accounting = is the art of recording, classifying, summarizing in significant mannerr and

in terms of money trnsactions and events which are in part at least of financial
character and interpreting the results therof.

Accounting cycle
Identify and analysis of business transctions.
Journalizing of business transactions
Posting to the ledger
Unadjusted trial balance
Worksheet (optional)
Adjusting journal entries-post to the ledger
Prepare the adjusted trial balance
Finacial statements
Closing entries
Post closing trial balance
Reversing Entries

Acccounting is the language of busins

Entity concept = the ownerr and the company are two separate entity.

Company have to communicate to:

creditors
customers
investors
government
employees
management

Accounting Equation

ASSETS = LIABILITIES + EQUITY

CURRENT ASSETS -assets that can be consumed or used within one year or less or during the normal operating c
Cash
Marketable securities
Accounts receivable 10000
Allowance for bad debts 500 9500 Net realizable value
Inventories
Prepaid expenses expenses paid in advance

NON-CURRENT ASSETS
Long-tem investment
Investment in equity securities
Investments in bonds
Sinking fund

Property, plant and equipment Cost = Depreciation

'-can be used for long perriod Machinery
- physical existence Deduct accumulated depreciation Less: Accumulated depreciati
-used in the operation of the busines
-not intended for sale

Intangible Assets
Franchise
Copyright
Goodwill
Patent
Amorization = deducted from the cost

Other Assets

LIABILITIES
CURRENT LIABILITIES = liabilities/obligationsto paid/settled within one year or less or during the normal operrating
Account payable
Tax payable
Bank overdraft
Interest payable
Accrued expenses = expenses already incurred but not yet paid
Unearned income = income already received but not yet earned

LONG-TERM LIABILITIES
Mortgage payable
Bonds payable
Bank loan-long term

EQUITY

Single proprietorship Partnership

Statement of Owner's Equity

Bginning capital xx Bginning capital

Add: net income xx Add: net income
Total xx Total
Less: withdrawal xx Less: withdrawal
Capital end xx Capital end

A A

Total Assets xx Total Assets

Laibilities xx Laibilities

Owners' Equity Partners' capital

X, capital xx X, capital
Total Liablities and Owners' Equity xx Y, capital
Z, capital
Total Liablities and Partners' Equity
during the normal operating cle fo the business.

Business Concern/Types of business

Net realizable value (NRV) Service
Merchandizing
Manufacturing
Raw materials
Finished Goods
Work in process
 Goods in transit

Accreud income = income already earned but not year received = receivable

Machinery 20000
Less: Accumulated depreciation 2000 18000 NBV NRV
15000

r during the normal operrating cycle of the busines

Partnership Corporation

Statement of Partners' Capital Statement of Changes in Shareholders' Equity

X Y Z TOTAL
x x x xx 5% Preference share caital, 10,000 shares authorized, $10 pa
x x x xx 5,000 shares issued and outstanding
x x x xx Ordinary share capita, 20,000 shares authorized, $5 par value
x x x xx shares issued and oustanding
 x x x xx Premium on ordinary shares
Total share capital
Retained earings
Total
Treasury shares, at cost
xx Total shareholders' equity

xx
A

Total asset
xx
xx Liabilities
xx xx
artners' Equity xx Shareholders' equity
Total liabilities and shareholders' equity
es in Shareholders' Equity

000 shares authorized, $10 par value,

and outstanding 50000
hares authorized, $5 par value, 10,000
50000
 20000
120000
15000
135000
-5000
130000

xx

xx

xx
xx
 ADJUSTING JOURNAL ENTRIES

A. Prepaid expense are expenses paid in advance.

ASSET METHOD

Paid rent for 1 year paying $24,000. Rent commence on April 1, 2023.

Paid
Prepaid rent 24,000
Cash 24,000

AJE Dec. 31
1/s Rent expense 18,000
B/s Prepaid rent 18,000
(24,000/12=2,000/mo x 9)
Prepaid REnt Rent Expense
Apr1. 24000 18,000 Dec. 31 Dec. 31 18,000
B/s Dec. 31 6000 i/s 18,000

B. Accrued Expense=expense already incurred but not yet paid.

Ex: Salaries unpaid on December 31 $15,000

Salaries expense 15,000

Salalries payable 15,000

C. Unearned income = income received in advance.

LIABILITY METHOD

Ex. Reeived $24,000 from a tenant for one year period rental of building space starting May 1, 2023.

Received
Cash 24,000
Unearned rent income 24,000

AJE Dec. 31

Unearned rent income 16,000

Rent income 16,000
(24,000/12 =2,000 x 8)
 Unearned Rent Income Rent Income
Dec. 31 16000 24,000 May 1. Dec. 31 16,000
8,000 Dec. 31 Bal. 16,000
B/s I/s

D. Accrued Income =income already earned but not yet received

Ex: Interest on notes receivable $500 was already earned but not yer recorded.

AJE
Interest receivable 500
Interest income 500

E. Depreciation

Ex: Purchased equipment for $60,000 with 5 years estimated useful life with no salvage value
on October 1, 2023

I/s Depreciation expense-equipment 3,000

B/s Accumulated Depreciation-equipment 3,000
(60,000/60=1,000 x 3 =3,000

F. Allowance for Bad Debts or Allowance for Doubtful Accounts

Ex. Accounts receivable 20,000,000

Sales (credit) 50,000,000
Allowance for bad debts (cr) 800,000

Allowance for bad debts is estimated at

5% of accounts receivable
5% of Sales

I/s Bad debts expense 200,000

B/s Allowance for bad debts 200,000
(5% x 20,000,000)=1,000,000-800,000=200,000

Bad debts expense 2,500,000

Allowance for bad debts 2,500,000

CLOSING ENTRIES
1. Close all revenue accounts to income summary aacount

2. Close all expenses accounts to Income summary account.

3. Clos net income or net loss to capital or retained earnings.

4. Close withdrwal /dividend

 EXPENSE METHOD

Paid rent for 1 year paying $24,000. Rent commence on April 1, 2023.

Paid
Rent Expense 24,000
Cash 24,000

AJE Dec. 31
Prepaid rent 6,000
Rent expense 6,000
(24,000/12=2,000/mo x 9)
Prepaid REnt Rent Expense
Dec. 31 6000 Apr. 1 24,000 Dec. 31 6,000
Dec. 31 6000 i/s 18,000

INCOME METHOD

rting May 1, 2023. Ex. Reeived $24,000 from a tenant for one year period rental of building space starting May 1, 20

Received
Cash 24,000
Rent income 24,000

AJE Dec. 31

Rent income 8,000

Unearned rent income 8,000
(24,000/12 =2,000 x 4)
 Unearned Rent Income Rent Income
8,000 Dec. 31 Dec. 31 8,000 Dec. 31
8,000 bal Bal.
B/s

lvage value

Income summary account

CJE Expense revenues CJE
lding space starting May 1, 2023.
 24,000
16,000
I/s