BOOKKEEPING

“ AN INTRODUCTION TO BASIC ACCOUNTING”

By: Ms. Estela Semilla – Ganas CPA, MBA

“ I Just Wanted To Be A Businessman, And
To Me, The Best Way To Understand
Business Was To Be An Accountant.”

-McClendon
 ACCOUNTING
• Is an art of RECORDING, CLASSIFYING, SUMMARIZING, in a
significant manner and in terms of money, transactions and
events which are in part at least of a financial character and
INTERPRETING the results thereof.

• Is a service activity. Its function is to provide quantitative

information, primarily financial in nature, about economic
entities that is intended to be useful in making economic
decision (SFAS No. 1).
 BOOKKEEPING VS ACCOUNTING
• BOOKKEEPING • ACCOUNTING
- Process of recording - Complete and accurate
systematically the business bookkeeping records necessary in the
transactions in a chronological performance of its responsibility to
manner. analyse and interpret FINANCIAL
REPORTS.
 PRIMARY FINANCIAL REPORTS
Balance
Sheet/Statement of Income Statement/ Cash Flows
Financial Position Results of Operation

- Statement which shows - Statement that shows

the results of operation - Statement that shows
the financial condition the inflow & outflow of
of the business as of a of the business for a
given period of time. cash.
given date.
- It includes the - It includes cash from
- It includes the ASSETS, operations, investing &
LIABILITIES, & OWNER’S REVENUES/INCOME &
EXPENSE financing
EQUITY
- NOTE:
- IF INCOME > EXPENSE =
PROFIT
- IF INCOME < EXPENSE =
LOSS
 ASSETS
• Things of value that are owned by the business in the conduct of its
operations.
• Classified into: Current Assets and Non-current Assets
• Example: Cash, Supplies Inventory, Prepaid Expenses, Accounts Receivable,
Land, Building, Vehicle , etc.

Question: In the given example, which are Current Assets? Non-current Assets?
Ans: Current: Cash, Supplies Inventory, Prepaid expenses & Accounts
Receivable
Non- current: Land, Building & Vehicle
 LIABILITIES
• Debts or financial obligation of the business that are payable in cash or
some kind of assets.
• Classified into: Current Liabilities and Non-current liabilities
• Example: Accounts Payable, Notes Payable, Salaries Payable, Rent Payable,
Bank Loan, Mortgage Payable etc.

Q: In the given example, which are current liabilities? Non-current liabilities?

A: Current: Accounts Payable, Notes Payable, Salaries Payable, Rent Payable
Non-current: Bank Loan, Mortgage Payable
 OWNER’S EQUITY
• Refers to the money or value of property put by the proprietor in to the
business to start with.
• Initial investment
• Increased by profit
• Decreased by losses
• Assets – Liabilities = Owner’s equity
 MALIKHAIN STORE
BALANCE SHEET
DECEMBER 31, 2014

Assets Liabilities

Cash on Hand P 10,000.00 Accounts Payable P 50,000.00

Cash in Bank 20,000.00 Loans Payable 100,000.00
Merchandise Inventory 200,000.00
Office Supplies 3,000.00 Total Liabilities P150,000.00
Furniture & Fixture 15,000.00
Office Equipment 30,000.00 Owner’s Equity
Malikhain, Capital P128,000.00
TOTAL LIABILITIES &
• Total ASSETS P278,000.00 EQUITY P278,000.00
 INCOME STATEMEMT

• Revenue/ Income • Expenses

- Denote money or proceeds from - denote benefit received by the
services rendered by a company business from its use which had
- Example: Auditing Fees,Professional helped in carrying out its operations
Fees, Sales, etc. - Example: Rent Expense, Salaries
expense, Purchases, Repairs and
Maitenance, Taxes and Licenses, etc.
 MAHARLIKA STORE
INCOME STATEMENT
FOR THE MONTH ENDED NOVEMBER 30, 2015
• Sales P 142,000
• Less: Cost of Goods Sold ( 90,000)
• Gross Profit P 52,000
• Less: Operating Expenses
• Rent Expense P 5,500
• Salaries Expense 10,000
• Utilities Expense 2,000
• Depreciation Expense 1,000 18,500

• Profit for the month P 33,500

 EXERCISE: IDENTIFY THE ACCOUNTS IF ASSET, LIABILITIES,
OWNER’S EQUITY, REVENUE OR EXPENSE
1. Salaries to employees
2. Accounts Receivable
3. Notes Payable
4. BB, Capital
5. Land
6. Mortgage Payable
7. Sales
8. Professional Fees
9. Utilities expense
10.Prepaid Insurance
 ACCOUNTING EQUATION:

ASSETS = LIABILITIES + OWNER’S EQUITY ( + REVENUE – EXPENSES)

ASSETS = LIABILITIES + OWNER’S EQUITY ( + REVENUE – EXPENSES)

BEGINNING BALANCES:

(A) P 278,000 = (L) P 150,000 + (O.E) P128,000

AFTER THE RESULTS OF OPERATION

(A) P 311,500 = ( L) P 150,000 + ( O.E) P 161,500

NOTE: [128,000 + PROFIT P 33,500 ]

EXAMPLE: IF ASSETS = 300,000, LIABILITIES = 100,000
HOW MUCH IS THE EQUITY? __________

OWNER’S EQUITY: P 200,000

EXAMPLE: IF LIABILITIES = 25,000, EQUITY = 100,000
HOW MUCH IS THE TOTAL ASSETS? __________

TOTAL ASSET: P 125,000

 BUSINESS TRANSACTIONS
- Exchanges of equal monetary values
- 1. For
every value received ( DEBIT), another
value is given away in exchange ( CREDIT)

- 2. These values are measured in terns of

pesos which are presumed to be equal
 DOUBLE-ENTRY BOOKKEEPING
• Double-entry bookkeeping, every transaction has two parts,
the left (debit) side and the right (credit) side.

• DEBIT – a Latin word which means “he owes”, the value

received.
• CREDIT – a Latin word which means “he trusts”, the value
parted with.
 EXAMPLE
• “ If I’ll give you a ballpen and you will give me a piece of paper in return as
an exchange, can you determine the value received and the value parted
with?

• If the value received is Ballpen, If the value parted is paper, then

• YOU ARE CORRECT!

• Debit Ballpen, Credit Paper

 THE RULES OF DEBIT AND CREDIT
MAY BE LAID AS FOLLOWS:

• Debit to: Credit to:

• Increase an asset Decrease in asset
• Decrease in liability Increase in liability
Increase in equity
• Decrease in equity
Increase in revenues
• Increase in expense
 THE RULES MAY BE SUMMARIZED
AS FOLLOWS:
To Increase To Decrease

Assets Debit Credit

Liabilities Credit Debit
Equity Credit Debit
Revenues Credit Debit
Expenses Debit Credit
 EXERCISES
• 1. Invested Cash of P 1,000,000 into the business.
• 2. Bought a welding machine for cash P 350,000.
• 3. Sold an old computer equipment for cash, P 20,000.
• 4. Received cash for services rendered amounting to P15,000.
• 5. Paid Utilities for the month amounting to P 2,500.
• 1. Cash P 1,000,000
Capital P 1,000,000 ANSWERS:
2. Equipment P 350,000
Cash P 350,000

3. Cash P 20,000
Old Computer P 20,000

4. Cash P 15,000
Service Income P 15,000

5. Utilities expense P 2,500

Cash P 2,500
ANALYSIS OF TRANSACTIONS:
 MAHARLIKA STORE
INCOME STATEMENT
FOR THE MONTH ENDED NOVEMBER 30, 2015
• Sales P 142,000
• Less: Cost of Goods Sold ( 90,000)
• Gross Profit P 52,000
• Less: Operating Expenses
• Rent Expense P 5,500
• Salaries Expense 10,000
• Utilities Expense 2,000
• Depreciation Expense 1,000 18,500

• Profit for the month P 33,500

 MALIKHAIN STORE
BALANCE SHEET
DECEMBER 31, 2014

Assets Liabilities

Cash on Hand P 10,000.00 Accounts Payable P 50,000.00

Cash in Bank 20,000.00 Loans Payable 100,000.00
Merchandise Inventory 200,000.00
Office Supplies 3,000.00 Total Liabilities P150,000.00
Furniture & Fixture 15,000.00
Office Equipment 30,000.00 Owner’s Equity
Malikhain, Capital P128,000.00
TOTAL LIABILITIES &
• Total ASSETS P278,000.00 EQUITY P278,000.00
 CASH-BASIS ACCOUNTING

• Revenues and expenses are recognized only when

cash is received or payments are made.
• Mainly used by small businesses.
• Not an accurate picture of true profitability.
 ACCRUAL VS. CASH-BASIS
ACCOUNTING
During 2010, Crown Consulting billed its client for P48,000.
On December 31, 2010, it had received P41,000, with the
remaining P7,000 to be received in 2011. Total expenses
during 2010 were P31,000 with $3,000 of these costs not
yet paid at December 31. Determine net income under
both methods.

Cash-Basis Accounting Accrual-Basis Accounting

Cash receipts P41,000 Revenues earned P48,000
Cash disbursement 28,000 Expenses incurred 31,000
Income P13,000 Income P17,000
 IMPORTANT THINGS TO
REMEMBER:
• Cost Principle

• Matching Principle
• Ms. Estela Semilla – Ganas CPA, MBA
• Instructor
• Accountancy Department
• Xavier University – Ateneo de Cagayan
• Email: [email protected]

• Contact no. 09176785153

THANK YOU!!!