Fundamentals of Accountancy, Business and Management 1 (Second Quarter)

Fundamentals of Accountancy,
Business and Management 1

(Second Quarter)
Bureau of Curriculum Development

December 2017
MANAGEMENT OF LEARNING
DEPARTMENT OF EDUCATION – BUREAU OF CURRICULUM DEVELOPMENT

COURSE DESCRIPTION
Fundamentals of Accountancy, Business and

Management 1
This is an introductory course in accounting, business

and management data analysis that will develop
students’ appreciation of accounting as language of
business and an understanding of basic accounting
concepts and principles that will help them analyze
business transactions.

COVERAGE OF THE SESSION
• Business Transactions and Their Analysis As Applied to the

Accounting
• Adjusting Journal Entries
• Worksheet
• Financial Statements
• Closing Entries
• Post Closing Trial Balance
• Reversing Entries
• Merchandising Business


Accounting
• Worksheet
• Closing Entries

ACCOUNTING CYCLE
REVERSING
ANALYZING
ENTRIES
POST-
CLOSING JOURNALIZIN
TRIAL G
BALANCE
CLOSING
POSTING
ENTRIES
FINANCIAL TRIAL
STATEMENT BALANCE
ADJUSTING
WORKSHEET
ENTRIES
ADJUSTING ENTRIES
• Generally, adjusting entries are prepared for the following

reasons:
• To bring records or balances of accounts updated
• To properly match revenues against expenses during the
period

ADJUSTING ENTRIES
• TYPES OF ADJUSTING ENTRIES

• Accruals
• Deferrals
• Provision for Estimated Uncollectible Accounts
• Provision for Depreciation of Property and Equipment or
Fixed Asset
• Unused Supplies Inventory Adjustment

ADJUSTING ENTRIES
• Accruals
• Accrued Income
- Income that is already earned but not yet collected
- Receivable
• Accrued Expense
- Expenses that is a already incurred but not yet paid
- Payable

ACCRUALS. EXAMPLE
• A building owned by ABC Company was partly rented by XYZ Company for 50,000
per month payable every 5th day of the following month. The rental for the month of
December 31, 2016 will be paid on January 5, 2017.
ABC Company
Year Particulars F Debit Credit
Dec 31 Accrued Rent Income 50,000
Rent Income 50,000
XYZ Company
Dec 31 Rent Expense 50,000
Accrued Rent Expense 50,000

ADJUSTING ENTRIES
• Deferrals
• Pre Collected Income
- This is a income collected although not yet earned
• Pre Paid Expense
- These are expenses that are paid in advance before
they are incurred

DEFERRALS. EXAMPLE
PRE-COLLECTION
• On October 1, 2016, Ichiro Saberon Realty Co. collected P12,000 from a tenant of the
building it owns for the period of one (1) year from Oct. 1, 2016 to Oct 1, 2017. The
accounting period will end on December 31, 2016.
Oct 1 Cash 12,000
Unearned Rent Income 12,000

Dec 31 Unearned Rent Income 3,000
Rent Income 3,000

DEFERRALS. EXAMPLE
PREPAID EXPENSE
• On September 1, 2016, June Commercial paid an insurance premium covering the
period from September 1, 2016 to September 1, 2017 in the amount of P3,600. The
accounting period ends on December 31, 2016
Sept 1 Prepaid Insurance 3,600
Cash 3,600

Dec 31 Insurance Expense 1,200
Prepaid Insurance 1,200

PROVISIONS. EXAMPLE
Provision for Estimated Uncollectible Accounts

• Let us assume that Gabby Company has an outstanding accounts receivable of
P60,000. Based on past experience, it is estimated that 2% is doubtful of collection
at the end of the accounting period on December 31, 2016

Dec 31 Doubtful Accounts 1,200
Allow. For Doubtful Accounts 1,200

PROVISIONS. EXAMPLE
Provision for Depreciation of Property and Equipment or Fixed Asset

• On September 1, 2016 Adi Machine Shop acquired a brand new machine at a cost of
P100,000. The estimated life of the machine is 5 years and with a residual value of
10,000

Dec 31 Depreciation Expense 1,500
Accumulated Depreciation 1,500

UNUSED SUPPLIES INVENTORY. EXAMPLE
PREPAID EXPENSE
• On September 1, 2016, June Commercial paid an insurance premium covering the
period from September 1, 2016 to September 1, 2017 in the amount of P3,600. The
accounting period ends on December 31, 2016
Dec 1 Supplies Inventory 20,000
Cash in Bank 20,000

Dec 31 Supplies Expense 12,000
Supplies Inventory 12,000

ADJUSTING ENTRIES. ACTIVITY
a. It is estimated that 2% of the outstanding accounts receivable is

uncollectible
b. Depreciation of the following property and equipment are not yet recorded
on January 2017:
1. Shop Equipment was acquired on January 1, 2016 with an estimated
life span of 10 years without scrap value at the end of its life. Only the
depreciation for 2016 was recorded in the amount of 24,000.
2. Furniture and Fixtures was acquired on July 1, 2016 with an estimated
life span of 5 years without scrap value at the end of its life. Only the
depreciation from July 1, 2016 to December 31, 2016 was recorded
c. Actual Inventory of shop supplies on January 31, 2017 was found to be
valued at P20,400
d. Of the Prepaid Insurance of P2,400 only 1,600 has actually expired.

ADJUSTING ENTRIES. ACTIVITY
e. The following expenses were incurred but not yet paid at the end of
January 31, 2017
1. Accrued interest on note issued to First Mindanao Micro Lending
Company of P100,000 at 15% per annum on December 30, 2016.
Remittance of fraction of principal plus interest will be due on
February 2, 2017.
2. Monthly shop rental payable every third day of the succeeding
month, P2,500.
3. Unpaid taxes and licenses to the city government that due on
January 20, 2017, P1,850
4. Unpaid bill of Light and Water, P1,500 (Utilities Expense)


Accounting
• Worksheet
• Closing Entries

ACCOUNTING CYCLE
REVERSING
ANALYZING
ENTRIES
POST-
CLOSING JOURNALIZIN
TRIAL G
BALANCE
CLOSING
POSTING
ENTRIES
FINANCIAL TRIAL
STATEMENT BALANCE
ADJUSTING
WORKSHEET
ENTRIES
WORKSHEET
WORKSHEET
is prepared to facilitate the preparation of adjusting entries,
financial statements and closing entries.
10-COLUMN WORKSHEET
• Unadjusted Trial Balance
• Adjustments
• Adjusted Trial Balance
• Income Statement
• Balance Sheet

10-COLUMN WORKSHEET
WORKSHEET
is prepared to facilitate the preparation of
adjusting entries, financial statements and
closing entries.

10-COLUMN WORKSHEET
1
Write the heading of the worksheet

10-COLUMN WORKSHEET
2
Copy the trial balance on the first two
columns

10-COLUMN WORKSHEET
4
The adjusted trial balance is
the total of the preadjusted
trial balance and adjustments.
Debit +Debit = Debit
Credit + Credit= Credit
Credit + Debit= extend on
the side of the
difference(Bigger number)

10-COLUMN WORKSHEET
5
Extend the expenses and
income accounts on the
Income Statement column.
Debit amount to debit side

Credit amount to credit side
Get the difference

10-COLUMN WORKSHEET
Extend the Assets, Liabilities,

Capital and Drawing
accounts to Balance Sheet
columns
Debit amount to debit side

Credit amount to credit side
Get the difference

10-COLUMN WORKSHEET
Write the column for account titles “Net Income” if the

difference is Net income or “Net Loss” if the difference
is a net loss.
7
Write the final totals and double rule.

WORKSHEET
ACTIVITY
PREPARE 10-COLUMN WORKSHEET

40 MINS


Accounting
• Worksheet
• Closing Entries

ACCOUNTING CYCLE
REVERSING
ANALYZING
ENTRIES
POST-
CLOSING JOURNALIZIN
TRIAL G
BALANCE
CLOSING
POSTING
ENTRIES
FINANCIAL TRIAL
STATEMENT BALANCE
ADJUSTING
WORKSHEET
ENTRIES
FINANCIAL STATEMENTS
Statement of Financial
formal statement showing the three elements comprising financial
Position
(Balance Sheet) position, namely assets, liabilities and equity.
Statement of Financial
is formal statement showing the financial performance of an entity
Performance
(Income Statement)
for a given period of time
Statement of Changes in shows the movements in the elements or components of the

Equity shareholders equity
Statement of Cash Flows summarizes the operating, investing and financing activities
provides narrative description or disaggregation of items presented

Notes to Financial
in the financial statements and information about items do not
Statement
qualify for recognition.
Statement of Statement of
Financial Cash Flows
Statement of Position Operating
Financial
Performance ASSETS Investing
Financing
LIABILITIES
INCOME
EQUITY Statement of
EXPENSES Changes in
Equity
Notes to Financial Statement

WHO – the name of the company or

proprietor’s name if there is no
trade name
WHAT – the name or title of the report
WHEN – the date of the report or
statement

ACTIVITY
PREPARE FINANCIAL STATEMENTS

40 MINS


Accounting
• Worksheet
• Closing Entries

ACCOUNTING CYCLE
REVERSING
ANALYZING
ENTRIES
POST-
CLOSING JOURNALIZIN
TRIAL G
BALANCE
CLOSING
POSTING
ENTRIES
FINANCIAL TRIAL
STATEMENT BALANCE
ADJUSTING
WORKSHEET
ENTRIES
CLOSING ENTRIES
Nominal accounts with an open balance of a

debit is to be credited by the same amount to be
reduced to zero.
These are journal entries that is recorded in the

general journal.

CLOSING ENTRIES
PROCEDURES IN CLOSING THE NOMINAL ACCOUNTS

1. Close the Income Accounts to Income and Expense
Summary
2. Close all Expense accounts to Income and Expense
Summary
3. Foot the debit and credit entries of the Income and
Expense Summary.
4. Close the Income and Expense Summary to Capital
Account

CLOSING ENTRIES
ACTIVITY
PREPARE CLOSING ENTRIES AND FOOT BALANCES

30 MINS


Accounting
• Worksheet
• Closing Entries

ACCOUNTING CYCLE
REVERSING
ANALYZING
ENTRIES
POST-
CLOSING JOURNALIZIN
TRIAL G
BALANCE
CLOSING
POSTING
ENTRIES
FINANCIAL TRIAL
STATEMENT BALANCE
ADJUSTING
WORKSHEET
ENTRIES
POST-CLOSING TRIAL BALANCE
• After closing statement of financial performance, what are

left open in the General Ledger of all Statement of Financial
Position accounts which are also considered as permanent
accounts.
• Another Trial Balance is prepare to prove the equality of
debit and credit.
• This time, Trial Balance will contain statement of financial
position accounts that remained open

ACTIVITY
PREPARE POST-CLOSING TRIAL BALANCE

20 MINS


Accounting
• Worksheet
• Closing Entries

ACCOUNTING CYCLE
REVERSING
ANALYZING
ENTRIES
POST-
CLOSING JOURNALIZIN
TRIAL G
BALANCE
CLOSING
POSTING
ENTRIES
FINANCIAL TRIAL
STATEMENT BALANCE
ADJUSTING
WORKSHEET
ENTRIES
REVERSING ENTRIES
• Is a journal entry that is being recorded in the General

Journal and is done at the beginning of the next accounting
period after the opening entry.
• The purpose of this is to facilitate the recording of
subsequent transactions

WHAT ACCOUNTS ARE TO BE REVERSED?
a. All accruals
b. Deferrals whose original entries follow the nominal
approach

ACTIVITY
PREPARE REVERSING ENTRIES


Accounting
• Worksheet
• Closing Entries

MERCHANDISING
• A business organization that deals with buying and selling

of goods
• The main difference between service concern and
merchandising business is the presence of Merchandise
Inventory

DISCOUNT TERMS
• 2/10, N/30
• 2/10, 1/20, N/30
• 2/10, EOM
• Cash Discounts
• Purchase Discounts
• Sales Discount

MERCHANDISING VS SERVICE
MERCHANDISING SERVICE CONCERN

BUSINESS
SERVICE INCOME xx
NET SALES xx Less: EXPENSE xx
Less: COST OF SALES xx
GROSS PROFIT xx PROFIT xx
Less: EXPENSES xx
PROFIT xx

INVENTORY SYSTEMS
• PERIODIC METHOD
• PERPETUAL METHOD

PERIODIC VS PERPETUAL
• PURCHASE OF INVENTORY
PERIODIC METHOD
JAN 1 PURCHASES XX
CASH/ACCOUNTS XX
PAYABLE
PERPETUAL METHOD
JAN 1 MERCHANDISE INVENTORY XX
CASH/ACCOUNTS XX
PAYABLE

• PURCHASE DISCOUNT
PERIODIC METHOD
JAN 1 ACCOUNTS PAYABLE XX
PURCHASE DISCOUNT XX
PERPETUAL METHOD
MERCHANDISE XX
INVENTORY

• PURCHASE RETURNS AND ALLOWANCES
PERIODIC METHOD
PURCHASE RETURNS AND XX
ALLOWANCES
PERPETUAL METHOD
MERCHANDISE XX
INVENTORY

• FREIGHT IN
PERIODIC METHOD
JAN 1 FREIGHT IN XX
CASH/ACCOUNTS XX
PAYABLE
PERPETUAL METHOD
JAN 1 MERCHANDISE INVENTORY XX
CASH/ACCOUNTS XX
PAYABLE

• SALES
PERIODIC METHOD
JAN 1 CASH/ ACCOUNTS XX
RECEIVABLE
SALES XX
PERPETUAL METHOD
JAN 1 CASH/ ACCOUNTS XX
RECEIVABLE
SALES XX
COST OF SALES
MERCHANDISE
• SALES DISCOUNT
PERIODIC METHOD
JAN 1 CASH XX
SALES DISCOUNTS XX
ACCOUNTS RECEIVABLE XX
PERPETUAL METHOD
JAN 1 CASH XX
SALES DISCOUNTS XX
ACCOUNTS RECEIVABLE
• SALES RETURNS AND ALLOWANCES
PERIODIC METHOD
JAN 1 SALES RETURNS AND ALLOW XX
CASH/ACCOUNTS XX
RECEIVABLE
PERPETUAL METHOD
JAN 1 SALES RETURNS AND ALLOW XX
ACCOUNTS RECEIVABLE XX
MERCHANDISE INVENTORY XX
COST OF SALES
CHART OF ACCOUNTS
Account Titles
1Cash in Bank 15Sales
2Accounts Receivable 16Sales Discounts
3Estimated Uncollectible Accounts 17Sales Returns and Allowances
4Merchandise Inventory 18Purchases
5Supplies Inventory 19Purchases Discounts
6Furniture and Fixtures 20Purchase Returns and Allowances
7Accum. Depreciation - FF 21Freight In
8Transportation Equipment 22Freight Out
9Accum. Depreciation - TE 23Salaries Expense
10Accounts Payable 24Utilities Expense
11Accrued Expense 25Taxes and Liscenses
12Y. Gutierrez, Capital 26 Supplies Expense
13Y. Gutierrez, Drawing 27Rent Expense
14Income and Expense Summary 28Uncollectible Accounts
29Depreciation Expense

TRANSACTIONS. MONTH OF JANUARY
DATE TRANSACTION
1 Ms. Gutierrez invested the following:
a. Bank deposit with Banco De Oro, P850,000
b. Merchandise with net realizable value of P250,000
c. Transportation Equipment with Fair Market Value of P1,800,000
2 Purchased merchandise in cash from Rowena Tuyor Trading costing P150,000 and paid freight and
handling, P2,500
3 Returned P3,000 cost of merchandise to Rowena Tuyor Trading due to some defects and no replacements
have been made.
5 Sold merchandise for cash, P120,000 to R. Guiang Grocery and gave a 3% trade discount and paid freight
shipment, P3,500
7 Purchase merchandise on account from S. Madelo Co. P50,000. Term: 3/10, N/30
8 Sold merchandise on account to F. Ybanez Trading, P185,000. Term: 2/10, N/30. Paid freight on shipment,
P1,200
9 Purchased merchandise on account from E Sardido Co. costing 230,000. Term: 2/10 EOM
10 Received P4,000 worth of merchandise on account from F. Ybanez Trading for not conforming with the
order and was not replaced

TRANSACTIONS. MONTH OF JANUARY
DATE TRANSACTION
12 Paid the account with S. Madelo Co., P48,500 after availing of the 3% purchase discount.
13 Sold merchandise on account to R. Langbid Co., P80,000 Term: 2/10, N/30
15 Purchased merchandise on account from M. Cervantes Co. 70,000. Term: 3/10, N/30
18 Returned P1,500 cost of merchandise to M. Cervantes Co. due to bad order and was not replaced
Collected in the full account of F. Ybanez Trading, P177,380.
20 Sold merchandise for cash, P50,000 ro R. Valle Enterprise and gave a 1% trade discount
22 Received P500 worth of merchandise from R. Valle Enterprise as item breakage and was not replaced due to
out of stock
23 Collected fro, R. Langbid Co. the amount of P78,400 net of 2% discount on Jan 13, sales on account
26 Sold merchandise on account to K Peras Commercial, P420,000. Term: 3/10. EOM
28 Paid the following expenses
Salaries for the month P15,000; Light and Water bill (Utilities) P5,800; Taxes and Licenses, P6,500; Rent
Expense, P10,000
30 Withdrew P20,000 for personal use of Ms. Gutierrez
31 Sold merchandise on account to J. Mascarinas Co. P35,000. Term 2/10, N/30
Account Titles Debit Credit
Cash in Bank 1,011,180
Accounts Receivable 455,000
Merchandise Inventory 250,000
Transportation Equipment 1,800,000
Accounts Payable 298,500
Y. Gutierrez, Capital 2,900,000
Y. Gutierrez, Drawing 20,000
Sales 885,900
Sales Discounts 5,220
Sales Returns and Allowances 4,500
Purchases 500,000
Purchases Discounts 1,500
Purchase Returns and Allowances 4,500
Freight In 2,500
Freight Out 4,700
Salaries Expense 15,000
Utilities Expense 5,800
Taxes and Liscenses 6,500
Rent Expense 10,000
Total 4,090,400 4,090,400
Unadjusted Trial Balance Income Statement Balance Sheet
Account Titles Debit Credit Debit Credit Debit Credit
Cash in Bank 1,011,180 1,011,180
Accounts Receivable 455,000 455,000
Merchandise Inventory, beg 250,000 250,000
Transportation Equipment 1,800,000 1,800,000
Accounts Payable 298,500 298,500
Y. Gutierrez, Capital 2,900,000 2,900,000
Y. Gutierrez, Drawing 20,000 20,000
Sales 885,900 885,900
Sales Discounts 5,220 5,220
Sales Returns and Allowances 4,500 4,500
Purchases 500,000 500,000
Purchases Discounts 1,500 1,500
Purchase Returns and Allowances 4,500 4,500
Freight In 2,500 2,500
Freight Out 4,700 4,700
Salaries Expense 15,000 15,000
Utilities Expense 5,800 5,800
Taxes and Liscenses 6,500 6,500
Rent Expense 10,000 10,000
Total 4,090,400 4,090,400
Merchandise Inventory, end 190,000 190,000
Total 804,220 1,081,900 3,476,180 3,198,500
Net Profit 277,680 277,680
1,081,900 1,081,900 3,476,180 3,476,180
Net Sales
Gross Sales xx
Less: Sales Discount (xx)
Sales Return and Alllowances (xx)
Net Sales xx
Cost of Goods Sold
Merchandise Inventory, beg xx
Purchases xx
Less: Purchase Discount (xx)
Purchase Returns and Allowances (xx)
Add Freight In xx
Less: Merchandise Inventory, end (xx)
Cost of Goods Sold xx
Gross Profit xx
Operating Expenses
Freight Out (xx)
Salaries Expense (xx)
Utilities Expense (xx)
Taxes and Licenses (xx)
Rent Expense (xx)
Profit for the Month xx

Fundamentals of Accountancy, Business and Management 1 (Second Quarter)

Uploaded by

Document Information

Original Description:

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Fundamentals of Accountancy, Business and Management 1 (Second Quarter)

Uploaded by

Copyright:

Available Formats

Fundamentals of Accountancy,

Business and Management 1

Bureau of Curriculum Development

DEPARTMENT OF EDUCATION – BUREAU OF CURRICULUM DEVELOPMENT