Entrep Bookkeeping PDF - 2nd Qtr

ENTREP: BOOKKEEPING JOURNALIZING | POSTING JOURNAL ENTRIES | TRIAL BALANCE | INCOME STATEMENT SHS | STEM | FIRST SEMESTER | 2023 Bookkeeping Importance of Keeping Business Records ▪ Refers to the recording of business transactions 1. Mo...

ENTREP: BOOKKEEPING JOURNALIZING | POSTING JOURNAL ENTRIES | TRIAL BALANCE | INCOME STATEMENT SHS | STEM | FIRST SEMESTER | 2023 Bookkeeping Importance of Keeping Business Records ▪ Refers to the recording of business transactions 1. Monitor the progress of your business in the books of business. 2. Prepare your financial statements ▪ Based on the premise that business transactions 3. Identify sources of your income must be properly recorded 4. Keep track of your expenses 5. Keep track of your basis in property Business Transactions 6. Prepare your tax returns ▪ Exchange of values between two parties 7. Support items reported on your tax returns expressed in terms of money ▪ Non-financial transactions: Bookkeeping Process 1. Soriano hired tourist guides for a salary of P10,000 each. Gathering and 2. A lease contract was signed for the use of an Recording the arranging the office space at a monthly rental of P18,000. transactions in business the journal 3. An order for office supplies was placed with documents/data Goodwill Bookstore amounting to P5,000. Business Papers/Documents Posting the Preparing the 1. Purchase ▪ Issued by the buyer to the entries in the preliminary trial journal to the Order seller of goods balance ledger 2. Invoice ▪ Commercial business (Services/ Sales/ document issued by the Purchase) buyer to seller 3. Official ▪ Commercial document that Preparation of Receipt indicates payment or financial statement report receipt of cash 4. Delivery ▪ Serves as an evidence that Receipt the goods or services are received 5. Receiving ▪ Used upon receipt of the Report goods shipped by courier 6. Vouchers ▪ Authorizes the incurrence (Check/Cash) or payment of obligations 7. Checks ▪ Orders a payment of money from the current account maintained in the bank 8. Promissory ▪ Debt instrument that Note contains a written promise by one party to pay another party a definite sum of money, either on demand or at a specified future date 9. Statement ▪ Outlines the transactions of Account between a buyer and a seller 10. Journal ▪ Stores the essential Voucher information about an accounting information 11. Contract ▪ Legally binding written agreement between business parties 12. Payroll ▪ Document that employees Sheet/ use to verify their tax Report liabilities or cross-check financial data ENTREP: BOOKKEEPING JOURNALIZING | POSTING JOURNAL ENTRIES | TRIAL BALANCE | INCOME STATEMENT SHS | STEM | FIRST SEMESTER | 2023 Books of Accounts Journal Ledger ▪ Book of original entry ▪ Book of final entry ▪ Where all business transactions are recorded ▪ Transferred information from journal chronologically on a daily basis Journal Date Particulars PR Debit Credit Value received (debit) = Value parted with (credit) Compound Entry Simple Journal Entry ▪ Has two debit values and only one credit value ▪ Only one debit and one credit 1. Date ▪ Shows the date of the 3. Particulars ▪ Shows the account debited Column occurrence of the transaction and credited, as well as a brief ▪ Year and month are not written explanation of the transaction 2. Debit ▪ First money column where the 4. Credit ▪ Second money column where Column amount of the debit account is Column the amount of the credit entered account is entered 5. Posting ▪ Used when the entries are posted, that is, until the amounts are transferred to the related References ledger accounts Ledger ▪ Consists of the following columns: 1. Date 3. Folio or post reference 2. Particulars 4. Amount Debit Side Credit Side ACCOUNTS RECEIVABLE PAGE NO. Date Particulars F Debit Amount Date Particulars F Credit amount Account Titles ▪ Provides the description of the type and nature of the business transaction ▪ Account: a device used to record the changes (increases or decreases) in the three accounting elements, assets, liabilities and owner's equity. Assets: economic resources or properties owned by the business that are expected for future gains 1. Cash ▪ Describes money, either in 5. Unused ▪ Unutilized manufacturing paper or coins Factory supplies Supplies 2. Accounts ▪ Collectibles from customers 6. Inventory ▪ Unsold goods that are Receivable who made sales transaction intended for sale on credit a. Raw materials Inventory b. Work-in-process inventory c. Finished goods 3. Notes ▪ Collectibles supported with 7. Equipment ▪ Tools and equipment directly Receivable promissory notes related to goods’ production 4. Supplies (on ▪ Unused office or store 8. Furniture ▪ Assets like chairs, tables, etc. hand) supplies and Fixtures ENTREP: BOOKKEEPING JOURNALIZING | POSTING JOURNAL ENTRIES | TRIAL BALANCE | INCOME STATEMENT SHS | STEM | FIRST SEMESTER | 2023 Liabilities: obligations to pay 1. Accounts ▪ Obligations arising from 4. Salaries ▪ Unpaid salaries of workers Payable goods purchased or services Payable received 2. Notes ▪ Financial obligations 5. Loans ▪ Obligation from borrowing Payable supported with promissory Payable money from any lending notes institution 3. Utilities ▪ Unpaid obligations on light ▪ Can be paid in a year or long- Payable and water consumptions term Owner’s Equity: interest and claim of the owner from the assets or properties of the business and investments of the owner; “capital” Capital Account Titles 1. Capital ▪ Original and additional 2. Drawing ▪ Temporary withdrawal of investment of the owner capital by the owner Income Account Titles 1. Service Income ▪ General services rendered 3. Sales ▪ Sale of goods or products to the consumers 2. Rental Income ▪ Income arising from lease or rent of property Expense Account Titles – costs incurred by the company 1. Salaries and ▪ Expenses on payments or 4. Utilities ▪ Expenses on lighting, Wages salaries Expense electricity, and water 2. Store Supplies ▪ Expenses on store 5. Traveling ▪ Expenses on transportation or Expense supplies Expense fare of personnel 3. Taxes and ▪ Expenses on taxes, 6. Rent ▪ Expenses on rent of property Licenses permits, fees, and licenses Expense Rules on Credit and Debit Asset Liability Owner’s Equity Revenue Expense Dr + Dr - Dr - Dr - Dr + Cr - Cr + Cr + Cr + Cr - SUMMARY: DEBIT CREDIT Assets Liabilities Expenses Capital Liabilities Income Capital Assets ENTREP: BOOKKEEPING JOURNALIZING | POSTING JOURNAL ENTRIES | TRIAL BALANCE | INCOME STATEMENT SHS | STEM | FIRST SEMESTER | 2023 Posting Journal Entries in the Ledger 2. Body ▪ Presents the different account Ledger titles ▪ is the group of the accounts used by the company. It is the book of final entry. Steps in Preparation of the Trial Balance ▪ Groups of accounts in the ledger: 1. In their proper numerical order, make a listing of 1. Balance Sheet or Real ▪ Assets all account titles Accounts ▪ Liabilities 2. Get the account balance of each ledger account, ▪ Owner's Equity and write them under their corresponding debit or 2. Income Statement or ▪ Revenue credit column. Nominal Accounts ▪ Expenses 3. Foot or add the debit and the credit columns of the trial balance. Chart of Accounts 4. Check whether the debit total and credit totals are ▪ The list of all account titles used by the company equal. They must be equal otherwise, there is with their corresponding account numbers error in your trial balance. ▪ Organizes the recording process and segregate accounting values into assets, liabilities, capital, Possible Errors in Trial Balance income, and expense in the following order. 1. Transposition ▪ Occurs when order of two numbers are Posting reversed ▪ The process of transferring information from the ▪ Ex: journal to the ledger 48 was erroneously written ▪ Debits in the journal are correspondingly posted as 84 as debits in the ledger and credit in the journal 2. Transplacement ▪ Occurs when a entry are likewise posted as credit in the ledger of Slide decimal point has been moved or Steps in Posting misplaced 1. From the journal, copy the date of the transaction ▪ Ex: to the ledger. 100 was erroneously 2. Under the journal reference (J.R.) column of the written as 10 ledger, copy the page number of the journal. 3. Under the debit column in the ledger, transfer the 67.89 was erroneously debit amount from the journal. Similarly, under the written as 678.9 credit column in the ledger, transfer the credit amount from the journal. Income Statement 4. After posting the amount to the ledger, write the ▪ A structure financial statement that presents the account number in the posting reference (P.R.) income, expenses, and net income or net loss column of the journal. realized during a certain period Net Income Net Loss Trial Balance ▪ Represents the ▪ Refers to the ▪ The schedule of all balances to prove the equality excess of the gross excess of the of the debit and credit. income or revenue expenses against ▪ Listing of all the account titles with their against the the revenue or respective debit or credit balances taken from the expenses income ledger. ▪ It does not check or vouch the accuracy of the Accounting Concept on the Preparation of report. the Income Statement ▪ Purposes of trial balance: 1. Cash ▪ Also known as the cash basis 1. To prove the equality of debit and credit Method of accounting 2. To determine the nominal accounts to be ▪ A financial reporting method closed that recognizes revenues 3. To serve as a basis for making draft financial and expenses only when statements cash is received or paid, ▪ Two major parts: respectively 1. Heading ▪ Normally has three lines 2. Accrual ▪ Revenues and expenses are intended for the name of the Concept recorded at the time they are business, title, and the date of incurred and not when they the trial balance are received or paid ENTREP: BOOKKEEPING JOURNALIZING | POSTING JOURNAL ENTRIES | TRIAL BALANCE | INCOME STATEMENT SHS | STEM | FIRST SEMESTER | 2023 Parts of the Income Statement 1. Heading ▪ Information on the name of the business, the name of the financial statement, and the date 2. Body ▪ Composed of the revenue, expenses, and net income or net loss of the business during a given period Pro forma of the statement of comprehensive income: 3. Operating Expense Section - Presents the different expenses incurred by the business during the period - Considered as the expenses that benefit the current period only 1. Salaries and 6. Postage and wages communication 2. Utilities expense 7. Doubtful accounts Major Sections in the Computation of Net 3. Supplies expense 8. Depreciation Income or Loss 4. Taxes and expense licenses 9. Gasoline and oil 1. Income or Revenue Section - Presents the different income accounts 5. Traveling expense 2. Costs of Goods Sold Section - Represents the amount of cost in selling the Inventory Account product or providing the service ▪ Refers to the goods that remain unsold or - Items included in this section depend on the unconsumed at the end of the accounting period nature of the business (merchandising, ▪ Normal accounting period is one year (most service, or manufacturing) financial statements are dated December 31) ▪ Three types of manufacturing business 2.1 Merchandising inventory: - Composed of merchandise inventory, 1. Raw ▪ Raw materials not used or purchases, and related accounts materials consumed on December 31 inventory 2. Work-in- ▪ Raw materials that have been process started but remained inventory unfinished on December 31 3. Finished ▪ Goods that have been goods completed but remained inventory unsold on December 31 2.2 Service - Composed of items that are directly Income Statement Illustration involved in providing the services 1. Correctly balanced balance trial serves as the basis of income statement preparation 2. Only account that are considered nominal must appear in the income statement 3. Account is nominal when it appears only during a 2.3 Manufacturing particular period. A nominal account does not - Most complicated since the business is appear in the next accounting period without a involved in converting raw materials to transaction affecting the account, hence, finished products with the use of direct considered as temporary account labor and other overhead accounts 4. When amounts are added, an underline appears on the last amount being added (single rule). Two underlines are on the last amount, indicating that there are no more related accounts to follow (double rule)