COLLEGES OF ADVANCE TECHNOLOGY

AND MANAGEMENT OF THE PHILS.,(CATMAN), INC.

Provincial Road Corner Faigal Street , Saranay District, Guimba, Nueva Ecija
_________________________________________________________________

Module Lesson
for

ACCOUNTING 2

Prepared by:

ANNABELLE D. MARIANO-CORREA
BSOA - Faculty

CATMAN Use Only

 PRELIMS

1.Accounting Framework and Concepts

2. Purchases and Cash Payments
3.Sales and Cash Receipts
SESSION 1

Accounting

Accounting is basically the systematic process of handling all the financial transactions
and business records. In other words, Accounting is a bookkeeping process that records
transactions,  keeps financial records, performs auditing, etc. It is a platform that helps
through many processes, for example, identifying, recording, measuring and provides
other financial information.

Objectives of Accounting

The functions of accounting facilitate the objectives of accounting. there are many
objectives of accounting. For instance,

1. Accounting facilitates the systematic management of the records of the transaction

and other financial data.

2. It gives an idea about the chances of profitability or failure or losses.

3.  The process assists the management by helping them to make the best decisions.
besides that, accounting ascertains the financial position of an organization.

4.  It also helps in the evaluation of the employee and their working efficiency, in
addition, communicating and spreading the accounting information to the user.

5. Accounting contributes the biggest to any organization by preventing fraud and

prevents profit risks.

What is the framework of accounting theory?

The theoretical framework of Accounting refers to the set of frameworks, methods,

and assumptions used in the study and application of accounts in financial situations.

Recording Transactions
The whole purpose of accountancy is to keep a track of all your business transactions.
The first and the most basic step is thus the recording of such transactions. From these,
we prepare our final accounts for the stakeholders. So let us learn about source
documents and recording transactions for financial accounting.

 Business Transaction and Source Document

 Using Debit and Credit

 Books of Original Entry

 Posting from Journal and Cash Book

 Journal Proper and Balancing the Accounts

 Purchases (Journal) and Purchase Return Book

 Sales (Journal) Book and Sales Return Book

Historical Functions

The historical functioning of accounting involves keeping accurate records of all the past
transactions made in the business. This type of functioning of accounting includes:

A.RECORDING FUNCTIONS – recording of business transactions in chronological order

1. Recording the financial transactions and maintain a journal to keep them all.

What to record?
Business Transactions – it means value received is equal to value parted with.
Where to record?

VR = VPW
Business Transaction

General Journal -2 columns journal and it is considered as the book of original entry

B. CLASSIFYING FUNCTIONS – putting together similar items or accounts

Ledger- where classifying of accounts being recorded

Basis of data is the journal or the book of original entry

2. It is important to classify and separate the records and the ledger.

C. SUMMARIZING – preparation of Financial Statements

/ Income Statement - income and expenses only

/ Capital Statement - capital and drawing
/ Balance Sheet - Assets, liabilities and capital

Asset = Liabilities + Capital

Fundamental Accounting Equation

Business = Owner

Liabilites + Capital = Business

(Owner”Equity)

3. Preparation of brief summary takes place for quick reviews.

4. This type of accounting gives the net result other than just keeping the records.

5. The preparation of the balance sheet takes place to determine the financial position
of the business.

6. The analyzed data and records are then used for other purposes.

D. INTERPRETING – financial condition of the business

7. The last step is to communicate the obtained financial information to the interested
sectors, for instance, owners, suppliers, government, researchers, etc.

Accounting values or account Titles

1. Asset - anything owned by the business

A.Current Asset- is consumable usable or anything turned easily into cash
Ex. cash - medium for exchange
Supplies – office supplies , laundry supplies, shop supplies
Inventory- stocks merchandise items ready for sale
Notes recievable – example titles of land, check ,promisory notes
Account Receivables – expectation of collection

B. Fixed Assets- assets of high value

Ex. Land – do not depreciate
Equipment and machinery
Building

2. Drawing – personal withdrawals or expenses of the owner

Ex. Correa, Drawing
 3. Expenses – anything incurred by the business
Ex. Rent Expense, Utility Expense, communication expense, Representation expense,
Salary and wages expense, marketing expenses

4. Capital – fund or investment of the owner or owners equity

Ex. Correa, Capital

5. Income- earnings or revenue or profit of the business

Ex. Commission income, Professional fees income, shop income, Interest income

6. Liabilities – anything owed by the business

A. Short Term Liabilities – not exceeding for 1 year
Ex. Notes Payable
Accounts Payable
B. Long term Liabilities – mortgage payable, bond payable

Second Semester - Prelim

SESSION 1
Activity Sheet No. 1

Name: _______________________________ Score/Average: _________________

Analyze the account titles below and write its normal entry in different journals.
(Debit and Credit)

__________1.Cash
__________2.Supplies
__________3.Accounts Payable
__________4.Merchandise Inventory
__________5. Correa, Capital
__________6. Correa, Drawing
__________7. Accounts Receivable
__________8. Sales
__________9.Purchases
__________10.Notes Payable
__________11. Notes Receivable
__________12. Rent Expense
__________13.Utility Expense
__________14.Commission Income
__________15. Equipments

Give the 1. journal entries( Debit and credit entry ) of the following business
transactions below and 2. state which special journals to record each.

Example: Paid cash utility used.

1. Dr. Utility Expense

Cr. Cash
To record payment for utility used.

2. General Journal

BEGIN HERE:

1. Bought merchandise on account.

2. Sold equipment on cash.
3. Bought equipment on cash.
4. Received income.