● Asset- economic resources owned.
They are equipment as a result of usage and
property and rights of value.
● Liabilities – include debts
● Owner’s Equity or Capital- includes the interest of
the owner of the business;
⬂ Two main sources
1. Investment of owners
2. Earning of the business.
● Income –revenues earned or generated by the
business in performing services for a customer or
client.
● Expenses – are cost or changes incurred in the
process of generating or earning revenue.
EXAMPLE OF CURRENT ASSET:
● Cash –cash items readily available for use in the
operations of the business
● Cash Equivalent- readily convertible
● Marketable Securities- stocks bonds purchased by
the enterprise only a short span of time or
duration. Excess cash.
● Trade and other Receivables- includes the
amount collectible from any of the following
accounts: A3CI2PN
● Accounts Receivable - amount collectible
from the customer to whom sales have
been made or services have been
rendered on account or credit.
● Notes Receivable- promissory note
● Interest Receivable- amount if interest
collectible on promissory notes received
from customer and clients
● Advance Employees- certain amount of
money loaned to employees payables in
cash. Salary deductions.
● Accrued Income- income already earned
but not yet received.
● Inventories- represent the unsold goods
at the end of the accounting period.
Merchandising business.
● Prepaid Expenses –to be received by the
business in the future paid in advance
-Contra-Asset Account – are accounts deducted from the
related asset account.
● Allowance for Bad Debts – losses due to
uncollectible accounts.
● Accumulated Depreciation – represents
the expired cost of property, plant, and
passage of time. deducted from the cost
of the related asset account to get the
carrying value or book value of the asset.
EXAMPLE OF NON-CURRENT ASSET:
● Long-term investment –interests, royalties,
dividends and rentals, for capital appreciation or
for other benefits to the investing enterprise such
as those obtained through trading relationships.
● Property, Plant, and Equipment – are tangible
assets These assets are expected to be used for
more than one period: FLEBI
● Land- a piece of lot or real estate owned
by the enterprise on which a building can
be constructed for business purposes.
● Building – edifice or structure used to
accommodate the office, store, or factory
of a business enterprise in the conducted
operation.
● Equipment- includes typewriter, air-
conditioner, calculator, filing cabinet,
computer, electric fan, trucks, and cars
used by the business in its office, store or
factory. Specific account titles may be
used such as office equipment, store
equipment, delivery equipment,
transportation equipment, and machinery
equipment.
● Furniture Fixture- includes tables, chairs,
carpet, curtain, lamp, and lighting fixtures,
and wall decors. Specific account titles
may be used such as office furniture and
fixtures, and store furniture and fixtures
● Intangible Asset- identifiable, non-
monetary assets without physical
substance held for use in the production
or supply of goods or services, for rental
to other, or for administrative purposes.
EXAMPLE OF CURRENT LIABILITIES:
● Trade and Order Payables – includes payables
from any of the following accounts: A2NU2L
● Accounts Payable – includes debts arising
from the purchase of an asset
● Notes Payable – includes debts arising by
a promissory note.
 ● Loan Payable – is a liability to pay the
bank
● Utilities Payable – is an obligation to pay
utility companies
● Unearned Revenue – represent
obligations of the business arising from
advance payments received before goods
or services are provided to the customer.
● Accrued Liabilities – include amounts
owed to others for expenses already
incurred but not yet paid.
EXAMPLE OF NON-CURRENT
LIABILITIES:
● Non-Current Liabilities – are long term liabilities
period of longer than one year MB
● Mortgage Payable – is a long-term debt of
the business with security or collateral in
the form of real properties.
● Bonds Payable – is a certificate of
indebtedness under the seal of a
corporation
OWNER’S EQUITY
● Capital–is an account bearing the name of the
owner representing the original and additional
investment
● Drawing Assets– represents the withdrawals
made by the owner of the business in cash or
other
● Income Summary – is the temporary account
used at the end of the accounting period to close
income and expense accounts. The balance of
thus accounts shows the net income or net loss
for the period before it is closed to the capital
account
INCOME STATEMENT
-accounts, namely revenue and expense, are
classified as nominal or temporary accounts
● Service Income – includes revenues earned or
generated by the business in performing services
for s customer or client
● Salaries or Wages Expense – includes all
payments made to employees or workers for
rendering services to a company
● Utilities Expense - is an expense related to the
use of electricity, water, fuel, and
telecommunications facilities
● Supplies Expense– covers office supplies used by
a business in the conduct of its daily operations
● Insurance Expense – is the expired portion of
premiums paid on insurance coverage such as
premiums paid for health or life insurance, motor
vehicles, or other properties
● Depreciation Expense – is the annual portion of
the cost of tangible assets such as building,
machineries, and equipment charged as expense
for the year
● Uncollectible Accounts Expense/ Doubtful
Accounts Expense/ Bad Debts Expense – means
that amount receivable charged as expense for
the period because they are estimated to be
doubtful of collection.
● Interest Expense – is the amount of money
charged to the borrower for the use of borrowed
funds.
FINANCIAL STATEMENT
- Key product or the end product of the
accounting process
● Statement of Financial Position or
Balance Sheet – shows the financial
condition of a business as of a given
period. It consists of the assets,
liabilities and capital
● Statement of Financial Performance or
Income Statement – shows the result
of operations for a given period. It
consists of the revenue, cost and
expenses
● Statement of Changes in Owner’s
Equity or Statement of Owner’s Equity
– shows the changes in the capital or
owner’s equity as a result of additional
investment or withdrawals by the
owner, plus or minus the net income
or net loss for the year
● Statement of Cash Flows –
summarizes the cash receipts and cash
disbursements for the accounting
period. It shows the net increase or
decrease for the accounting period. It
shows the net increase or decreaseof
 cash in a given period and the cash Owner’s Equity Credit Debit
balance at the end of the period
Revenue/Income Credit Debit
● Books of Accounts – are a set of books used by
accountants to record transactions and events Cost/Expense Debit Credit
which are financial in nature
● Transactions – are exchanges which involve value
received or value parted with. Transactions are ● Ledger – group of accounts used by the company
recorded for the first time in general journal and ● The accounts in the general ledger are
posted in the general ledger classified into two general groups:
● Journal – called the book of original entry ⮚ Balances sheet or Real Accounts
(assets, liabilities, and owner’s
- a chronological record of events or
equity)
business transactions showing all the effects of each
⮚ Income Statement or Nominal
transaction in terms of debit and credits
Accounts (Revenue and Expense)
● Ledger – called the book of final entry ● The ledger has a record of each account
● Journalizing – the process of recording a ● Ledger has a page for each customer
transaction in the journal after it has been ● T-account- the basic format used to record every
recognized and measure account
● The double-entry is used which means ● Normal Balance of an Account – the side of an
two or more accounts are affected by account where increase is recorded
each transaction ● Posting - the process of transferring in formation
● It follows that for every debut, a from the journal to the ledger
corresponding credit is made ● Chart of Accounts –the entries in the general
● The total debits should equal total credits journal are classified in the general ledger. All the
for every transaction account titles to be used in the recording process
are assigned pages in the general ledger. Ledger
RULES OF DEBIT AND CREDIT: accounts are listed in a Chart of Accounts. The
● Debit Chart of Account is a listing of titles that are to be
1. Increase in Asset used for the accounting period which is usually a
2. Decrease in Liabilities calendar year or a fiscal year.
3. Decrease in Owner’s Equity ● Subsidiary Ledger- are record of the increase
● Owner’s Withdrawal (pluses), decrease(minuses), and balances of
● Expenses certain general ledger accounts like:
● Credit ● Accounts Receivable for customer
1. Decrease in Assets (debtors) account
2. Increase in Liabilities ● Accounts payable for suppliers (creditors)
3. Increase in Owner’s Equity account
● Initial Investment - It is important to know the running balances
● Additional Investment of the due from customers or debtors as well
● Revenue/Income as the running balance due to suppliers or
creditors

Increase Decrease
Assets Debit Credit
Liabilities Credit Debit
STEPS IN ACCOUNTING CYCLE:
 1. Journalizing – journalize the economic
transactions and events
2. Posting – post the journal entries in number 1 to
the general ledger
3. Trial Balance – prepare the trial balance from the
general ledger
4. Adjusting – adjust the ledger balances
5. Financial Statement – make income statement
and balance and balance sheet from the adjusted
trial balances
6. Closing – close or transfer the income and
expense accounts to “income and expense
summary account” and the latter account to
owner’s equity
7. Posting Closing Trial Balance – make a trial
balance of all assets, liabilities, owner’s equity.
8. Reversing – reverse some adjusting entries to
prepare them for a new accounting period

TRANSACTION SOURCE DOCUMENT

1. Cash Receipt a. Office Receipt
2. Services or Sales b. Service or Sales
Invoice

3. Purchase c. Purchase Invoice

4. Cash Disbursement d. Cash Voucher and
Check Number

e. Other Documents
are dependent on
the nature of the
business