Entrep

• Bookkeeping is centered on three elements, assets, liabilities and owner’s equity. An equation may be formed to show the relationship of the three elements.
• Assets = Liability + Owner's Equity
• Four Phases of Accounting

  •Recording

  •Classifying

  •Summarizing

  •Interpreting
• How then do we know that our business realizes an income? It is through bookkeeping or accounting that we can measure the profitability of the business.
• Why do some business ventures fail? Some businesses fail because there is no system by which they can better manage the business. Some do not keep the proper records by which they can determine the progress of the business.
• Accounting has been defined as the process 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 result thereof.
• Recording is a basic phase of accounting that is also known is bookkeeping. In this phase, all financial transactions are recorded in a systematical and chronological manner in the appropriate books or databases. AccountingRecorders are the documents and books involved in preparing financial statements.
• Classifying is phase of accounting involves sorting and grouping similar items under the designated name, category, or account. This phase uses systematic analysis of recorded data in which all transactions are grouped in one place.
• Summarizing is a phase of accounting involves summarizing the data after each accounting period, such as a month, quarter, or year. The data must be presented in a manner which is easy to understand and use by both external and internal users of the accounting statements.
• Interpreting is a phase of accounting that process concerned with analyzing financial data and is a critical tool for decision- making. This data is then used to prepare future plans and frame policies to execute financial plans.
• Bookkeeping is the process of recording business transactions in a chronological order. In other words, it records the day-to-day activities of a business unit.
• Bookkeeping is a part of accounting. It becomes a tool of business entities in determining the results of the business. Anybody who engages in business needs bookkeeping in order to know whether the business realizes an income or suffers a loss
• A business is started by investing the personal money or funds of the Owner. Hence, this money in the meantime becomes the money of the business. In accounting, this is what we call the “business entity concept.” Under this concept, the personality of the business is treated distinct and separate from the personality of the owner. There is a dividing line between the money of the owner and that of the business
• Types of Business Activity

  -Service Business

  -Merchandising

  -Manufacturing
• Service Business income is derived from services rendered.
• Merchandising type of business engaged in buying and selling goods.
• Manufacturing – a business engaged in transforming raw materials into finished products.
• Forms of Business Organization

  -Single or Sole Proprietorship

  -Partnership

  -Corporation
• Single or Sole Proprietorship an organization owned by only one person.
• Partnership an organization composed of five or more people who contribute money, property, or industry into a common fund and then divide the profits among themselves.
• Corporation an organization composed of five or more persons not exceeding fifteen registered with the Securities and Exchange Commission having the rights, powers, and attributes of a person.
• accounting period is the length of time covers the business transactions being reported upon.
• Accounting period varies depending on the policy of the owner or management. It may cover a month, a quarter, six months, or one year.
• Calendar year or period a of twelve months starting January 1 and ending December 31.
• Fiscal year any succession of twelve months starting with any month except January and ending in any month except December.
• Parties interested in the Accounting Reports

  -Owner/ Management

  -Creditors

  -Investors

  -Government
• Owner/ Management the _ like to know the progress of their business. They would like to know how their money is being used.
• Creditors are interested whether or not the business their maturing obligations.
• Investors use the report as their bases for giving out their money. They can estimate the rate of return in their investment.
• Government __ agencies like BIR and other government institutions use the accounting reports as a basis for the computation of their income tax.
• Three major Elements of Accounting

  • Assets
  • Liabilities
  • Owner's Equity
• ASSETS are the economic resources owned by the business.
• CURRENT ASSETS those assets which can be reasonably converted into cash with in the short period of time, usually within one accounting period.
• NON-CURRENT ASSETS are those assets in permanent in nature, permanent in such a way that their useful life to the business exceeds beyond one year.
• LIABILITIES are debts or obligation of the business to a party other than its owner.
• CURRENT LIABILITIES are those which are due for payment within a short period of time or within one year from the balance sheet date.
• NON-CURRENT LIABILITIES are obligations mature beyond one year from the balance sheet date.
• OWNER’S EQUITY represents the capital or investment in the business.
• Cash in Bank is a money deposited in the bank
• Cash on Hand refers to cash and other cash items which are not yet deposited in the bank.