Tech Talks

CHAPTER 5
TYPES OF BUSINESS
ACCORDING TO
ACTIVITIES
 OBJECTIVES COMPARE AND CONTRAST THE TYPES OF BUSINESS
ACCORDING TO ACTIVITIES.
AT THE END OF THE
IDENTIFY THE ADVANTAGES AND DISADVANTAGES
CHAPTER , THE , AND BUSINESS REQUIREMENTS EACH TYPE.
STUDENTS SHOULD BE
ABLE: MAKE A LIST OF BUSINESS IN THEIR COMMUNITY
ACCORDING TO THEIR ACTIVITIES
INPUTS OR RESOURCES SUCH AS MATERIAL, LABOR,
AND OVERHEAD INTO OUTPUTS WHICH ARE USUALLY
EITHER GOODS OR SERVICES.

3 MAJOR TYPES OF BUSINESS

• SERVICE COMPANIES - ARE FIRMS THAT GENERALLY

USE THEIR EMPLOYEES TO PROVIDE INTANGIBLE
PRODUCTS OR SERVICES TO CUSTOMERS.
SERVICE REVENUE- THE PRIMARY SOURCE OF REVENUES OF SERVICE
COMPANIES IS THE PERFORMANCE OF SERVICES.
OPERATING CYCLE- IS THE TIME IT TAKES FOR A COMPANY TO CREATE
PRODUCTS , SELL THESE PRODUCTS, AND COLLECT CASH PAYMENTS
FROM CUSTOMERS.
OPERATING CASH ON
CYCLE OF HAND
SERVICE
COMPANY
RECEIVES PAYS
PAYMENT EMPLOYEES
FROM AND OTHER
CUSTOMERS EXPENSES

PERFORMS
SERVICES
2. MERCHANDISING COMPANIES-sell tangible products.
This type of business buys finished goods from their suppliers
and resell the same to customers.
RETAILER - A MERCHANDISING COMPANY THAT SELLS
GOODS DIRECTLY TO CUSTOMERS.

WHOLESALER - IS A MERCHANDISING COMPANY THAT

SELLS GOODS TO RETAILERS.
OPERATING CYCLE OF
MERCHANDISING
COMPANIES CASH ON
HAND

RECEIVES BUYS
PAYMENT
FROM GOODS
CUSTOMERS

STORES
SELLS GOODS AS
INVENTORY INVENTORY
 MANUFACTURING
COMPANIES
ARE SIMPLY MANUFACTURERS, ARE RELATIVELY COMPLICATED
ORGANIZATIONS THAN SERVICE AND MERCHANDISING COMPANIES.
MANUFACTURERS CREATE THEIR OWN PRODUCTS..
OOPERATING CYCLE
OF MANUFACTURING
COMPANIES CASH ON
PAYS FOR
HAND INPUTS
( MATERIALS,
LABOR ,
RECEIVES OVERHEAD)
PAYMENT
FROM
CUSTOMERS
CONVERTS
INPUTS INTO
FINISHED
GOODS
SELLS STORE
INVENTORY FINISHED
GOODS AS
INVENTORY
 CHAPTER 6
ACCOUNTING CONCEPTS AND PRINCIPLES

OBJECTIVES:
AT THE END OF THIS CHAPTER: THE STUDENTS SHOULD BE ABLE TO:
1.explain the varied accounting concepts and principles
2. identify generally accepted accounting principles
3. solve exercises on accounting principles as applied in various
cases.
ACCRUAL ACCOUNTING
AN ACCOUNTING BASIS WHEREIN INCOME IS RECOGNIZED WHEN EARNED AND
EXPENSES ARE RECOGNIZED WHEN INCURRED IRRESPECTIVE OF THE TIMING OF
CASH RECEIPT OR PAYMENT.

CASH BASIS ACCOUNTING

OPPOSITE OF THE ACCRUAL BASIS ACCOUNTING , RECOGNIZES INCOME WHEN
CASH IS RECEIVED AND RECOGNIZES EXPENSES WHEN CASH IS PAID.

MATCHING PRINCIPLE
A CONCEPT CLOSELY RELATED TO ACCRUAL ACCOUNTING WHICH STATES THAT
EXPENSES SHOULD BE RECORDED IN THE SAME PERIOD AS THE RELATED REVENUES.
ACCOUNTING JUDGEMENT AND ESTIMATES
NOT ALL ITEMS IN COMPANY’S ACCOUNTING RECORDS CAN BE DETERMINED
PRECISELY. THIS IS THE REASON WHY ESTIMATES ARE USED.

PRUDENCE
ALSO CALLED CONSERVATISM. IT MEANS EXERCISING CARE IN DECISIONS
REGARDING RECOGNITION OF ITEMS IN ACCOUNTING RECORDS. IN CASE OF
DOUBT, RECOGNIZE LIABILITIES AND EXPENSES AND DO NOT RECOGNIZE
ASSETS AND INCOME.

SUBSTANCE OVER FORM

THE SUBSTANCE OF SOME BUSINESS TRANSACTIONS DIFFER FROM THEIR LEGAL
FORM. A COMMON EXAMPLE OF THIS IS A CONTRACT OF LEASE.
ACCOUNTING ENTITY ASSUMPTION
THE ASSUMPTION THAT THE BUSINESS IS AN ENTITY SEPARATE AND DISTINCT FROM
THE OWNERS, MANAGERS, AND EMPLOYEES. PERSONAL TRANSACTIONS OF
OWNERS, MANAGERS, AND EMPLOYEES SHOULD NOT DISTORT THE RESULTS OF
COMPANY OPERATIONS.

TIME PERIOD ASSUMPTION

THE ASSUMPTION THAT THE INDEFINITE LIFE OF A COMPANY CAN BE DIVIDED
INTO MULTIPLE TIME PERIODS WITH EQUAL LENGTHS. THE RESULT OF THIS IS
THE PERIODIC PERIOD PRESENTATIONOF COMPANY’S FINANCIAL STATEMENTS.
A CALENDAR YEAR IS A 12 MONTH PERIOD THAT ENDS ON DECEMBER 31. A
FISCAL YEAR IS A 12 MONTH PERIOD THAT ENDS ON ANY MONTH.
CHAPTER 7
THE ACCOUNTING EQUATION
AT THE END OF THIS CHAPTER, THE STUDENTS SHOULD BE ABLE
TO:
• define the accounting equation
• enumerate and explain the elements of the accounting equation
• solve basic problems applying the accounting equation
 ACCOUNTING EQUATION
states that a company's total assets are equal to the sum of its liabilities and
its shareholders' equity.

2 ELEMENTS OF ACCOUNTING EQUATION

• THE LEFT SIDE OF THE EQUATION REPRESENTS WHAT THE

ENTITY OWNS.
2. THE RIGHT SIDE REPRESENTS THOSE THAT THE COMPANY
OWES.

FORMULA: ASSETS= LIABILITIES + OWNER’S EQUITY

Increased task automation and use of artificial intelligence.

Extra focus on high-value tasks.

Continuous investment in cybersecurity and security technology.

A better conscious focus on mental health.

Greater geographic distribution and representation of the workforce.

 ELEMENTS OF THE ACCOUNTING EQUATION:
Assets
are used by the company in manugits normal operations
such asSCHLESINGER
ARTHUR the manufacture of goods or delivery of services.
examples of assets:
1. CASH
Generally , it is the money that we use comprising of
the bills and coins we use in our everyday lives in order to
buy the goods that we want and also avail the services that
we need.
 ELEMENTS OF THE ACCOUNTING EQUATION:
Assets
examples of assets:
ARTHUR SCHLESINGER
2. ACCOUNTS RECEIVABLE
This represents amounts that are
collectible from customers. They arise when
a business sells its goods or services on
account or credit.
 ELEMENTS OF THE ACCOUNTING EQUATION:
Assets
examples of assets:
3.ARTHUR
INVENTORIES
SCHLESINGER

When going to a sari-sari store, you would notice

pile of assorted products being offered to be sold. Such
products are normally owned by the sari-sari store.
These products are inventory which are normally held
for sale by the store in its normal operations.
 ELEMENTS OF THE ACCOUNTING EQUATION:

examples of assets:
4. ARTHUR
EQUIPMENT
SCHLESINGER
5. LAND AND BUILDING
6. INTANGIBLE ASSETS
is an asset that lacks physical substance. Examples are
patents, copyright, franchises, goodwill, trademarks, and trade
names, as well as any form of digital asset such as software or
cryptocurrency, including stablecoins in duress. This is in
contrast to physical assets and financial assets.
 ELEMENTS OF THE ACCOUNTING EQUATION:
LIABILITIES
ARE ONE OF THE CLAIMS OF EXTERNAL PARTIES FROM ENTITY. BASICALLY,
THEY ARE THE DEBTS OF THE ENTITY TO EXTERNAL CREDITORS.
ARTHUR SCHLESINGER

examples of Liabilities:
1. ACCOUNTS PAYABLE
2. NOTES PAYABLE
3. UNEARNED REVENUE
 ELEMENTS OF THE ACCOUNTING EQUATION:
OWNER’S EQUITY
IT REFLECTS THE RESIDUAL CLAIMS OR NET ASSETS OF THE
ARTHUR SCHLESINGER OWNERS OF AN ENTITY.

2 SOURCES OF OWNER’S EQUITY

CAPITAL
NET INCOME/NET LOSS
Do you have any
questions?
Send it to us! We hope you learned something new.
 FORMULA
ASSETS= LIABILITIES + OWNER’S EQUITY

OWNER'S
ASSETS =
LIABILITIES +

EQUITY
ACCOUNT
S EQUIPMEN ACCOUNTS NOTES UNEARNED
CASH CAPITAL NET INCOME EXPENSES
RECEIVAB Y PAYABLE PAYABLE REVENUE
LE

INVENTOR
LAND
IES

BUILDING

INTANGIBL
E ASSETS