basic bookkeeping for entrepreneurs

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BASICBOOKKEEPING

forENTREPRENEURS:Seminar-Workshop

11Taxes affects lives care for taxes

By: Tax & Accounting Center, Inc.(www.taxacctgcenter.org )Venue: Sorosa Building, Buendia Avenue,

Pasay City July 12-13, 2012/9:00 a.m.-5:00 p.m.


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Learning points

Understand basicaccounting termsand conceptsLearn the basic

accounting cycleLearn how to makeentries in the journalLearn how to post

entries in the Ledger;Learn prepare thenecessary andproper adjustments;

Learn how togenerate periodicbalances of theaccountsLearn how to preparethe basic financialreportsProperly analyzefinancial statementsfor businessimplications;Learn someimportant tips inbusiness accounting 22Taxes affects lives, care for taxes and


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COURSE OUTLINE

1 Basic Business Accounting Concepts

2 Accounting Elements & Account Titles

3 Analysis of transactions & entries

4 Accounting Cycle

5 Journalizing & posting


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COURSE OUTLINE,

continued6 Preparing The Trial Balance

7 End Of Period Adjusting Entries

8 Basic Financial Accounting Reports

9 Closing & Reversing Entries

10 Subsidiary Journals/Ledgers


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Accounting is the art of analyzing , classifying ,recording ,and summarizing in a significantmanner and in terms of money, transactions and

events which are, in part at least of a financialcharacter, and interpreting the results thereof

Accounting is a service activity which functionis to provide quantitative information, primarilyfinancial in nature, about economic entities thatis intended to be useful in making economicdecisions.

Definition of

Accounting


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Financial Accounting focuses on recordingbusiness transactions and preparation of financialstatements for use of the following users:

External users suppliers, lenders, customers,government & agencies, & public

Internal users Management, employees,officers, internal auditors

Branches of Accounting


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Management Accounting focuses on providingmanagement with accounting informationrelevant to the activities of the managers

developing strategies to achieve specific goals. This is aimed for decision making, planning,directing, and controlling enterprises operations.

Branches of Accounting



Public Accounting external auditors(certified public accountants or CPA)

Private Accounting bookkeeper, financialaccountant, internal auditor, treasury,budget

Government Accounting accounting forgovernment transactions of governmentagencies and instrumentalities.

Fields of Accounting



Bookkeeper versus

AuditorAuditor BookkeeperQualification Must be CPA Need not be CPAAccreditation BOA and/or SEC, CDA,

BSP, etc.

No required

accreditation.Objective Express an opinion Maintain books for FS

preparationIndependence Required Not requiredLiability Directly liable Subsidiary only

Impact of FS Adds credibility to AFS Adds credibility toaudit



Accounting Standards greatly affectingpreparation of financial statements embodying:

PrinciplesNormsPracticesConcensus

Influenced by SEC, BIR, Accounting StandardsCouncil (ASC) & International AccountingStandards Council (IASC)

Philippine FinancialReporting Standards

(PFRS)



Going Concern the company is presumed tobe continuing its business operations.

Accrual Basis income recorded when earnedregardless of collection, and expenses recordedwhen incurred regardless of payment.

Accounting Period any period (usually 12months) for preparation of financial reports.* calendar year vs. fiscal year

Accounting Principles



Accounting cycle the period covering thetime when inventories where acquired until thetime funds were collected from sales

Accounting entity enterprise is separate &distinct from its owner and related companies

Monetary unit transactions are measured infinancial terms (money). PhP/Functionalcurrency concept

AccountingPrinciples



Historical cost value at transaction date

Matching expenses incurred to earn arevenue is recognized in the period revenue isearned.

Accounting Principles



Consistency same accounting methods fromyear to year for comparability

Disclosure vital information are reported

Nuetrality no bias in reports

Prudence degree of caution in the exercise of judgement s in making estimates underuncertain conditions.

Accounting Practices



These are exchanges of things with value. Valuefor value.

Purchases payments for materials,equipments or services (cash purchases orcredit purchases)

Sales collections for giving products orservices (cash sales or credit sales)

Business Transactions



ELEMENTS OF ACCOUNTINGand

ACCOUNTING EQUATION



The foundation of an accounting system

Assets properties of value ownedLiabilities financial obligations bound to bepaidCapital investment of owners

Revenue income generated adds capitalExpenses reduces capital

Accounting Elements



Accounting EquationBasicequation: Assets = Liab. + Capital

Always equal and balance is alwaysmaintainedInvestment + +

Loans + +Withdrawal - -

Loanrepayments

- -

Conversion of liab to equity - +

Collection + / -

Loan to repayanother loan

+/- +/-



AccountingEquation

Expanded: A = L + C - D + R - EAlways equal and balance is alwaysmaintainedCash sales + +

Sales onaccount

+ +

Cashexpenses

- +

Expensesowed

+ +

Recovery of worthlessaccount

+ +



AccountingEquation

Expanded: A + E + D = L + C + RAlways equal and balance is always maintainedCash sales + +

Sales onaccount

+ +

Cashexpenses

- +

Expensesowed

+ +

Recovery of worthlessaccount

+ +


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Double-entrybookkeeping

Business transaction has at least two effects onthe accounting elements

Positive entry vs negative entry

Debit vs credit

Value received vs value given away

Always equal



Rules of Debit &Credit

A = L + C + R - E

Debit Inc. Dec. Dec. Dec. Inc.

Credit Dec. Inc. Inc. Inc. Dec.



Rules of Debit & Creditand Accounting Equation

DEBIT CREDITA + E + D = L + C + R+ + + + + +

DEBIT CREDIT

L + C + R = A + E + D- - - - - -


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na ys s otransactionsExamples

Expenses incurred and paid.

Billed client for services.Hired a new employee.Purchased supplies on account.Withdrawal for personal use.Declared cash dividends


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Chart of Accounts

Enumeration of account titles;For easy reference on proper usage of account titles;

Uniform usage of account titles on similar transactions;Account codes may also be provided to eachand every account title.



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Classifications of Accounts

Assets, Liabilities, Capital, Revenue, expensesCurrent & non-current

Principal account & offset or contra-accountReal or nominal accountsIncome statement or Balance Sheet account



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Sample AccountsASSETS LIABILITIES CAPITAL REVENUE EXPENSE

Current: Current:

Cash Accts. Payable Capital stock Sales Cost of sales

Accounts Rec. Notes Payable Subs. CS Prof. fees Salaries

Notes Rec. SSS Payable Addl. Paid-inCapital Interestincome Utilities exp.

Prepayments PHIC Payable RetainedEarnings

Rental income Supplies exp.

Inventories HDMF Payable Deposit forfuture subs.

Serviceincome

Interest exp.

Supplies Accrued salaryDividends Gain on saleof asset

SSS employershare

InstallmentsReceivable

W/holding taxpayable

Managementincome

HDMF Cont.

Dividends Dividends Royalties PHIC Cont.



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Sample AccountsASSETS LIABILITIES CAPITAL REVENUE EXPENSE

Non-current: Non-current:

Cash for plantexpansion

Notes Payable Long Term

Fixed assets MortgagepayableFranchise Unearned

revenueOfficeequipmentsFurniture &fixtures



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Accounting Cycle Journalizing

PostingTrial balance

Adjusting entriesWorksheetFinancial statementsClosing entries

Post closing trial balanceReversing entries


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Basic FinancialStatements

Statement of Financial PositionBalance Sheet Assets, Liabilities & Equity

Statement of Comprehensive Income

Income Statement Revenue & ExpensesStatement of Changes in Equity movementsof capital and related accountsStatement of Cash Flows cash inflows and

outflowsNotes to Financial Statements Disclosuresand notes required by PFRS, SEC, and BIR.


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Comprehensive IllustrationJournal

Book of original entryParts

Heading

Date columnParticularsFolio or ReferenceDebit

Credit

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Comprehensive Illustration



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Comprehensive IllustrationLedger

Book of final entryParts

Heading

Debit/Credit SidesDateFolio or referenceParticulars

Debit/Credit amounts



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Taxes affects lives, care for taxes and save lives

(Courtesy: www.taxacctgcenter.com )

End of slides Thank you!
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