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BASICBOOKKEEPING
forENTREPRENEURS:Seminar-Workshop
11Taxes affects lives care for taxes
By: Tax & Accounting Center, Inc.(www.taxacctgcenter.org )Venue: Sorosa Building, Buendia Avenue,
Pasay City July 12-13, 2012/9:00 a.m.-5:00 p.m.
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Learning points
Understand basicaccounting termsand conceptsLearn the basic
accounting cycleLearn how to makeentries in the journalLearn how to post
entries in the Ledger;Learn prepare thenecessary andproper adjustments;
Learn how togenerate periodicbalances of theaccountsLearn how to preparethe basic financialreportsProperly analyzefinancial statementsfor businessimplications;Learn someimportant tips inbusiness accounting 22Taxes affects lives, care for taxes and
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COURSE OUTLINE
1 Basic Business Accounting Concepts
2 Accounting Elements & Account Titles
3 Analysis of transactions & entries
4 Accounting Cycle
5 Journalizing & posting
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COURSE OUTLINE,
continued6 Preparing The Trial Balance
7 End Of Period Adjusting Entries
8 Basic Financial Accounting Reports
9 Closing & Reversing Entries
10 Subsidiary Journals/Ledgers
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Accounting is the art of analyzing , classifying ,recording ,and summarizing in a significantmanner and in terms of money, transactions and
events which are, in part at least of a financialcharacter, and interpreting the results thereof
Accounting is a service activity which functionis to provide quantitative information, primarilyfinancial in nature, about economic entities thatis intended to be useful in making economicdecisions.
Definition of
Accounting
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Financial Accounting focuses on recordingbusiness transactions and preparation of financialstatements for use of the following users:
External users suppliers, lenders, customers,government & agencies, & public
Internal users Management, employees,officers, internal auditors
Branches of Accounting
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Management Accounting focuses on providingmanagement with accounting informationrelevant to the activities of the managers
developing strategies to achieve specific goals. This is aimed for decision making, planning,directing, and controlling enterprises operations.
Branches of Accounting
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Public Accounting external auditors(certified public accountants or CPA)
Private Accounting bookkeeper, financialaccountant, internal auditor, treasury,budget
Government Accounting accounting forgovernment transactions of governmentagencies and instrumentalities.
Fields of Accounting
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Bookkeeper versus
AuditorAuditor BookkeeperQualification Must be CPA Need not be CPAAccreditation BOA and/or SEC, CDA,
BSP, etc.
No required
accreditation.Objective Express an opinion Maintain books for FS
preparationIndependence Required Not requiredLiability Directly liable Subsidiary only
Impact of FS Adds credibility to AFS Adds credibility toaudit
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Accounting Standards greatly affectingpreparation of financial statements embodying:
PrinciplesNormsPracticesConcensus
Influenced by SEC, BIR, Accounting StandardsCouncil (ASC) & International AccountingStandards Council (IASC)
Philippine FinancialReporting Standards
(PFRS)
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Going Concern the company is presumed tobe continuing its business operations.
Accrual Basis income recorded when earnedregardless of collection, and expenses recordedwhen incurred regardless of payment.
Accounting Period any period (usually 12months) for preparation of financial reports.* calendar year vs. fiscal year
Accounting Principles
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Accounting cycle the period covering thetime when inventories where acquired until thetime funds were collected from sales
Accounting entity enterprise is separate &distinct from its owner and related companies
Monetary unit transactions are measured infinancial terms (money). PhP/Functionalcurrency concept
AccountingPrinciples
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Historical cost value at transaction date
Matching expenses incurred to earn arevenue is recognized in the period revenue isearned.
Accounting Principles
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Consistency same accounting methods fromyear to year for comparability
Disclosure vital information are reported
Nuetrality no bias in reports
Prudence degree of caution in the exercise of judgement s in making estimates underuncertain conditions.
Accounting Practices
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These are exchanges of things with value. Valuefor value.
Purchases payments for materials,equipments or services (cash purchases orcredit purchases)
Sales collections for giving products orservices (cash sales or credit sales)
Business Transactions
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ELEMENTS OF ACCOUNTINGand
ACCOUNTING EQUATION
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The foundation of an accounting system
Assets properties of value ownedLiabilities financial obligations bound to bepaidCapital investment of owners
Revenue income generated adds capitalExpenses reduces capital
Accounting Elements
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Accounting EquationBasicequation: Assets = Liab. + Capital
Always equal and balance is alwaysmaintainedInvestment + +
Loans + +Withdrawal - -
Loanrepayments
- -
Conversion of liab to equity - +
Collection + / -
Loan to repayanother loan
+/- +/-
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AccountingEquation
Expanded: A = L + C - D + R - EAlways equal and balance is alwaysmaintainedCash sales + +
Sales onaccount
+ +
Cashexpenses
- +
Expensesowed
+ +
Recovery of worthlessaccount
+ +
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AccountingEquation
Expanded: A + E + D = L + C + RAlways equal and balance is always maintainedCash sales + +
Sales onaccount
+ +
Cashexpenses
- +
Expensesowed
+ +
Recovery of worthlessaccount
+ +
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Double-entrybookkeeping
Business transaction has at least two effects onthe accounting elements
Positive entry vs negative entry
Debit vs credit
Value received vs value given away
Always equal
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Rules of Debit &Credit
A = L + C + R - E
Debit Inc. Dec. Dec. Dec. Inc.
Credit Dec. Inc. Inc. Inc. Dec.
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Rules of Debit & Creditand Accounting Equation
DEBIT CREDITA + E + D = L + C + R+ + + + + +
DEBIT CREDIT
L + C + R = A + E + D- - - - - -
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na ys s otransactionsExamples
Expenses incurred and paid.
Billed client for services.Hired a new employee.Purchased supplies on account.Withdrawal for personal use.Declared cash dividends
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Chart of Accounts
Enumeration of account titles;For easy reference on proper usage of account titles;
Uniform usage of account titles on similar transactions;Account codes may also be provided to eachand every account title.
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Classifications of Accounts
Assets, Liabilities, Capital, Revenue, expensesCurrent & non-current
Principal account & offset or contra-accountReal or nominal accountsIncome statement or Balance Sheet account
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Sample AccountsASSETS LIABILITIES CAPITAL REVENUE EXPENSE
Current: Current:
Cash Accts. Payable Capital stock Sales Cost of sales
Accounts Rec. Notes Payable Subs. CS Prof. fees Salaries
Notes Rec. SSS Payable Addl. Paid-inCapital Interestincome Utilities exp.
Prepayments PHIC Payable RetainedEarnings
Rental income Supplies exp.
Inventories HDMF Payable Deposit forfuture subs.
Serviceincome
Interest exp.
Supplies Accrued salaryDividends Gain on saleof asset
SSS employershare
InstallmentsReceivable
W/holding taxpayable
Managementincome
HDMF Cont.
Dividends Dividends Royalties PHIC Cont.
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Sample AccountsASSETS LIABILITIES CAPITAL REVENUE EXPENSE
Non-current: Non-current:
Cash for plantexpansion
Notes Payable Long Term
Fixed assets MortgagepayableFranchise Unearned
revenueOfficeequipmentsFurniture &fixtures
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Accounting Cycle Journalizing
PostingTrial balance
Adjusting entriesWorksheetFinancial statementsClosing entries
Post closing trial balanceReversing entries
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Basic FinancialStatements
Statement of Financial PositionBalance Sheet Assets, Liabilities & Equity
Statement of Comprehensive Income
Income Statement Revenue & ExpensesStatement of Changes in Equity movementsof capital and related accountsStatement of Cash Flows cash inflows and
outflowsNotes to Financial Statements Disclosuresand notes required by PFRS, SEC, and BIR.
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Comprehensive IllustrationJournal
Book of original entryParts
Heading
Date columnParticularsFolio or ReferenceDebit
Credit
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Comprehensive Illustration
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Comprehensive IllustrationLedger
Book of final entryParts
Heading
Debit/Credit SidesDateFolio or referenceParticulars
Debit/Credit amounts
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Taxes affects lives, care for taxes and save lives
(Courtesy: www.taxacctgcenter.com )
End of slides Thank you!
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