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Basic Accounting - First Bridging

Basic accounting involves tracking financial position through assets, liabilities, and owner's equity. Performance is measured through income, gains, expenses, and losses. Key accounts include assets (resources), liabilities (obligations), and equity (residual owner interest). Transactions are recorded through double-entry bookkeeping, with debits and credits to increase or decrease relevant accounts.

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126 views

Basic Accounting - First Bridging

Basic accounting involves tracking financial position through assets, liabilities, and owner's equity. Performance is measured through income, gains, expenses, and losses. Key accounts include assets (resources), liabilities (obligations), and equity (residual owner interest). Transactions are recorded through double-entry bookkeeping, with debits and credits to increase or decrease relevant accounts.

Uploaded by

Mae Namoc
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPTX, PDF, TXT or read online on Scribd
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BASIC ACCOUNTING

FINANCIAL POSITION:
 Asset
 Liabilities
 Owner’s Equity
PERFORMANCE:
 Income
 Gains
 Expenses
 Losses
ASSET
 Asset is a resource controlled by the
enterprise as a result of past events and
from which future economic benefits
are expected to flow to the enterprise.
 An asset may be used with other assets
in production of goods and services,
exchanged for other assets, to settle a
liability, and may be distributed to the
owners of the enterprise.
LIABILITIES
 Liability is a present obligation of the
enterprise arising from past events, the
settlement of which is expected to result in
an outflow from the enterprise or resources
embodying economic benefits.
 Settlement of liabilities may be payment of
cash, transfer of assets, provision of services,
replacement of obligation with other
obligation, and conversion of obligation to
equity.
EQUITY
The residual interest in the assets of the
enterprise after deducting all its liabilities.
 Sole Proprietorship – only one owner’s
equity account
 Partnership – an owner’s equity account
exists for each partner
 Corporation – stockholder's equity consists
of share capital, retained earnings,
appropriations of retained earnings.
Asset Liabilities Owner’s Equity
 Accounting is based on a double entry
system which means that dual effects of
a business transaction is recorded.
Account Title

Value Value
Received Parted
With
BALANCE SHEET ACCOUNT
Assets Liabilities and Owner’s Equity

Debit Credit Debit


(+) Credit
(-) (-)
Increases (+)
Decreases Decreases
Increases
Normal
Balance Normal
Balance
INCOME STATEMENT ACCOUNTS
Debit for decreases Credit for increases in
in owner’s equity owner’s Equity
EXPENSES INCOME

Debit Credit Debit Credit


(+) (-) (-) (+)
Increases Decreases Decreases Increases

Normal Normal
Balance Balance
ACCOUNTS
DEBIT CREDIT

Increases in Increases in
Assets and Liabilities,
Expenses Owner’s
Capital,
Income

Decreases Decreases
in Liabilities in Assets,
Owner’s Expenses
Capital
Income
NORMAL BALANCE OF AN ACCOUNT

Increases Normal
Recorded by Balance
Account Category Debit Credit Debit Credit
Asset  
Liabilities  
Owner’s Equity:
Owner’s Capital  
Withdrawals  
Income  
Expenses  
TYPES AND EFFECTS OF TRANSACTIONS

Source of Assets (SA)

Exchange of Assets (EA)

Use of Assets (UA)

Exchange of Claims (EC)


Assets

Cash C N
O
U N
Cash R -
Equivalents R C Property, Plant
E U and Equipment
Notes R
N R
Receivable Accumulated
T E
N
Depreciation
Accounts T
A Intangible
Receivable
S A Assets
S S
Inventories E S
E
T
T
Prepaid S S
Expenses
Liabilities

N
Accounts C O
Payable U N
R -
Notes R C
E U
Payable R
N
T
R Mortgage
Accrued E
N Payable
Liabilities L T
I
Unearned A L Bonds Payable
B I
Revenues A
I
B
L I
Current I L
Portion of T I
I T
Long Term I
E
Debt S E
S
Income Statement

Cost of Sales

Salaries or
Wages Expense E
X I Service
Telecommunication,
Electricity, Fuel and P N Income
Water Expenses
E C
N O
Rent Sales
S M
Expense
E E
Uncollectible S
Accounts Expense

Depreciation
TRANSACTION ANALYSIS (Step 1)

1. Identify the transaction from source


documents
2. Indicate the accounts – either asset,
liabilities, equity, income or expenses –
affected by the transaction.
3. Ascertain whether each account is
increased or decreased by the transaction.
4. Using the rules of debit and credit,
determine whether to debit or credit the
account to record its increase or decrease.
SOURCE DOCUMENTS
Source documents identify and describe
transactions and events entering the
accounting process. These original
written evidences contain information
about the nature and the amounts of the
transactions. These are the bases for the
journal entries; some of the more
common source documents are sales
invoices, cash register tapes, official
receipts, bank deposit slips and other
documents.
The Ledger
A grouping of accounts. Used to classify
and summarize transactions and to
General Journal prepare data for basic financial statements

Office Equipment XX Cash


Cash XX
Accounts Payable XX
Office
Equipment

Accounts
Shows all the effect Payable
of the transaction in Posting
terms of debit and Transferring the amounts
credit from the general journal to
appropriate accounts in the
ledger

Listing of all ledger


accounts, in order, with Trial Balance
their respective debit or
credit balances
The Journal
A chronological record of the entity’s
transactions. A journal entry shows all the
effects of a business transaction in terms of
debits and credits. The General Journal is the
simplest journal.

Format
1. Date
2. Account Titles and Explanation
3. P.R. Posting Reference
4. Debit
5. Credit

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