BUSINESSPLAN

SIMPLE BOOKKEEPING & ACCOUNTING

Presented by: Maydilyn M. Gultiano, RN, MAN

February 23, 2020
At the end of this lesson, the learner should
be able to:
1. discuss simple bookkeeping procedures &
income statement;
2. identify the books of accounts used in
business, and
3. describe the posting process.
 CONTENTS

1 2 3 4
JOURNAL BUSINESS
DOCUMENTS
SIMPLE
BOOKKEEPING
CLASSIFYING
 INTRODUCTION

BOOKKEEPING
Refers to the recording of business transactions
in the books of the business.
It is based on the premise that business
transactions must be properly recorded.
Bookkeeping involves the chronological
writng or recording of business
transactions and events in the books of
accounts for the first time.
All business transactions are recorded in

TRANSACTION the books of accounts and not in an

In this context refers to events where there are

ordinary bond paper or yellow pad.

exchanges of values that are measureable in

one common denominator.
 1
JOURNAL

The Journal is the book of original entry. It is where all

business transactions are chronologically recorded for
the first time. It is advisable to use a columnar pad or
two-column journals.
 GUIDELINES IN USING THE GENERAL JOURNAL

Date Column Debit Column

It shows the date of the occurrence of the
JOURNAL It is the first money column
transaction. The year and the month are
where the amount of the debit
not rewritten for every entry unless they
account is entered.
have changed, or a new page is needed.

Particulars Credit Column

It shows the account debited and
It is the second money column
credited as well as a brief
where the amount of the credit
explanation of the transaction
account is entered.
Posting Reference
It is used when the entries are posted, that is, until the amounts
are transferred to the related ledger accounts.
Two-Column General Journal
The following procedures must be observed when using the two-column general journal:

Writing the amount

Writing the debit & credit
a. The debit amount must be
account titles written in the first money column
a. The debit account title in line with the debit account title.
Writing the date b. The credit amount must be
must be written first
Labeling the placed in the second money
a. Fill up the data for the b. The credit account title
journal column in line with the credit
year, month, and day. must be indented from the
account title.
b. Write the year and the debit account title. c. No peso sign must be placed in
a. On top at the center:
month on every page. c. Abbreviation of the the debit and credit money
“General Journal”
account title is not allowed. columnc.
b. Rightside most: c. If there are two or more
d. The explanation must be d. If there is no centavo, a dash
Page number of the journal transactions in one day, do
sign is used.
not repeat the day. indented from the credit
c. Succeeding pages: e. No comma and period are
account title.
Write only the page number used to indicate thousand pesos
e. There must be no blank and cents
of the journal
space in recording the f. The amounts in the money

succeeding transactions columns are not summed up.

 ACCOUNT TITLES

Assets Liabilities Capital

Income Expense
ASSET ACCOUNT TITLES
1. Cash - It describes money, either in paper or in coins.
2. Accounts receivable - It describes collectibles from customers who made sales transactions on credits.
3. Notes receivable - It describes collectibles that are supported with promissory notes.
4. Supplies on hand - It describes unused office or store supplies.
5. Unused factory supplies - It describes unutilized manufacturing supplies.
6. Inventory - It describes unsold goods that are intended for sale. The types of inventories for
manufacturing business are as follows:
a. Raw materials inventory - It refers to unutilized materials in the production of goods.
b. Work-in-process inventory - It refers to unfinished goods at the end of the period.
c. Finished goods - It refers to unsold finished goods.
7. Equipment - It describes tools and equipment like calculators, computers, or any equipment directly
related to the producton of goods.
8. Furniture and fixtures - It describes assets like chairs, tables, and display cases.
LIABILITY ACCOUNT TITLES
The account titles that are commonly used in the recordkeeping of the transactions of small
businesses include the following:

1. Accounts payable - It describes the financial obligations arising from goods purchased or services
received.
2. Notes payable - It describes the financial obligations supported with notes.
3. Utilities payable - It describes the unpaid obligations on light and water consumptions.
4. Salaries payable - It describes the unpaid salaries of the workers.
CAPITAL ACCOUNT TITLES
The capital account titles are as follows:

1. Capital - It describes the original and additional investment of the owner.

2. Drawing - It describes the temporary withdrawal of capital by the owner.

INCOME ACCOUNT TITLES

The income account titles that may be used to record the income or revenue of small businesses
are as follows:

1. Service income - It describes general services rendered.

2. Rental income - It describes the income arising from lease or rent of property.
3. Sales - It describes the sale of goods or products to the consumers.
EXPENSE ACCOUNT TITLES
In recording the business transactions of a small entrepreneurial venture, the following expense
account titles are commonly used:

1. Salaries and wages - It describes the expenses on payments or salaries.

2. Store supplies expense - It describes the expenses on store supplies.
3. Taxes and licenses - It describes the expenses on taxes, permits, fees, and licenses.
4. Utilities expense - It describes the expense on light and water.
5. Travelling expense - It describes the expenses on transportation or fare of personnel.
 2
BUSINESS DOCUMENTS

The business transactions that are recorded in the two-column general jounal are based on
business documents, which basically support the existence of transactions. All entries
appearing in the general journal are fully supported with business documents. Before any
recording process takes place, all the supporting documets must be arranged chronologically.
BUSINESS DOCUMENTS
The most common types of business documents that support transactions and events are as
follows:

1. Purchase order - It is an official business document issued by the buyer to the seller of goods.
2. Invoice - It is a commercial business document issued by the seller to the buyer.
3. Official receipt - It is a commercial document that indicates payment or receipt of cash.
4. Delivery receipt - It is a document that serves as an evidence that the goods or services are received.
5. Receiving report - It is a document used within the business upon receipt of the goods shipped by the
courier or forwarder.
6. Check - It is a document that orders a payment of money from the current account maintained in the
bank.
7. Voucher - It is an internal business document that authorizes the incurrence or payment of obligations.
 3
SIMPLE BOOKKEEPING
SIMPLE BOOKKEEPING
Remember the following fundamental concepts in bookkeeping:

1. Surface all transactions with business documents.

2. Record the transactions using the two-column journal.
3. Use the proper account title.
4. Observe the guideline when using the two-column journal.
ILLUSTRATIONS ON SIMPLE BOOKKEEPING
 Value received (debit) = Value parted with (credit)

Compound entry - A journal entry that appears to have two debit values, while credit
has only one value.
Simple journal entry - A jounal entry with only one debit and one credit.
Double-entry bookeeping - For every debit, there is
always a corresponding credit.
 4
CLASSIFYING

It refers to all the transactions of the month that are grouped based on the nature or
characteristics of the account.
Classifying is the grouping of similar business transactions and events and it is the second
mechanical phase of the whole accounting process.
CLASSIFYING

1. Surface all transactions with business documents.

2. Record the transactions using the two-column journal.
3. Use the proper account title.
4. Observe the guideline when using the two-column journal.
 POSTING

JOURNAL THE LEDGER

POSTING
PROCESS

Posting - The process of transferring the same information from the journal to the ledger.
LEDGER
Another book of accounts used to record business transactions and events.

TWO SIDES:
1. Debit side
2. Credit side

BOTH SIDES CONSISTS OF THE SAME COLUMNS:

3. Date
4. Particulars
5. Folio or post reference
6. Amount
POSTING
The following procedures should be observed in posting in the ledger:

STEP 1
• Check the completeness and arrangement of the ledger
• Arrange the ledger in the following order: Assets, Liabilities, Capital, Income, and Expense

STEP 2
• Label the different sections of the ledger properly
• The account title must be centered at the top of the page
• Indicate the page number at the rightmost side in line with the account title
• Write the year and the month only once on both the debit and credit sales
POSTING
STEP 3
a. Transfer the date first, followed by the amount
b. Indicate in the folio column of the ledger the page number of the journal
c. Indicate in the folio column of the general journal the page number of the ledger
d. Make a brief explanation in the particulars column of the ledger. ThIs is optional.

STEP 4
• Repeat all the procedure in step 3 for the credit entry

STEP 5
• Repeat step 3 and 4 in the next entry in the journal until all entries are completely posted
• Remember that posting is usually made at the end of the month after recording the last transaction.
FOOTING THE ACCOUNT
• Footing - The process of adding the debit and the credit money columns of the ledger and finding
their balances.

• The following procedures should be observed in footing the ledger:

1. If an account has a debit balance, that is, the debit total is higher than the credit total, the
difference is placed in the Particulars column of the debit side.
2. If the account has a credit balance, that is, the credit total is bigger than the debit total, the
difference is placed in the Particulars column of the credit side.
3. If there is only one entry on any side of an account in the ledger, no footing is done and the
entry is simply left open.
TRIAL BALANCE
• It is the listing of the debit and credit balances of accounts from the general ledger with the following
purposes:
1. To prove the equality of debit credit
2. To determine the nominal accounts to be closed
3. To serve as basis for making draft financial statements

• 2 MAJOR PARTS:
1. Heading - It normally has three lines intended for the name of the business, title, and the date of
the trial balance.
2. Body - It presents the different account titles and their balances.
TRIAL BALANCE
• 2 KINDS OF TRIAL BALANCE:
1. The Trial Balance of Totals
2. The Trial Balance Balances - commonly used trial balance among the different businesses.
POSSIBLE ERRORS IN THE BOOKKEEPING PROCESS
• Once the trial balance is not in balance, possible errors could have been committed in the
bookkeeping process, such as the following:
1. Erroneous recording in the journal
2. Erroneous posting to the ledger
3. Mathematical mistakes
4. Omission
 LESSON SUMMARY

1. The following are the procedures in simple bookkeeping:

a. Arrange and file in chronological order all the business documents that serve as evidence of
transactions.
b. Record daily the business transactions in the two-column general journal by observing the
chronological occurence of the events as reflected in the business documents and the principle of
debit and credit, which dictates that for every value received, there should be a corresponding value
parted with of equal amount.
c. Transfer or post all the entries in the general journal to the ledger at the end of the month without
changing any information. This procedure implies that all the information in the ledger are sourced
from the general journal.
 LESSON SUMMARY

d. After the posting process has been completed, foot or add the amounts of the debit and credit in the
ledger by observing the principles of footing.
e. Prepare the trial balance from the balances appearing in the ledger.

2. The two books of accounts used in all businesses are the following:
a. The Journal is also known as the book of original entry. All business transactions are recorded in the
journal for the first time.
b. The ledger is also known as the book of final entry. Information in the journal are transferred to the
ledger through the process of posting.
 LESSON SUMMARY

3. The following procedures may be observed in posting:

• STEP 1 Check the completeness and arrangement of the ledger. All the accounts appearing in the
chart of accounts or in the journal must have a ledger.
• STEP 2 Arrange the ledger in accordance with the listings appearing in the chart of accounts.
Otherwise, arrange the ledger as follows: assets, liabilities, capital, income, and expense.
• STEP 3 Label the different sections of the ledger properly. The account title must be centered at the
top of the page, the page number at the rightmost side in line with the account title, and the year and
the month writtern only once on both debit and credit sides.
 LESSON SUMMARY

• STEP 4 Start the posting process with the first debit entry found in the journal
a. Transfer the date first, followed by the amount.
b. Indicate in the folio column of the ledger the page number of the journal.
c. Indicate in the folio column of the general journal the page number of the ledger.
d. Make a brief explanation in the Particulars column of the ledger. This is, however,
optional.
• STEP 5 Repeat all the procedure in Step 4 for the credit entry.
• STEP 6 Repeat Steps 4 and 5 in the next entry in the journal until all entries are completely posted.
 INCOME STATEMENT
Recall the processes in simple bookkeeping
STEP 1 Gathering and arranging the business
documents

STEP 2 Recording the transactions in the journal

STEP 3 Posting the entries in the journal to the

ledger

STEP 4 Preparing the preliminary trial balance

Bookkeeping processes prior to the preparation of Financial Statements
 INCOME STATEMENT
It is a structured financial statement that presents the income, expences and
net income or net loss realized during a certain period.
The term Net Income represents the excess of the gross income or revenue
against the expenses
The term Net Loss refers to the excess of the expenses against the revenue
or income during the period
The term Period may mean a month, a quarter, semi-annual, or annual
Hence, if the income statement has a date labeled “For the year ended
December 31,” it covers a one-year operation.
 Income Statement Illustration
Before an income statement is prepared, the entrepreneur must consider the following.
1. Be sure that the trial balance that serves as the basis of income statement preparation is
correctly balanced.
2. Only accounts that are considered nominal must appear in the income statement.
3. The account is considered nominal when it appears only during a particular period. A nominal
account does not appear in the next accounting period without a transaction affecting the
account, hence considered as a temporary account.
4. When amounts are added, an underline appears on the last amount being added. The
underline is technically called a single rule. The singe rule implies that any amount that appears
below it is related. Hence, it may either be added or deducted. However, the last amount must
have always two underlines called double rule, which indicates that there are no more related
amounts to follow. In case there are, they are no longer related.
 The basis for preparing the income statement is the trial balance. All the accounts and amounts
appearing in the trial balance, as emphasized come from the ledger.
Recall the trial balance of Modern Laundry Center and use the same in the preparation of the
income statement.
Modern Laundry Center
Trial Balance
December 31, 2016
Cash P 66,000
Accounts receivable 80,000
Notes receivable 20,000
Laundry equipment 48,000
Office furniture 28,000
Accounts payable P 38,000
Jenny Toledo, Capital 68,000
Laundry service income 175,300
Laundry supplies expense 11,800
Rent expense 3,000
Salaries and wages 16,000
Utilities expense 3,500
Taxes and licenses 5,000
Totals P 281,300 281,300
 Using the information provided in the trial balance of Modern Laundry Center, the income
statement is presented is as follows:

Modern Laundry Center

Income Statement
For the Period Ended December 31, 2016
Laundry service income
P 175,300 Less: Cost of laundry service
Direct labor - salaries of workers P 16,000
Laundry supplies 11,800
Utilities expense 3,500 31,300 Gross profit
P 144,000
Less: Operating expenses
Rent expense P 3,000
Taxes and license 5,000 8,000
Net income P 136,000

The net income of P136,000 does not have any relation to the cash of the business.
 Reference

ENTREPRENEURSHIP IN PHILIPPINE SETTING

BY NICK L. ADUANA (2016)
THANK YOU