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• Fundamentals of Accountancy, Business and Management 1


  Introductory course in accounting, business and management data analysis that will develop students' appreciation of accounting as language of business and an understanding of basic accounting concepts and principles that will help them analyze business transactions
• Posting to the General Ledger


  1. Post transactions in a ledger

  2. Journal entries are needed to complete the posting process

  3. Posting is the process of transferring the records from the journal to the ledger

  4. A ledger constitutes a group of accounts, also called as book of final entry

  5. Each side has columns for date, explanation, cross-reference/folio and amounts
• Chart of Accounts


  A list of account titles used by the business. Each account title has a given code number which is needed for the cross-referencing in the posting process
• Posting Process

  1. Locate the corresponding account in the ledger

  2. Transfer to the ledger the date, explanation and amount from the journal. Debit accounts on the debit side and credit accounts on the credit side

  3. Place the page number of the journal in which the information was taken to the column of the ledger

  4. Place in the folio column of the journal the account number of the account title (indicates that the posting process is completed)
• Posting to the General Ledger


  Post the following journal entries (from the General Journal) to the General Ledger
• Trial Balance


  1. Prepare the Trial Balance

  2. Definition

  3. Types

  4. Parts

  5. Steps/Procedures
• Trial Balance


  A list of all accounts in the ledger (excluding accounts with zero balance) at a given time with their corresponding balances. It proves the equality of the debits and credits in the general ledger
• Types of Trial Balance

  • Trial Balance of Balances
  • Trial Balance of Totals
• Trial Balance of Balances


  • Debit Balance if the debit total is more than the credit total
  • Credit Balance if the credit total is more than the debit total
  • Zero Balance (Closed account) if debit total and credit total are equal
• Parts of Trial Balance


  • 1
  • 2
  • 3
  • 4
  • 5
• Procedure in Trial Balance Preparation

  1. Write the heading of the trial balance. The heading includes: The name of the business, Title (Trial Balance), Date of the Trial Balance

  2. Provide a column for accounts and two money columns (debit and credit)

  3. The accounts should be written in just one column arranged as to: Assets, Liabilities, Capital, Income and Expenses

  4. Write the amounts opposite the corresponding accounts under the money column. (Debit money if it is a debit balance and credit money if it is a credit balance)

  5. Foot the money columns. Double rule the totals
• Adjusting Entries


  1. Prepare adjusting entries

  2. Prepayment of Expenses

  3. Unearned Income

  4. Accrual Expenses

  5. Accrual Income

  6. Provision for Bad Debts

  7. Depreciation
• Adjusting Entries


  Entries made at the end of the accounting period to update the balances of some accounts in order to present more fairly & more accurately the results of operations and financial condition of the business
• Methods of Keeping the Books of Accounts

  • Cash Basis – income is recorded only when cash is received and expense is recorded only when paid
  • Accrual Basis – income is recorded at the time goods or services are rendered, whether or not cash is received; and expense is recorded when incurred, whether cash is paid or not
• Types of Adjusting Entries

  • Deferrals – postponement of the recognition of an expense already paid or revenue already received
  • Accruals – expense or revenue that gradually increases with the passage of time
  • Depreciation of Plant Assets
• Prepaid Expenses


  Expenses paid in advance. At the time of payment, the account is an asset, and as it is used, becomes an expense
• Adjustment for the Expiration of Prepayment Expenses


  1. Asset Method – entry is charged to asset account

  2. Expense Method – entry is charged to expense account
• Asset Method


  1. Transaction: On November 1 of the current year, C. Santos paid P30,000 for a three-month rental of the office space

  2. Original Entry: Nov. 1 Prepaid Rent 30,000 Cash 30,000

  3. Adjusting Entry: Dec. 31 Rent Expense 20,000 Prepaid Rent 20,000

  4. Analysis: Nov. - 10,000 Dec. - 10,000 Jan. - 10,000 (unused)
• Expense Method


  1. Transaction: On November 1 of the current year, C. Santos paid P30,000 for a three-month rental of the office space

  2. Original Entry: Nov. 1 Rent Expense 30,000 Cash 30,000

  3. Adjusting Entry: Dec. 31 Prepaid Rent 10,000 Rent Expense 10,000

  4. Analysis: Nov. - 10,000 Dec. - 10,000 Jan. - 10,000 (unused)
• Unearned Income


  Arises when payment is received before goods are delivered or services are rendered
• Adjustment for Unearned Income

  1. Income Method – income account is credited when cash is received

  2. Liability Method – liability account is credited upon receipt of cash
• Income Method


  1. Transaction: On November 1 of the current year, the business received P30,000 cash from the tenant of vacant space of the store for three months

  2. Original Entry: Nov. 1 Cash 30,000 Rent Income 30,000

  3. Adjusting Entry: Dec. 31 Rent Income 10,000 Unearned Rent 10,000

  4. Analysis: Nov. - 10,000 (collected) Dec. - 10,000 (collected) Jan. - 10,000 (advance)
• Liability Method


  1. Transaction: On November 1 of the current year, the business received P30,000 cash from the tenant of vacant space of the store for three months

  2. Original Entry: Nov. 1 Cash 30,000 Unearned Rent 30,000

  3. Adjusting Entry: Dec. 31 Unearned Rent 20,000 Rent Income 20,000

  4. Analysis: Nov. - 10,000 (collected) Dec. - 10,000 (collected) Jan. - 10,000 (advance)
• Accrual of Expenses


  Adjusting Entry: Debit Expense Account Credit Liability Account (Accrued Expense)
• Accrued Expense


  1. Transaction: Office employees are paid every two weeks. On December 31, five day's salary of an office employee at P300 per day was accrued

  2. Adjusting Entry: Dec. 31 Salaries Expense 1,500 Salaries Payable 1,500

  3. Analysis: 300 x 5 days = 1,500
• Accrual of Income

  Adjusting Entry: Debit Asset Account Credit Income Account
• Accrual of Expenses


  Accrued expenses are those expenses already incurred during the period but are not yet paid or recorded
• Adjusting Entry

  1. Debit Expense Account

  2. Credit Liability Account (Accrued Expense)
• Accrued Expense


  Transaction where office employees are paid every two weeks and on December 31, five day's salary of an office employee at P300 per day was accrued
• 300 x 5 days = 1, 500
• Accrual of Income


  Accrued income arises when goods have been delivered or services have been rendered but no payment has been collected. If there is payment, such collection has not yet been recorded
• Adjusting Entry

  1. Debit Asset Account

  2. Credit Income Account
• Accrued Income


  Transaction where a tenant occupying the right side of the shop space is two months delayed as of the balance sheet date and his monthly rental is P5, 000 per month
• 5000 x 2mos = 10, 000
• Provisions for Bad Debts

  Not all credit extended or collectibles are good, a certain percentage of these collectibles are not collected. The business should provide for such losses for non-collectible of credit (Bad Debts)
• Adjusting Entry


  1. Debit Bad Debts

  2. Credit Allowance for Bad Debts
• Provision for Bad Debts


  Example: An account receivable amounting to 70, 000 has an estimated 10% allowance for bad debts
• 70, 000 x .10 = 7, 000
• Depreciation


  The portion of the cost of the asset which is already used or consumed; an accounting method of allocating the cost of a tangible asset over its useful life and is used to account for declines in value
• Provisions for Depreciation - Methods

  • Straight line Method
  • Units of Production Method
  • Sum of the Years Digits Method