FABM/FINANCE

• Accounting

  • Service activity. Is an information system that measures business activities.
• Finance - is a science or arts of handling money. Study on how money works
• Phases in accounting process:

  Recording - is the process of systematically maintaining a record of all business transactions

  Classifying - is the sorting or grouping of similar and interrelated transactions in their respective class.

  Summarizing - involves the preparation of financial statements.
• 3 basic activities:

  1. Identification
  2. Recording - record, classify, summarize
  3. 3. Communication

  • preparing accounting reports
• Accounting Process/Accounting Cycle involves a series of steps completed during each reporting period to record, store, and report accounting information contained in the recorded transactions.
• Accounting Equation/Expanded:

  Assets = Liabilities + Equity

  Assets= Liabilities + Owner’s Capital - Drawings + Revenues - Expenses
• Types of accounts:

  Assets

  Liabilities

  Owners Equity

  Drawings

  Revenues

  Expenses
• Assets - Resources owned by the business (Cash, Inventory, Equipment, Furniture, Land, Accounts Receivable etc)
• Liabilities - Obligations or debts owed by the business (loans, account/notes payable, unearned revenue)
• Owners Equity - The owner’s claim on the business (Capital, Retained earnings, Investments)
• Drawings

  • outflows of cash and other assets to owners for personal use (decrease equity)
• Revenues - are the money a business makes from selling things or doing services (money in: Sales, Service revenue)
• Expenses

  • are the money a business spends to keep running (Money out: Rent Salaries, Utilities, etc)
• Income Statement

  • show’s company’s revenues and expenses over a specific period, shows the net/loss income
• Balance Sheet - shows a company’s financial position (assets, liabilities, and equity) at a specific point of time. Statement of financial position.
• Cash Flow Statement - shows the inflows and outflows of cash during a period of operations, investing, and financing activities
• Statements of Owner’s Equity - shows changes in owner’s equity during a period
• Double Entry of Accounting:

  • Keep the accounting equation balance
• Debit - an entry on the left side of an account (increase assets, expenses, dividends)
• Credit

  • an entry on the right side (increases liabilities, equity, revenue)
• ASSETS (Debit)

  • Cash - CA
  • Accounts/Notes Receivable - CA
  • Inventory - CA
  • Equipment - CA
  • Prepaid Expenses - CA
  • Land - NCA
  • Building - NCA
• LIABILITIES (Credit)

  • Accounts payable - CL
  • Loans payable - CL
  • Unearned Revenue - CL
  • Short term notes payables - CL
  • Current portion of long term debts -CL
  • Accrued Expenses - CL
  • Long Term notes payable - NCL
  • Mortgage payable - NCL
  • Non current portion of long-term debt - NCL
• OWNERS EQUITY (Credit)

  • Capital
  • Retained Earnings
  • Drawing (debit)
• REVENUES (Credit)

  • Sales Revenue
  • Service Revenue
  • Interest Income
• EXPENSES (Debit)

  • Rent expense
  • Salaries Expenses
  • Utilities expenses
  • Supplies Expenses
  • Advertising expense 
  • Depreciation Expense
• OTHERS ACCOUNTS

  CONTRA-ACCOUNTS

  • Accumulated Depreciation (Credit)
  • Allowance for Doubtful Accounts (Credit)
  • Sales Return and Allowances (Debit)
  • Drawings/Withdrawals (Debit)
• Heading contains the following:

  Name of the business

  Title of report

  Date of the report
• Accrued Expenses (Liability account) expenses that already done/incurred but not yet paid

  Accrued Revenues (Asset account) revenues that is already earned but no cash been collected yet
• 2 formats presenting statement of financial position:

  1. Report Form - shown in vertical form

  Account Form - T-accounts format