ENTREPRENEURSHIP
ethical entrepreneur is one
Module 6: Social & Ethical
Responsibilities
Business ethics - refers to
the standards of morally
right and wrong conduct in
business. The law partially
defines the conduct, but
"legal" and "ethical" aren’t
necessarily the same.
Code of Ethics - A formal
document indicating the
entrepreneurships adapt-ted
principles of appropriate
behavior.
Punishments - could take
the form of dismissal,
demotion, suspension or
reprimand.
Rewards - may be given in
the form of cash gifts,
promotions, or citation.
Internal Programs for
Resolving Conflicts
Ethics Review Committees
Provision of Training in
Ethics for Employees
Top Management Support
Ethical Issues Facing
Entrepreneurship:
1. Between the company
and the customers
2. Between the company
and its personnel and
employees;
3. Between the company
and its business associates;
and
4. Between the company
and the investors and the
financial community
Relations with Customer
•When ethical abuses are
committed, the most
probable victims are
customers.
This is expected because of
the high frequency of
transactions between the
company and the
customers.
Entrepreneurs should
provide support for
consumer rights which
are as follows:
The Right to Be Safe –
consumers expect that the
products and services that
they buy will do them no
harm.
The Right to Be Informed
– consumers make
purchasing decisions often.
The Right to Choose –
firms that intend to adhere
to business ethics should
strive to protect consumer’s
right.
The Right to Be Heard –
customers have the right to
communicate their concerns
to entrepreneurship they
patronize.
Relations with Personal
and Employees
• There is always the
possibility that business
firms, including
entrepreneurships, will
commit unethical acts
toward their employees.
Good ethical conduct
requires entrepreneurs to
be aware of their
responsibilities to
employees.
Workplace safety – the
who makes sure that the
workplace is safe for
employees.
Quality of life issues –
many employees are
burdened by problems
about maintaining a good
balance between work and
family.
Avoiding Discrimination –
everyone has the right to
work in a place where
discrimination is not
practiced.
Preventing Sexual
Harassment – sexual
harassment refers to
unwelcome sexual
advances.
Relations with Investors
and the Financial
Community
• The country’s financial
system survives partly
because investors and other
players have placed a
certain degree of trust in
firms they deal with.
Module 7: The Nature of
Accounting and Its
Business Environment
Accounting is the process
of summarizing analyzing
and reporting the financial
transactions in a manner
that adheres to certain
accepted standard formats,
helping to evaluate a past
performance.
decision makers of the
business are relying on
accounting data to be able
to make decisions.
DIFFERENT CONCEPT OF
ACCOUNTING
1. ECONOMIC ENTITY OR
ACCOUNTING ENTITY
The personal transactions
of the owner are
SEPARATE from that of the
business he/she owns.
2. ACCRUAL BASIS OF
ACCOUNTING
- Revenue is recorded when
earned.
- Expenses are recorded
when it happens.
- Regardless of when cash
is received or paid.
3. GOING CONCERN
The company will continue
operating indefinitely until
the foreseeable future, and
that company closure is not
imminent.
4. MONETARY UNIT
Transactions are express in
a monetary unit of measure.
5.TIME PERIOD
Transaction are
summarized and reported at
regular time intervals.
HISTORY OF
ACCOUNTING
In Venice, as early as
November 1494, this
Franciscan monk had
published a book which
contained the primary
principles of mathematics.
And incidentally, a set of
accounting procedures.
Accounting as defined
The Accounting
Standards Council (ASC)
is its Statement of
Financial Accounting
standards (SFAS) No one
defense accounting as
follows:
• It is a serious activity. Its
function is to provide
quantitative information,
remarkably financial in
nature.
The statement of the
Accounting Standards
Council is known as
statement of Financial
Accounting Standards.
The American Institute of
Certified Public
Accountants (AICPA)
which is the largest
organization of privacy
accountants.
Four major functions of
accounting
The recording, classifying
and summarizing functions
constitute the series of
steps, methods and
procedures which are being
followed and applied in
order to transform the
accumulated accounting
data into a report from
called financial statements.
fourth function which is
interpreting, refers to the
analytical and interpretative
words of accounting.
THE DIFFERENT
BRANCHES OF
ACCOUNTING THE
WORLD OF ACCOUNTING
EXPANDED INTO
SEVERAL BRANCHES
THAT SPECIALIZE IN
PARTICULAR
LEGAL AREAS, OR
FOCUS ON A CERTAIN
ASPECT OF BUSINESS.
1. Financial accounting
Involves recording and
clarifying business
transactions along with
preparation and
presentation of financial
statements.
2. Managerial accounting
Provides information to a
company's internal
structure,namely
management.
3. Cost accounting
analyzes manufacturing
costs to prepare and
present reports that inform
decision makers on how to
reduce cost, or when to
spend more.
4. Auditing is a branch of
accounting that is usually
done internally and
externally.
5. Tax accounting follows
state and federal tax rules
during tax planning or in the
preparation of tax returns.
6. Fiduciary accounting
handles the accounts
entrusted to the person
responsible for custody or
management of property.
7. Project accounting falls
under the project
management umbrella. This
accounting analyzes costs
and prepares reports at
regular intervals.
8. Forensic accounting,
also known as legal
accounting, handles legal
matters
related to bankruptcy, fraud
or mismanagement.
9. Fund accounting works
with non-profit organizations
(NPO) to ensure the correct
and accurate allocation of
funds.
10. Government
accounting tracks the
movement of money
through various agencies
and ensures budget
requirements are kept or
met.
11. Political campaign
accounting is practiced in
local, state or nationwide
political races.
12.International
accounting
As global business
expands, so do international
markets and the need for
international accounting.
BUSINESS
ORGANIZATIONS
An entity formed for the
purpose of carrying on
commercial enterprise.
Such an organization is
predicated on systems of
law governing contract and
exchange, property rights,
and incorporation.
4 Major Legal Business
Organization Forms
Sole proprietorship- The
simplest and most common
form of business ownership,
sole proprietorship is a
business owned and run by
someone for their own
Partnership- These come
in two types: general and
limited. In general
partnerships,
both owners invest their
money, property, labor, etc.
to the business and are
both 100% liable for
business debts.benefit.
Corporation- Corporations
are, for tax purposes,
separate entities and are
considered a legal person.
Cooperatives- It operates
similar to a corporation. It
has its Board of Directors
who are selected from
among of its members.
However,
Module 8: Assets,
Liabilities, Capital
Revenue, And Expenses
of the Financial
Statements
ASSETS- are resources
which often help to reduce
expenses, enhance
profitability and generate
robust cash flow as they
help convert raw materials
or can be converted into
cash or cash equivalents.
LIABILITIES - are the
debts, or financial
obligations of a business
the money the business
owes to others.
TYPES OF LIABILITIES
• CURRENT - are debts that
are paid in 12 months or
less, and consist mainly of
monthly operating debts.
• LONG TERM - are
typically mortgages or loans
used to purchase or
maintain fixed assets, and
are paid off in years instead
of months.
EXPENSES OF THE
FINANCIAL STATEMENT
Financial Expense / Income,
net financial
expense/income includes
interest expense, net of
interest income, and foreign
exchange gains and losses.
TYPES OF FINANCIAL
STATEMENT
• Financial statements-
provide a picture of the
performance, financial
position, and cash flows of a
business.
• Income statement- It is a
financial performance of an
organization for the entire
reporting period. It begins
with sales, and then
subtracts out all expenses.
Balance sheet- A balance
sheet lays out the ending
balances in a company's
asset, liability, and equity
accounts as of the date
stated on the report.
• Statement of cash flows-
is one of the financial
statements issued by a
business, and describes the
cash flows into and out of
the organization.
• Statement of Changes in
Equity- is a reconciliation of
the beginning and ending
balances in a company’s
equity during a reporting
period.
CAPITAL REVENUE
are a non-recurring
incoming cash flow into the
business that leads to the
creation of liability and a
decrease in company
assets.
Module 9: The Accounting
Equation
The fundamental
accounting equation, also
called the balance sheet
equation, represents the
relationship between the
assets, liabilities, and
owner's equity of a
person or business. It is
the foundation for the
double-entry bookkeeping
system. For each
transaction, The total
debits equal the total
credits.
VALUE RECEIVED =
VALUE PARTED WITH The
amount of value received
will always equal with the
amount of the value parted
with
DEBIT = CREDIT
The amount entered on the
debit side of an item’s
account will always have a
corresponding amount
entered on the credit side of
another item’s account.
ASSETS = LIABILITIES +
CAPITAL
The liabilities and capital
are called “Equites” which
means that the assets of the
business as a separate
entity can be claim of both
the outside creditors and
the proprietor himself.
ASSETS = EQUITES
If the proprietor wants to
know his proprietary interest
in the business or if he
wants to know how much is
his claim over the assets of
the business, the
accounting equation is
stated as"
ASSETS – LIABILITIES =
CAPITAL
The equation will remind
you of the information that a
proprietor can get from the
balance sheet as:
WHAT THE BUSINESS
OWNS – LESS WHAT THE
BUSINESS OWES equals
WHAT IS LEFT FOR THE
BUSINESS which stands
for the CAPITAL and is the
claim of the proprietor.
ASSETS = LIABILITIES +
CAPITAL (Drawing +
Income - Expenses)
ASSETS = LIABILITIES +
CAPITAL
RULES OF DEBIT AND
CREDIT
As previously discussed,
the accounting equation
reflects the normal balances
of the three accounting
values as well as the
temporary accounts of a
capital account.
Module 10: Recording
Business
Double entry system of
bookkeeping recognizes the
two- fold effects of a
transaction; the value
received and the value
parted with. This justifies the
equality of debit and credit
amounts.
A General Journal can that
be of a “loose-leaf or book
bound” form. It has the
following columnar
headings:
Date Column- shows the
date when the transactions
took place.
Particulars- Shows the
item or the accounts debited
and credited as a result of a
transaction analysis as well
as a brief or concise
explanation of what the
transaction is about.
Folio- Shows the number of
an account in a ledger or
page of a ledger to which it
was transferred. Folio is the
Latin word for “page”. It is
called a “reference”.
Debit Column- This is a
money column showing the
peso amount of the value
received in a transaction.
Credit Column- This is the
money column showing the
amount of the value parted
with in a transaction.
General ledger can that
also be of a “loose-leaf” or
“book bound” form. This
book will group items or
accounts of the same kind,
class or nature. Each item
or account is being provided
with a leaf of a ledger. For
this reason, a ledger is also
called “group of
accounts”.
Two sides of General
Ledger
1. The left-hand side which
is called a debit side.
2. The right-hand side which
is called a credit side.
General Ledger
Each side has the column
of the following:
Date Column- Shows the
date of the transaction that
occurred as recorded in the
Journal;
Particulars- Shows a brief
but a concise explanation of
the transaction as shown in
the Journal. This is
sometimes called
“Explanation”, “Description”
or “Item”.
Folio- Shows the page
number of a Journal where
entries are taken from;
Money Columns-The debit
money columns shows the
amounts that are
transferred from the debit
money column of the
Journal while the credit
money column shows the
amounts that are
transferred from the credit
money column of the
Journal.
End of Accounting Period:
The debit and credit entries
of its item or account in the
ledger are totaled. If the
debit side total is bigger
than the credit side total, the
difference in amount is
called, “DEBIT
BALANCE”. We then say,
the account is a debit
balance.
On the other hand, if the
credit side total is bigger
that the debit side total, the
difference I amount is called
“CREDIT BALANCE”. We
then say, the account is a
credit balance.
If both totals of debit sides
are equal, the account is
said to be “IN-BALANCE’
or‘CLOSED ACCOUNT”.
What is a T-Account?
A general ledger in its
skeleton form is a “T-
ACCOUNT”. The use of a
T-Account as previously
discussed is same with that
of a ledger, except that the
columns for folio and
particulars are eliminated.
To determine the amount
balances of an item or
account in an expedient
manner, a T- Account is
used.
How Transactions Are
Recorded?
Journalizing- The act of
recording business
transaction in the journal,
which is the first step of the
accounting process.
Recording- is the first
phase of accounting. This
involves the writing down of
business transaction in a
systematic manner and in
order of their occurrence in
the book of original entry
called journal.
Journal Entry- The entry
that is made in the journal.
A Journal Entry may be
“SIMPLE” or
“COMPOUND”.
A Simple Journal Entry is
one that has one debit item
with a debit amount and one
credit item with a credit
amount.
Compound Journal entry
is one that may have one
debit item and two or more
credit items; two or more
debit items and one credit
item; or may have two or
more items on both sides.
Chart of Accounts- A list of
account titles is prepared
beforehand to guide
bookkeeper and accountant
of what specific titles are to
be used in describing the
exchanges of values in a
transaction. The list of
account titles is called
“Chart of Accounts”.
Posting to the Ledger -
After the transaction have
been recorded in the
Journal, the entries in the
Journal will then be
transferred to another book
called “Ledger”, for final
recording.
“Classifying”, which is the
second phase of
accounting.
PROCEDURE IN POSTING
JOURNAL ENTRIES TO
THE LEDGER
1st step
As the first account shown
in the General Journal entry
is “cash”, turn the ledger to
the page where the account
“cash”, is located;
2nd step
In the ledger of the account
“cash”, enter in the date
column of the left side
(debit) of the said ledger the
date when transaction
occurred as shown in the
journal;
3rd step
In the “particular” column of
the ledger, state briefly the
nature of the transaction,
how cash existed in the
record;
4th step
In the “folio” column of the
ledger, write down the page
of the journal where the
account “cash” entry was
taken from and
simultaneously, write down
in the “folio” column of the
journal the account or page:
number assigned to the
account “cash”. This is
called “cross-referencing” or
“cross-indexing”.
5th step
Enter in the debit money
column of the ledger “cash”
the amount and the same
procedure is followed in
posting the next account
and subsequent journal
entries.
A Trial Balance is of two
forms; the “Trial Balance of
Balances” and the “Trial
Balance of Totals”.
Generally, a trial balance is
defined as “a statement
listing the debit and credit
balances of accounts in
the General Ledger that
are remaining open at the
end of the accounting
period”. This form of a trial
balance is being referred to
as the “Trial Balance of
Balances”.
A trial balance has the
following headings:
a. Name of the business
or proprietor
b. Title of the report
c. Period covered by the
report
The purpose of preparing a
trial balance is to check the
arithmetical or mathematical
accuracy in postings and
footing of the debit and
credit entries of accounts in
the General Ledger.
PROCEDURE IN
PREPARING THE TRIAL
BALANCE OF BALANCES
Step 1
See to it that footing of each
ledger account is properly
done;
Step 2
List down all accounts in the
General Ledger with “open
balances”, following the
sequence of filing the
accounts in the ledger and
simultaneously write down
the accounts' amount
balance in the debit or credit
column of the trial balance
depending on what account
balance they may have.
Step 3
After listing the last account
title, draw a single line
across the two amount
columns and foot the debit
and credit money columns
by using a well-sharpened
pencil in writing the trial
total. The pencil total is
written in the uppermost
portion of the next line
following the amount of the
last account title written.
The single line drawn is
called “Single Rule”;
Step 4
As the debit and credit
totals are equal, “final total”
is written in ink in the same
line with the pencil trial total;
Step 5
Draw a double line under
the totals of both columns.
The double line drawn is
called “Double Rule”, which
signifies that the trial
balance is already “in-
balance”.
Module 11: ADJUSTING
JOURNAL ENTRIES
Adjusting entries are
journal entries made at the
end of accounting period to
allocate income and
expenditure to the period on
which they actually occurred
Three types of Accounting
Period
1. Calendar Year
➢January 1 to December
31
➢ Generally used by the
business
2. Fiscal Year
➢ Any 12-month period as
long as it is not ending in
December.
Example: April 1, 2010 to
March 31, 2011
3. Natural Business Year
➢ Accounting period ending
in lax season
Types of Adjusting Entries
A. Prepaid Expense
B. Unearned Revenue
C. Accrued Revenue
D. Depreciation Expense
E. Doubtful Accounts or bad
debts
Unearned Revenue (L) –
when company receives
payment before providing
the product or services to its
customer.
Accrued Revenues (A) -
are receivables that are
already been earned but not
yet collected.
Accrued Expenses (L) -
refer to expenses that are
already incurred but not yet
paid.
Depreciation Expense
(Contra-Asset) –
represents how much of an
asset’s value has been
used up.
Doubtful Accounts or Bad
Debts Expense (E) –
represents the estimates
uncollectible amount for
credit sales or revenue.
Module 12: COMPLETING
THE ACCOUNTING
CYCLE
Closing Entries
The accounts that are to be
closed at the end of the
accounting period are the
nominal or income
statement accounts. By
closing, this means that a
nominal account which has
an “Open Balance” will be
reduced to “Zero” balance.
purpose of closing entry is
to effect the results of its
operations to Capital Net
Income will be added to
Capital and Net Loss will be
deducted from Capital
account.
The post-closing trial
balance therefore contains
the list of the Balance Sheet
accounts with open
balances and is therefore
defined as “balance sheet in
a trial balance form”.
Reversing Entry is a
journal entry that is being
prepared at the beginning of
the next accounting period.
It is the ninth and the last
step of the accounting
process.
ACCRUED ITEMS
All accrued item
adjustments are reversed.
They are accrued expense
and accrued income.
Deferred Items
There are two approaches
that can be used in
recording payment and pre-
collection. They are the
nominal and real
approaches.
a. Expense account is
debited upon prepayment of
expenses.
b. Income account is
credited upon receipt of pre-
collected income.