ACCOUNTING 1

• The process of receiving money and spending it wisely is called BUDGETING which is one important in accounting.
• REVENUE is the money a company earns from the sale of its products and services.
• EXPENSES a fee called boundary which is paid to the operator or owner of the vehicle.
• The excess of his total revenues over expenses will be his take home pay called PROFIT OR NET INCOME.
• PROPERTIES or ASSETS that you own such as cash, cars, equipment, jewelries, and real estate. If you do not owe or do not have LIABILITIES to anybody, then this wealth is your NET WORTH.
• Money RECEIVED from selling The Goods (REVENUE) LESS Money SPENT for Goods (EXPENSES) EQUALS PROFIT
• These steps are the first part of the accounting process called BOOKKEEPING.
• In the Philippines, bookkeeping was introduced by the Spaniards and the bookkeeper was called TENEDOR DE LIBRO.
• ACCOUNTING helps the business to determine whether the amount of capital invested is enough, how much raw materials is needed in order to make a profit and what will be the reasonable selling price for the product that is produced.
• Statement of Financial Position is a progress report showing a list of assets and liabilities.
• Income Statement is a performance report of revenues against costs and expenses.
• Statement of Cash Flows is a cash report showing where the money came from and where it is being used.
• Statement of Owner’s Net Worth is a progress report showing changes is your wealth.
• Sole Proprietorship 

  This is the business set up and managed by one person.
• Partnership 

  This business owned by two or more persons called partners.
• Corporation

  A business organized as a separate legal entity from the owners. It means it can conduct business by itself.
• Service business is one which provides service, for a fee, to clients or to customers.
• Merchandising business is one which buys and sells goods or merchandise.
• Manufacturing business is one who buys raw materials, process these into finished goods and sells these to customers.
• Financing Activities. The owner “finances” the business with a start-up capital in cash and other resources. It also includes withdrawals (capital withdrawn) made by the owner/investor as well as loans repaid to lenders.
• Investing Activities. It happens when a business needs resources other than cash in order to operate e.g. acquisition in properties in land, furniture, machineries and equipment.
• Operating Activities. It is related to earning income by selling goods or services and by incurring expenses such as wages, rent, utilities, and transportation is paid.
• Company accumulates financial data through its various activities.
• Accounting processes financial data and prepares financial reports.
• Stakeholders or Users read the reports and make decisions.
• Users of the financial information are called stakeholders.
• Stakeholder is a person or entity who has a “stake” or interest in the business.
• Owner Investor, the one who puts capital such as money or property in the business endeavor.
• Manager, the one who is responsible for running the business.
• Lender or Creditor, the one who helps the owners in financing their business.
• Supplier, the one who offers goods or merchandise to the business.
• Government, investigates whether the business is regularly paying its tax.
• Employee, the one who assesses the ability of the business to grant higher salaries and benefits through its financial information.
• Customer, the one who assesses the ability of the business to continuously provide services with the right price and right quality.
• Income Statement shows how wealth is produced by listing the revenues earned and expenses incurred by the business.
• Statement of Owner’s Equity shows why the net worth changed by listing the activities that caused it to increase or decrease.
• Statement of Cash Flows shows what happens to the cash by enumerating the activities of cash received and cash used by the business.
• Statement of Financial Position shows how the wealth of the business stands by enumerating the assets, liabilities, and new worth of the business.