Accounting notes (June 1)

Breakeven:
- Sometimes this is good because both entities can gain profit.
- This is bad in accounting because the effort you put in will not return to you as much as
you put effort into making a profit.

Financial cycle:
1. Bookkeeping or recording phase –
- Preparing and organizing receipts.
- Recorded in order by date based on original documents.
- Transactions are posted in the general ledger. A general ledger is a company’s main
accounting accounting records that contains the complete record of financial
transactions of a company that holds account information to prepare financial
statements. i.e. assets, liabilities, expenses, revenues.

2. Summarize phase –
- Adjusting entries to correct and update the accounts before they are finalized so that
income and expenses are adjusted accordingly.
- Accounts need to be balanced before you proceed to making a financial statement.

3. Clearing or preperatory phase –

BUSINESS TRANSACTIONS:
- RAW materials that enter into the accounting process (business transactions) that result
to a final output ( financial statements).
- Transactions – an action, event characterized by exchange of values or something
valuable between two parties stated or given in terms of money, goods, or service.
(movement of money)

DUAL EFFECT OF BUSINESS TRANSACTIONS:

- Something of value is exchanged for another thing of value. This implies that there is
always a value RECEIVED which is EQUAL to the value parted with.
- Serves as the basis for Double Entry Bookkeeping. Revenue or money that is received or
parted with.
- Written evidence is required for a transaction.

The Accounting Elements:

- Assets, Liabilities, and Owner’s Equity. (ALO)
- Assets: EVERYTHING the company owns (equipment, money, etc…)
- Liabilities: Utang of company
- Owner’s Equity: essentially the owner’s rights to the assets of the business. Ownership
of the money invested.
- When transactions are recorded there should be a change in ALO
Accounting notes (June 8)

Assets = Liabilities + Owner’s equity

A + Exp = L + OE + Rev ( – Exp + Exp )

Assets – anything of economic value to that the company owns.

Liabilities – total utang

Debit – left side

Credit – right side
- There is no one particular side that increases or decreases.
- Debit and credit can both decrease and increase but it depends.

A T-Account is used to visualize an account for analysis in order to depict the two sides of the
account.

Assets and Expenditure are increased on the debit side

Liability, Capital, and Revenue accounts are increased on the credit side.