CONDUCT OF BASIC ACCOUNTING AND

BOOKKEEPING FOR SUSTAINABLE LIVELIHOOD

PROGRAM ASSOCIATIONS (SLPAS)

OCTOBER 28, 2022

AUDIO VISUAL ROOM, LGU POTOTAN
 MODULE 1.
THE IMPORTANCE OF BOOKKEEPING

Objectives:
• Be able to state what a business is all about
• Know the different business ownerships, their advantages and disadvantages
• Understand entrepreneurship
• Explain the importance of bookkeeping in business operation
• Raise interest in the course
WHAT IS A BUSINESS?
• is an organization which is engaged in the trade of goods, services, or both to satisfy the
consumers in order to make a profit. Businesses are predominant in capitalist economies,
where most of them are privately owned and administered to earn profit to increase the
wealth of their owners.
• Businesses may also be not-for-profit or state-owned.
• also known as enterprise or firm
BUSINESS OWNERSHIP

Ownership forms related to micro, small and medium enterprises

are:
• Sole proprietorship (owned by one person)
• Partnership (owned by a few persons, could be 2-20)
• Co-operative (owned by a large group)
SOLE PROPRIETORSHIP/ SOLE TRADER

In this form of ownership, the whole business is owned by a single person.

• o The owner enjoys all the profits of the business but also accepts all losses.
• o This single owner has complete freedom to manage the affairs of the business as he
desires; he is answerable to nobody.
• o The owner’s liability is unlimited. That is in settling the debts of the business if the
business assets are insufficient, the personal assets will also be taken.
• o Being owned by a single person, the resources of the business are limited
PARTNERSHIP
- Here, two or more persons join to start a business.
• o The owners collectively are called the company, and individually, partners.
• o The profits and losses are shared by the partners in agreed proportions.
• o Their liability towards the firm’s debts is unlimited.
• o Freedom of conducting the affairs of the business is restricted as the partner is liable to the
other partners.
• o Since more than one person is involved, the resources of the firm are usually more.
• o A partnership could also be formed to combine the resources required for the enterprise.
Resources could include skills, money, land, raw material etc
 CO-OPERATIVE AND GROUP OWNERSHIP
- A co-operative is when people come together to do business with a common purpose and intent.
o In a co-operative form of ownership, a large number of persons collectively own the enterprise and are involved
in its activities. The part owners are called members.
o All the members contribute an equal amount towards capital, share the profits equally and have equal rights.
o Since a large number of owners are involved, the management of the co-operative is entrusted to a small group
of members who are elected by the many.
o The financial asset is crucial. The liability of the members is limited. o That is even if the assets of the co-
operative are insufficient to satisfy the debts, the members’ personal assets cannot be touched.
o A co-operative is also much more powerful than individuals or partnerships.
o A co-operative represents a large group of people and, quite often, this gives its access to Government programs
and developmental agencies, which offer financial assistance in the form of grants or interest-free loans
• In these three categories of business ownership, it is essential to
establish appropriate bookkeeping and financial management of
the finances of these forms of business. Money coming in and
money going out must be recorded in the various books of the
business for good management of record keeping
UNDERSTANDING BASIC BOOKKEEPING

• What is bookkeeping?

The bookkeeping system refers primarily to recording the

financial effects of financial transactions only.
Bookkeeping means that you write down all the
money that comes into your business and all the
money that goes out of your business
OF WHAT VALUE IS BOOKKEEPING TO YOUR
BUSINESS?
• You will know how much money you have received,
• You will know how much money you have spent and how you have spent it;
• You can calculate whether you are making a profit or a loss;
• You will be able to make better decisions on what to buy and sell;
• You can keep records of buying and selling on credit, so that people cannot trick you;
• You can keep records of money coming in and going out of a group project and thus
prevent abuse of funds and avoid mistrust amongst group members
BEST PRACTICES IN BOOKKEEPING
HERE ARE BEST PRACTICES TO MAKE BOOKKEEPING EASIER FOR YOU:

• • Manage to go through your books once a week (preferably at the end of the week) to do
the following:
• a) Categorize your expenses
• b) Mark invoices as paid by associating them to deposits you've imported or update
invoice status
• c) Setup contractors and clients in your contact list
• • Reconcile your account(s) at the end of every month.
• a. Make sure that the remainder of your account matches what is in your bank
statement.
• • Run weekly and/or monthly reports.
• • Do not forget to assign personal expenses as non taxable expenses.
• • Make sure that you have separate bank accounts for personal and business purposes.
• • Bookkeeping is a extremely valuable process in managing a business.
 ADVANTAGES & DISADVANTAGES
Advantages of regular record-keeping Disadvantages of not keeping records or
keeping poor record

You will know how much money you have You will not know how much money you are
received, how much you have spent and how you earning, whether your business is making a profit
spend it. or losing money

You can calculate whether you are making a You will not know why you are making a profit
profit or a loss and also know your break-even or losing money
point
You can keep records of buying and selling on You will not be able to make good decisions that
credit. That is, you will know whom your will allow you to make more money and save
debtors are and how much they owe you, and your business from losing money
who your creditors are and how much you owe
them.
ADVANTAGES & DISADVANTAGES
Advantages of regular record-keeping Disadvantages of not keeping records or keeping
poor record
You can keep records of money coming in and You will not know which customers owe you money,
going out of group businesses or projects. This how much they owe you or how much you owe
will prevent misuse of money and avoid mistrust someone else.
among group members.

It can help you in the monitoring and controlling Where groups of people work together, lack of a
of your stock levels, knowing when to make a proper record-keeping system often leads to mistrust
new order and how much to order. and accusations between groups and members

By comparing your actual record with your

planned budget, you can determine if you are on
the right track during your business year.
ADVANTAGES OF KEEPING RECORD

• Record-keeping is crucial because you cannot

keep everything in your head.
• Memory is not good enough for proper research
and planning
CHARACTERISTICS OF GOOD RECORD KEEPING
Recommended documents for a good record keeping system include:
• Business accounts for checking, savings, and investing and credit cards.
• An income and expense ledger or appropriate software program to record all cash
business transactions by date and category.
• Inventory involves the physical counting and valuation. It is done at least annually at the
end of the business fiscal or calendar year.
• A depreciation schedule for all business assets showing asset basis:
a. Cost valuation b. Market valuation
 CHARACTERISTICS OF GOOD RECORD KEEPING
Recommended documents for a good record keeping system include:
• A cost and market valuation balance sheet summarizing assets and liabilities of the firm.
• • An income statement listing
o Receipts, Expenses,
o Accounts receivable and
o Accounts payable.
• A statement of cash flows showing the source of cash inflows into the business and where business
cash outflows went.
• Enterprise records showing receipts and expenses by enterprises with some level of profitability
analysis
REASONS WHY YOU MUST WRITE DOWN ALL MONEY THAT
COMES IN AND MONEY THAT GOES OUT OF YOUR BUSINESS:

• You do not combine your personal finances with the business money;
• You will know when you buy on credit;
• You will know when you sell on credit;
• There is transparency in recording the business money;
• Have the fear of one person cheating the others;
• Trust from people who will need to give you a loan like the banks
WHAT RECORDS SHOULD BE KEPT?

Cash Book
Inventory Record
Credit Record
Debtor Book
Labor Book
MODULE 2: THE USE OF SYMBOLS IN BOOKKEEPING
-THE CASHBOOK-

Objectives:
Participants will be able to:
• Identify symbols of money that come in and go out of business.
• State from which source money comes in and goes out of business.
• Point out things that they spend money on in the business
SYMBOLS FOR 'MONEY IN' AND 'MONEY OUT’

• Bookkeeping means that you write down all the money that comes in and the money that
goes out
• Money In = money becomes more, so we use the addition sign (+) / debit
• Money Out = money becomes less, so we use the subtraction sign. ( - ) / credit

The book in which we write all the money that comes in and goes out is called a
‘CASH BOOK'.
 THE CASH BOOK
-YOU CAN USE AN REGULAR ARITHMETIC EXERCISE BOOK AS A 'CASH BOOK'.

• All money that comes in is written on the left page (+) / debit
• All money that goes out is written on the right page (-) / credit
•ACTIVITY
MODULE 3: HOW TO KEEP ACCOUNTING
RECORDS

Objectives:
After the completion of this session, you will be able to:
• Identify the different accounting records to be kept during the operation of
business
• State the advantages and disadvantages of keeping accounting records •
State the characteristics of good record keeping
• Identify transactions and record entries into the various records
ENTRY SYSTEMS IN BOOKKEEPING
-WAYS TO ENTER TRANSACTIONS INTO THE VARIOUS RECORDS

BOOKKEEOING RECORDS:
• Cash Book- primary bookkeeping records; imilar to a checking account register but
allocates the income and expenses to various income and expense accounts.
• Separate account records are maintained for petty cash, accounts payable and receivable,
and other related transactions such as inventory and travel expenses.
SIMPLE CASH BOOK ENTRY
-FINANCIAL RECORD-KEEPING MEANS THAT YOU WRITE DOWN ALL THE
MONEY THAT COMES IN AND THE MONEY THAT GOES OUT.
 THE BOOK IN WHICH WE WRITE ALL THE MONEY THAT COMES IN AND GOES
OUT IS CALLED A ‘CASH BOOK’. YOU CAN USE AN STANDARD ARITHMETIC
EXERCISE BOOK AS A ‘CASH BOOK’.

the day the What the

Source of Income day that money How much
that you How much money
received you pay was spent on money
the the
money money
1. On October 15, 2022, Rumbang SLP sold 5 sacks of
rice for a total amount of 10,500.
Date Dr (+) Amount Date Cr (-) Amount
Money in Money Out

10/15/2022 Sold 10 sacks of rice 10,500.00

TOTAL TOTAL
2. Sinuagan Community Store sold 20 pcs. of Ice Cream
at P20 each on October 18, 2022.
Date Dr (+) Amount Date Cr (-) Amount
Money in Money Out

10/15/2022 Sold 10 sacks of rice 10,500.00

Sold 20 pcs. of ice 400.00

10/18/2022
cream

TOTAL TOTAL
3. Thrive Store passed and resolution to purchase a Wall Fan and
purchase on October 25, 2022 in the amount of 3,500.00.
Date Dr (+) Amount Date Cr (-) Amount
Money in Money Out

10/15/2022 Sold 10 sacks of rice 10,500.00 10/25, 2022 Purchase of wall fan 3,500.00

Sold 20 pcs. of ice 400.00

10/18/2022
cream

TOTAL TOTAL
 4. Brgy. Macatol Kabuhayan Enterprise on October 30, 2022 collected
payment of loans from members for a total amount of 5,000.00.

Date Dr (+) Amount Date Cr (-) Amount

Money in Money Out

10/15/2022 Sold 10 sacks of rice 10,500.00 10/25, 2022 Purchase of wall fan 3,500.00

Sold 20 pcs. of ice 400.00

10/18/2022
cream
Collection of loan
10/30/2022 5,000.00
payment
TOTAL TOTAL
 5) Ubang Minimart paid 3,000 to its storekeeper on
November 2, 2022.
Date Dr (+) Amount Date Cr (-) Amount
Money in Money Out

10/15/2022 Sold 10 sacks of rice 10,500.00 10/25, 2022 Purchase of wall fan 3,500.00

Sold 20 pcs. of ice Salary of

10/18/2022 400.00 11/2/2022 3,000.00
cream storekeeper

Collection of loan
10/30/2022 5,000.00
payment
TOTAL TOTAL
 6) P500 Electricity bill for the month of October was paid
by Nanga Sewers on November 3, 2022 .
Date Dr (+) Amount Date Cr (-) Amount
Money in Money Out

10/15/2022 Sold 10 sacks of rice 10,500.00 10/25/2022 Purchase of wall fan 3,500.00

Sold 20 pcs. of ice Salary of

10/18/2022 400.00 11/2/2022 3,000.00
cream storekeeper

Collection of loan Electricity

10/30/2022 5,000.00 11/3/2022 500.00
payment
TOTAL TOTAL
15,900.00 7,000.00

Example of a Filled in Cash Book

INVENTORY RECORD

• keeps a record of physical items that your business has at any point in time.
• It includes what you had at the beginning of the year, what has been added to those items
through purchases and production and how much has left your business through sales,
consumption, planned use or losses

Example of inventory record

 CREDIT BOOK
- KEEPS THE RECORD OF ALL THE MONEY THE CUSTOMERS HAVE TO REPAY FOR GOODS
AND SERVICES PURCHASED ON CREDIT.

Example of Credit Book

CUSTOMER CREDIT BOOK

NAME: RAMIL M. RAQUIT ADDREES: Brgy. Quezon, Arevalo, Iloilo City

Date Description Credit Payment Balance Signature
June 15, 2015 1 sack of rice 2,100.00 2,100.00 ∂£
July 10, 2015 5 trays of egg 1,500.00 1,500.00 ∂£
August 21, 1 gallon Ice 250.00 250.00 ∂£
2015 cream
TOTAL 3,850.00 0.00 3,850.00
 LABOR BOOK
-keeps a record of who had worked for you,
-how much they have worked (number of hours, days or quantity of work done),
-how much they were paid and when they were paid.

DATE DESCRIPTION HOURLY WORK AMOUNT

6/15/2022 Ramil 3 hours at P100/ hour 300.00
SINGLE-ENTRY SYSTEM (JOURNAL)

• The primary bookkeeping record in single-entry bookkeeping is the cash book,

• allocates the income and expenses to various income and expense accounts.
• Separate account records are maintained for petty cash, accounts payable and receivable,
and other relevant transactions such as inventory and travel expenses.
SAMPLE REVENUE AND EXPENSE JOURNAL FOR SINGLE-ENTRY
BOOKKEEPING

Transactions
January 2, 2012- Received 3,000 for sales of goods
January 14, 2012 –Received 6,000 for services rendered to customer
January 22, 2012- Purchased office supplies for 1,000
January 26, 2012 Pay for advertisement for 300
January 31, 2012 Bank charges in the amount of 15
DOUBLE ENTRY SYSTEM

• Under this system of accounting, every transaction in business involves at least two accounts.
That is why this system of accounting is called the “Double Entry System”
• Under this system every transaction has two aspects i.e. debit side and credit side.
• Under this system, every transaction is entered into at least two accounts in the Ledger. In one,
account, the transaction is entered on the Left hand side i.e. on the debit side of the account and
on the other account an entry for an equal amount is made on the Right hand side of the account
i.e. the credit side of the account
DOUBLE ENTRY SYSTEM
EVERY MODERN ACCOUNTING SYSTEM IS BUILT ON THE DOUBLE ENTRY
BOOKKEEPING CONCEPT BECAUSE EVERY BUSINESS TRANSACTION AFFECTS AT
LEAST TWO DIFFERENT ACCOUNTS.
• For example, when a company takes out a loan from a bank, it receives cash from the
loan and also creates a liability that it must repay in the future. This single transaction
affects both the asset accounts and the liabilities accounts.
• For example, suppose Flomo paid cash salaries to his staff. The two accounts affected are
cash account and salaries account. As cash is going out of it, cash account is credited.
Salaries are expenses for the business, salaries account is debited.
• She sold finished goods to customers on credit, the two accounts involved are the
customer's personal account (debtor) and sales account.
DOUBLE ENTRY SYSTEM

• The basic principle is that for every single transaction there are
two entries – one to a “giving account” and a corresponding one
to a “receiving account.” In principle it is said that you Credit
(Cr) the giving account and Debit (Dr) the receiving account
 WHAT ARE THE DIFFERENT TYPES OF ACCOUNTS?
- THERE ARE 5 TYPES OF ACCOUNTS THAT MUST ALWAYS BE USED IN DOUBLE-ENTRY ACCOUNTING:

• Asset accounts record the monetary value of what a business owns, such as the money in its
checking account, tools/equipment, and buildings
• Liability accounts record the amount a business owes on things like lines of credit or a mortgage
• Equity is the difference between Assets and Liabilities (also known as the book value of the
business)
• Income accounts record money coming in, like revenue
• Expense accounts record what you’ve spent money on, such as payroll and advertising

The 5 types of accounts make up your chart of accounts. The chart of accounts is a different category group
for the financial transactions in your business and is used to generate financial statements.
THE ACCOUNTING EQUATION

You will need to keep this balance at all times, no matter how many transactions you have
recorded. If you have a Balance sheet on hand, calculating whether this balance has been
maintained is quite easy.
1. Add all the Assets, such as cash and equipments, together.
2. Now, look for Liabilities (what your business owes to third parties) and total them as well.
3. Next, add Shareholder’s equity to the total Liabilities.
4. Finally, check if the amount you have for Assets equals the amount you got in step 3.
TRANSACTIONS ON DOUBLE ENTRY SYSTEM

January 1, 2012 Purchased office supplies for 1,000

Particulars Debit Credit
Office supplies 1,000.00
Cash 1,000.00
January 5, 2012 Payment for advertisement in the amount of 300
Advertisement 300.00
Cash 300.00
January 11, 2012 Payment for goods in the amount of 6,000
Goods 6,000.00
Cash 6,000.00
TRANSACTIONS ON DOUBLE ENTRY SYSTEM

January 15, 2012 Freight charges in the amount of 700

Particulars Debit Credit
Freight 700.00
Cash 700.00
January 20, 2012 Received 3,000 for sales of goods
Cash 3,000.00
Sales 3,000.00
January 29, 2012 Bank charges for the month in the amount of 120
Bank Charges 120.00
Cash 120.00
THE BALANCE SHEET
WHAT IS A BALANCE SHEET?

• Is a financial report that shows the financial picture of a company at a given time.
• Balance sheets are usually done monthly or quarterly depending on the nature and size of
the business.
• The basic principle of the balance sheet is to show what you own, what you owe and how
much you personally have invested in your business.
• It gives you a idea of whether or not you can pay your creditors, how you manage your
inventory and how you manage your billing. What is the worth of your business? This is
a valuable tool to improve your business.
HOW IS THE BALANCE SHEET STRUCTURED?
There are two columns to a
balance sheet

what you own, or your assets. your liabilities. These include loans that
This includes your cash you owe, accounts payable and taxes
that you may owe.
on hand, accounts receivable
and inventory. owners net worth or investment is
added to the liabilities

Both numbers on the sheet should equal each other

EXAMPLE OF A FILLED IN BALANCE SHEET
 INFORMATION PROVIDED BY THE BALANCE
SHEET
• It can help a bank decide whether to lend your business money or not.
• You would like to know exactly what's going on all the time in your business.
• You have a chance to improve your company, thus making the sheet more appealing
to the bank.
• It can show you if the financial position of your company can handle hiring more
employees or giving the current ones a raise.
• you can see how your business is growing or if the market is declining.
• You can see if there are areas where you want to cut back or maybe spend more
money.