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Introduction To Accounting
Introduction To Accounting
Business
Person or organization
Regular conduct
Commercial, industrial or professional activities
Lawful transactions
Whether for profit or not
To fulfill a purpose, goal, mission or cause
1. Sole Proprietorship
2. Partnership
a business organization that has a separate legal personality from its owners
usually adopted by large business organizations
can generate large amounts of capital from investments
not easy to set-up and organize
ownership is usually represented by shares of stock.
owners (stockholders) enjoy limited liability but have limited involvement in
the company's operations.
easy to transfer ownership
1. Service Business
2. Merchandising Business
a business that buys products and sells the same at a higher price for a
profit.
known as "buy and sell" businesses.
sells a product without changing its form.
Examples are: grocery stores, convenience stores, distributors, and other
resellers.
3. Manufacturing Business
a business that buys materials and converts them into a new product.
combines raw materials, labor, and overhead costs in its production process,
and sells the manufactured goods to customers.
4. Mixed/Hybrid Business
companies that can be classified in more than one type of business.
example: A restaurant, combines ingredients in making a fine meal
(manufacturing), sells a cold bottle of wine (merchandising), and fills
customer orders (service).
Depending on the form of the business, it must register with the following government
agencies:
Depending on the nature of its activities, the business must secure its permits and
licenses in the city or municipality where it conducts its business. Generally the following
will be obtained:
The business entity must also comply with the following requirements of the Bureau of
Internal Revenue:
1. Business registration
2. Issuance of receipts and invoices
3. Keeping of tax and accounting records
4. Withholding of taxes on certain payments
5. Filing and payment of taxes
However profitable or noble the purpose of the business may be, the failure of the
business entity to comply with any of these requirements might lead to penalties, fines,
surcharges or, at worst, closure of the business.
After the registration and securing all the necessary certificates and permits, the
company needs to maintain its accounting records.
Definition of Accounting
Accounting
Purpose of Accounting
Financial Statements
Customers
Suppliers
Creditors
Investors
External Auditors
Government Agencies
Industrial Organizations
Public
Branches of Accounting
1. Financial Accounting
2. Management Accounting
3. Tax Accounting
4. Auditing
Bookkeeping
Bookkeeper is the person who keeps and maintains the books of accounts of the
business organization. The bookkeeper is responsible for recording the transactions of
the business.
Functions of a Bookkeeper
General Accounting
Accounts Receivable
Accounts Payable
Inventory Accounting
Record receipts of inventory from suppliers.
Record release of inventory to customers
Record inventory returns and adjustments
Prepare purchase requests and Inventory issuance slips
Reconcile physical count of inventory to ledger balances
Maintain inventory subsidiary ledgers
Prepare Inventory reports
The Bookkeeper may also be assigned to handle other functions, such as:
The scope and variety of functions depends on the nature, type, size, organization
structure of the business and other factors.
Due to the importance of his or her functions, the Bookkeeper must possess the
knowledge, abilities and temperaments required to properly fulfill his or her duties and
functions. One of the knowledge requirements would be the basic knowledge in
Accounting.
Recording
3. Posting. The transactions from the journal are classified in the book of final entry
known as the ledger. The ledger classifies the transactions effecting the increases and
decreases for each account.
Summarizing
4. Trial Balance. The summary of accounts balances from the ledger is prepared in
the list of accounts known as the trial balance. This is the proof that the ledger debit
balances and credit balances are equal and is in balance.
5. Adjusting Entries. Adjusting journal entries are made at the end of the accounting
period to assign revenues to the period in which they are earned and expenses to the
period in which they are incurred.
Reporting
7. Closing Entries. The temporary nominal accounts are eliminated from the accounts
by recording and posting the closing entries. This will prepare the accounting records
for the next accounting period.
8. Post-Closing Trial Balance. After the closing entries are posted, the post-closing
trial balance is prepared to check that the debit and credit balances of the remaining
accounts are correct.
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