaction as having a two-fold
after adjustments are made.
effect on values - a value received and a
ADJUSTED TRIAL BALANCE - basis for the
preparation of the financial statements
7. PREPARING THE FINANCIAL STATEMENTS - the transactions with the customer
these are the means by which the information during a period, the payments made by
processed is communicated to users. the customer and any remaining
8. CLOSING THE BOOKS - journalizing and balance due from the customer. Also
posting closing entries and ruling the ledger. serves as a notice of billing.
TEMPORARY ACCOUNTS (NOMINAL
ACCOUNTS) - closed and the resulting profit or TYPES OF EVENTS:
loss is transferred to an equity account 1. EXTERNAL EVENTS - transactions that
9. PREPARING THE POST-CLOSING TRIAL involve the business and another external
BALANCE - the equality of debits and credits are property
again rechecked after the closing process. 2. INTERNAL EVENTS - events that do not
10. RECORDING OF REVERSING ENTRIES involve an external property.
REVERSING ENTRIES - usually made at the
beginning of the next accounting period to SIMPLE JOURNAL ENTRY
simplify the recording of certain transactions in - One that contains a single debit and a single
that period. credit element

ACCOUNTABLE EVENT COMPOUND JOURNAL ENTRY

- A transaction that has an effect on the - One that contains two or more debits or
accounts which needs to be recorded credits.

NON-ACCOUNTABLE EVENT
- A transaction that has no effect on the POSTING TO THE LEDGER
accounts which is not recorded
POSTING
SOURCE DOCUMENTS - Transferring the amounts of debits and
- Transactions credits in a recorded journal entry to the
● SALES INVOICE - Used for the sale of ledger accounts
goods - To classify the effects of transactions on
● OFFICIAL RECEIPT - used for the specific asset, liability, equity, income, and
rendering of services expense accounts in order to provide more
● PURCHASE ORDER - issued by a meaningful information
buyer to a seller indicating the types,
quantities, and agreed prices for TRIAL BALANCE
products or services that the buyer - A list of general ledger accounts and their
intends to purchase balances.
● DELIVERY RECEIPT - document - To check the equality of total debits and total
signed by the receiver of a shipment credits in the ledger
acknowledging the receipt of the goods
● BANK DEPOSIT SLIP - evidence of a TYPES OF TRIAL BALANCE
deposit to a bank account. It shows the a. UNADJUSTED TRIAL BALANCE - prepared
date of deposit, the bank account name before adjusting entries are made.
and number, and the amount deposited. b. ADJUSTED TRIAL BALANCE - prepared after
● BANK STATEMENT - report issued by adjusting entries but before the financial
the bank that shows the deposits and statements are prepared
withdrawals during the period and the c. POST-CLOSING TRIAL BALANCE - prepared
cumulative balance of a depositor’s after the closing process
bank account.
● CHECK - orders a bank to pay the TRANSPLACEMENT ERROR (SLIDE ERROR)
person names on the check or the - Committed when the number of digits in an
bearer thereof a definite amount of amount is incorrectly increased
money from the drawer’s bank account. TRANSPOSITION ERROR
● STATEMENTS OF ACCOUNT - a report - Committed when digits in an amount are
a business sends to its customer listing interchanged
 - Include all income statement accounts,
ADJUSTING ENTRIES drawings account, clearing accounts, and
suspense accounts
ADJUSTING ENTRIES
- Entries made prior to the preparation of CLEARING ACCOUNT
financial statements to update certain - An account used temporarily to store amount
accounts so that they can reflect correct that will eventually be transferred to another
balances as of the designated time. account
- To take up unrecorded income and expenses
of the period. INCOME SUMMARY
- To split mixed accounts into their real and - Stores amounts of income and expenses
nominal elements. during the period
- The balance represents the profit or loss
ACCRUALS OF INCOME AND EXPENSES during the period
- To recognize an income that is already - Closed to the owner’s capital account before
earned but not yet collected the financial statements are prepared
- To recognize an expense that is already
incurred but not yet paid SUSPENSE ACCOUNT
- An account used temporarily to store
SYSTEMATIC AND RATIONAL ALLOCATION discrepancies in the accounts pending their
PRINCIPLE analysis and permanent classification
- Costs that provide economic benefits over
several accounting periods but cannot be CASH SHORTAGE OR OVERAGE
directly associated with the earning of - To record cash shortages or overages
revenues are recognized as expenses over pending their investigation
the periods where the economic benefits are - Closed to a receivable or loss account or a
consumed payable or gain account

DEPRECIATION MIXED ACCOUNTS

- Allocation of the cost of a depreciable asset - Accounts that have both real and nominal
over the periods the asset is used account components.
- Subject to adjustment
IMMEDIATE RECOGNITION PRINCIPLE - Include unadjusted prepayments and
- A cost that produces no future economic deferral that have both expired and
benefits or an asset that ceases to provide unexpired components
future economic benefits is recognized EXPIRED PORTION
immediately as an expense. - The nominal account component

MATCHING PRINCIPLE UNEXPIRED PORTION

- Costs that are directly associated with the - The real account components
earning of revenue are recognized as
expenses in the same period in which the METHODS OF INITIAL RECORDING OF INCOME
related revenue is recognized AND EXPENSES
1. LIABILITY METHOD - advance collections of
REAL ACCOUNTS (PERMANENT ACCOUNTS) income are initially credited to a liability account.
- Accounts that are not closed at the end of At the end of the period, the earned portion is
the accounting period. recognized as income, while the unearned
- Extended to the next accounting period. portion remains as liability.
- Include all balance sheet accounts, except 2. INCOME METHOD - advanced collections of
the owner’s drawings account. income are initially credited to an income
account. At the end of the period, the unearned
NOMINAL ACCOUNTS (TEMPORARY ACCOUNTS) portion is recognized as liability, while the earned
- Accounts that are closed at the end of the portion remains as income.
accounting period
3. ASSET METHOD - prepayments of expense are
initially debited to an asset account. At the end of
the period, the incurred portion is recognized as
expense, while the unused portion remains as
asset.
4. EXPENSE METHOD - prepayments of expenses
are initially debited to an expense account. At the
end of the period, the unused portion is
recognized as an asset, while the incurred
portion remains as expense.

DEFERRALS
- Recording of items of income that were
collected in advance and items of expense
that were paid in advance
- To defer means to postpone the recognition