TLE 9 REVIEWER Examples:

Bank Loans
CHAPTER 1.1: Mortgages
ASSETS, LIABILITIES, Owners Equity reflects the amount
AND OWNERS EQUITY the owner has invested in the
business.
o Owners Investments the
Assets items that are of value and amount of money provided
are owned by a business. directly by the owner or other
investors.
Current Assets o Retained Earnings the amount
Assets that are expected to be retained from profits.
converted into cash within a period of
one year. IN THE NUTSHELL
Examples: The financial position or structure of a
- Inventory/Stocks business is based on assets, liabilities,
- Trade Receivables and owners equity.
- Bank & Cash Balances
Assets are items that are value and
are owned by a business. They can be
Noncurrent Assets current or noncurrent.
Assets that are not expected to be Liabilities are what a business owes to
converted to cash within a period of one others for resources that were
year. furnished to the business. It can be
Tangible Assets Intangible Assets current or noncurrent.
Physical Substance No Physical Form Owners Equity reflects the amount
Examples: Examples: the owner has invested in the firm.
Land & Patents
Buildings Copyrights CHAPTER 1.2:
Machinery & Trademarks THE ACCOUNTING
Equipment
Vehicles EQUATION AND
Furniture
CHART OF ACCOUNTS
Liabilities the debts of a business.
Current Liabilities The Accounting Equation
These are debts and obligations that Assets = Liabilities + Owners Equity
should be paid off in a period not to Assets Liabilities = Owners Equity
exceed one year.
Assets Owners Equity = Liabilities
Examples:
Accounts payable Purchase if Items Assets = Owners Equity
Salaries payable Services from
employees that are not yet paid The Chart of Accounts
Utilities payable Utilities used that It is a list of account codes for assets,
are not yet paid liabilities, and owners equity,
Rent payable Unpaid rent revenues, and expenses.
Noncurrent Liabilities It is used to record business
These are the long-term debts of a transactions.
business that will be paid off for at least The number and accounts depend on
one year away. the type of business operations.
 Revenue refers to the amount
earned by a business by selling
goods or performing services.
Expenses are expenditures
made to generate revenue.
IN THE NUTSHELL
The relationship between Assets,
Liabilities, and Owners Equity are
shown in terms of a formula: Assets =
Liabilities + Owners Equity.
The chart of accounts is a list of
account codes for assets, liabilities,
and owners equity, revenues, and
expenses.
CHAPTER 2.1:
TYPES OF
BOOKKEEPING
Single Entry Bookkeeping
- Each transaction is recorded as
one single entry.
- Used by small businesses and
other types of organizations.
- It is the simplest type of
bookkeeping for it can be as basic
as the maintenance of only
receipts and payment account.
Cashbook these are the receipts and
payment account. It will record all
transactions involving money either
being received or being spent.
Disadvantages:
- Assets are not shown making
theft from business by
employees
- Auditing ends up becoming a
tedious work
- Clerical errors are often
committed
- The liabilities are not
immediately determined.
- Reports of the financial position
of the business are limited. The
management may not be aware
of their business performance.
Double Entry Bookkeeping
- A standard system used by many
businesses.
- The term double-entry arises out
of the fact that each and every
financial transaction will require
two entries.
- Debit entry and Credit entry
- Each is recorded in a single
amount.
- The account in which the
transaction is recorded will depend
on the nature of the transaction.
Methods of Bookkeeping:
Manual Method
- The traditional way of recording
financial transactions
- It is paper-based
- It is performed by hand using
paper book of accounts.
- It is cheap, simple, and easy to
maintain
Computerized Method
- New and innovative
- Allows a faster recording of
business or financial transactions
- Accounting/bookkeeping software
is used for an easier, faster, and
more convenient bookkeeping
process.
- It is expensive, but is convenient,
reliable, and efficient.
IN THE NUTSHELL
 The two types of bookkeeping - For a sole proprietorship, the owner
commonly practiced by business of business or company can
organizations today are single-entry withdraw money from the
bookkeeping and double-entry business.
bookkeeping. External Transactions
Small businesses keep their financial - Occur between a business and an
records through a process of single- external entity.
entry bookkeeping where each - Such as that when it borrows
transaction is recorded as one single money from the bank.
entry.
Double-entry bookkeeping is the Transaction Effects on the Accounting
standard system of bookkeeping used Equation:
by businesses. The term double-
entry arises out of the fact that each The Accounting Equation
and every financial transaction will Assets = Liabilities + Owners Equity
require two entries. 1) The owner starts a business with
The methods of bookkeeping include 100,000 AED cash.
the manual and computerized Liabilitie Owners
methods. Assets = +
s Equity
100,000
= 0 + 100,000 AED
AED
CHAPTER 2.2: 2) The owner purchases furniture for
EFFECTS OF 25,000 AED cash.
Owners Liabilitie
TRANSACTIONS ON Equity + s = Assets
Furniture
100,000 75,000
ACCOUNTING AED + 0 = AED + 25,000
AED

EQUATION
Financial Transactions involve money IN THE NUTSHELL
exchanges and every transaction has
Financial or business transactions
an effect on accounting elements.
have effects on accounting elements
in the accounting equation.
Types of Transactions
The types of financial or business
Internal Transactions
transactions are the internal and
- Take place among the employees
external transactions.
of business or company.
The accounting equation should
- The employees receive money as
always be balanced.
payment for their services in the
company.