CHAPTER II

REVIEW OF RELATED LITERATURE

This chapter introduces the conceptual studies and literature sourced by

the researchers after performing and in-depth search. In this chapter, the

research literature will also be presented to provide recent studies relevant to

the study being conducted, and finally the synthesis to give a thorough

comprehension of the significance of the sourced literature to the research.

Conceptual Literature

Conceptual literature is a material that contains key factors, concepts,

and variables related to the study. The goal of conceptual literature review is to

categorize and describe the concepts relevant to the study or topic, and outline

the relationship between them. (L. Frederiksen, S. Phelps &R. Kimmons) The

researchers sourced and gathered and reviewed literatures and are therefore

presented below together with their significance and relation to the study being

conducted.

Accounting Cycle

According to Win Ballada (2018), the accounting cycle is a series of

sequential steps or procedures to accomplish the accounting process.

Identification of events to be recorded is the first step in the accounting

cycle. In this step, the aim is to gather information about transactions or

recording of transactions in the journal. The purpose of this step is to record

the economic impact of transactions on the firm in a journal, which is a form

that facilitates transfer to accounts. After the transactions are recorded in the

journal, the journal entries are then posted to the ledger. This is to transfer the

information from the journal to the ledger for classification. After posting the

journal entries, the preparation of a trial balance proceeds. Preparing a trial

balance provides a listing to verify the equality of debits and credits in the

ledger. The next step is to prepare the worksheet including the adjusting

entries. The objective of this step is to aid in the preparation of financial

statements which is the succeeding step. To prepare financial statements is to

provide useful information to decision-makers. After the financial statements

are prepared, the adjusting journal entries are journalized and posted. This

step is done to record the accruals, expiration of deferrals, estimations, and

other events from the worksheet. After the adjusting entries are journalized

and posted, the closing journal entries are now journalized and posted to close

temporary accounts and transfer profit owner’s equity. After the closing entries

are journalized and posted, the next step will be the preparation of a post-

closing trial balance. The aim of this step is to check the quality of debits and

credits after the closing entries. After the post-closing trial balance, the final

step is the journalizing and posting of the reversing journal entries. This step is

done to simplify the recording of certain regular transactions in the next

accounting period.
 This cycle is repeated each accounting period. The first three steps in the

accounting cycle are accomplished during the period. The fourth to the ninth

steps generally occur at the end of the period. The last step is optional and

occurs at the beginning of the next period. (Ballada, 2018)

Bookkeeping

According to Win Ballada (2018), bookkeeping is a mechanical task

involving the collection of basic financial data. The data are first entered in the

accounting records or the books of accounts, and then extracted, classified and

summarized in the form of income statement, balance sheet, and cash flow

statement. This process normally takes place once a month. Bookkeeping

ensures that the data is timely, comprehensive and has accurate records, and

provides the information from which accounts are prepared. The bookkeeping

procedures usually end when the basic data have been entered in the books of

accounts and the accuracy of each entry has been tested. At that stage, the

accounting function takes over.

According to K.V. Anojan (2016), generally, transactions include

purchases, sales, receipts and payments by an individual person or an

organization. There are several standard methods of bookkeeping such as the

single-entry bookkeeping system and the double-entry bookkeeping system but

vitally double entry bookkeeping system is used in all over the world.

Bookkeeping is usually performed by a bookkeeper. A bookkeeper is an

employee who records the day-to-day financial transactions of an organization.

of purchases, sales, receipts, and payments. The bookkeeper is responsible for

ensuring that all transactions whether it is cash transaction or credit

transaction are recorded in the correct daybook, supplier's ledger, customer

ledger and general ledger. An accountant is the responsible person to prepare

reports from the information concerning the financial transactions recorded by

the bookkeeper, so the bookkeeping is a very fundamental and important

activity in every organization.

Relationship of Bookkeeping and Basic Accounting

Bitaccounting (2021) stated that there has always been some intersection

or focal point between accounting and bookkeeping sectors. Both due to the

same nature and lies under the same department that is managing the

financial data of the company. Both accounting and bookkeeping deal with

financial data, require basic accounting knowledge and classify and generate

reports using financial transactions.

Kate Bluest (2019) stated that bookkeeping and accounting can appear

to be the same profession to the untrained eye. To enter either profession, you

must have basic accounting knowledge. Bookkeepers in smaller companies

often handle more of the accounting process than simply recording

transactions. They also classify and generate reports using the financial

transactions.
 They may not have the education required to handle these tasks, but

this is possible because most accounting software automates reports and

memorizes transactions making transaction classification easier. Sometimes,

an accountant records the financial transactions for a company, handling the

bookkeeping portion of the accounting process.

Bookkeeping and accounting both form part of the accounting

cycle: bookkeeping primarily covers the financial recordkeeping aspects, which

form the first stage of the accounting cycle, and accounting involves the use of

financial records to prepare reports, conduct financial analysis, and produce

financial information. The main difference between bookkeeping and

accounting is that accounting involves the interpretation and analysis of

financial data, which bookkeeping does not. (oxbridgeacademy.edu, 2021).

Bookkeeping NCIII Assessment

Students enrolled in the bookkeeping NCIII course maybe required to undergo

a Competency Assessment before graduation, (TESDA Course Philippines) but

aspiring NCIII holders can also take the assessment without enrolling in the

course, provided that they have a background knowledge in Bookkeeping in

which one’s competency is to be assessed.

NCIII holders. Bookkeeping NCIII has a duration of 292 accumulated hours

that the students need to complete before proceeding to the final assessment.

As it was indicated in the training regulations of BOOKKEEPING NCIII

program of TESDA, under section 3 of its table of contents, it covers the

curriculum design, where it illustrates the 3 the qualification consists of

competencies that a person must achieve to enable him/her to journalize

transactions, post transactions, prepare trial balance, prepare financial reports

and review internal control system.

The basic competency requires 20 hours, common competency requires

24 hours and lastly the core competency which is the most crucial part of the

assessment it requires 248 hours. The bookkeeping NCIII as defined in TESDA

training is designed to enhance the knowledge, skills and attitude of

bookkeepers in journalizing transactions, posting transactions, preparing trial

balances, preparing financial reports, and reviewing internal control system

which is indicated in the core competency. The Unit of Competency comprising

this Qualification include the following:

The first one is to journalized transactions, it is the process of recording

transactions, the learning outcomes to this are they will be able to prepare

chart of accounts, analyze documents and prepare journal entries. Post

appropriate accounts in the ledger. Debits in the journal are posted as debits in

the ledger, and credits in the journal as credits in the ledger, the learning

outcome are they will be able to prepare a ledger and transfer journal entries.

Preparing trial balance, in here is the list of all accounts with their respective

debit and credit balances. Its is prepared to verify the equality of debits and

credits in the ledger at the end of each accounting period or at any time the

postings are updated, the learning outcome in this area, they will be able to

know the different account titles, transfer balances from the ledger and

summarize the trial balance. Preparing financial reports, involves the process

of aggregating accounting information into a standardized set of financials, the

learning outcome on this step are they will be able to prepare financial

statements properly and analyze it. Review internal control system is an overall

assessment of an organization’s internal control system across each business

area to determine if it’s functioning as intended and if it’s able to manage the

risks that the company may face in its day-to-day operations, the learning

outcome is they can prepare policy compliance report.

According to brainkart.com (2018) in their article titled “Relationship

Among Bookkeeping, Accounting and Accountancy” that bookkeeping is part of

Accounting. It is the primary stage in accounting. It is the process of recording transactions in the

books of accounts. Accounting is part of Accountancy. Accounting is the process of reording,

classifying, analysing and interpreting of financial data. Accountancy is the systematic

to be followed in accounting.

Bookkeeping besides known as record maintaining is the procedure pf

roll upping, forming, have awayings, and accessing the fiscal information base

of an entity, which is needed for two basic intents; easing the daily operations

of the entity and fixing fiscal statement, revenue enhancement returns, and

internal studies to directors. At the same clip, accounting is the systematic

recording, analyzing, sum upping and coverage of fiscal information.

Bookkeeping and accounting are related in some ways as they both trade with

the fiscal information of the concern or an administration. Bookkeeping is an

indispensable portion of the accounting procedure and without book-keeping

the accounting procedure can non get down. That is, the readying of the

concluding fiscal statements (income statement and the statement of fiscal

place). Accountants depend on dependable and accurate fiscal information

from bookkeepers to decently measure the fiscal place of the concern. If the

bookkeeper fiscal information is wrong so the accountant fiscal statements

would be wrong as good. Though, the accountant usually examines the

bookkeeper’s work before really describing it. Bookkeeping and accounting

depends on each other systems to efficaciously analyze, summarize, and

describe fiscal information of an administration or concern to the assorted

stake holders. (artscolumbia 2021)

the various points of view of the various scholars, as well as an overview

of the related experiments in connection with the subject of thought and

argument.

According to the previous study entitled “Enhancing the

Accounting skills of grade 12 Accountancy, Business and Management

Learners in Don Eulogio de Guzman Memorial National High School” (2020),

the study revealed that students topmost problems when completing the

Accounting Cycle are transaction Analysis and Journalizing entries. All

learners fully understand the Accounting cycle of core competencies before

advancing to another learning competency. This research communicates the

student’s mastery of Accounting cycle to be able to know what part or step of

Accounting cycle is need to be improve and mastered that compel learner’s

mastery to achieve Basic concepts. Principles and Framework necessary for

experiential learning. This study highlighted the importance of passing any

future Competency, Assessment such as Bookkeeping NCIII.

Students who have previously taken accounting/bookkeeping at the high

school level frequently approach the first university level with a great deal of

confidence. Usually, they realize that many of their fellow students will have no

previous training in accounting. An instructor often hears comments like “I’ve

already seen all f this before,” or “this is just like what I studied in high

school,” or “this will be a good review for me because I’m going to be an

up such confidence or statements with performance. The question arises, then

of just how such prior study in the field does affect those students who are

subsequently taking the first university-level course, usually basic accounting.

(Secondary-Level Study of Accounting and Subsequent Performance in the

First College Course)

From the previous study entitled “ANALYSIS OF THE RESULT OF THE

BOOKKEEPING NCIII NATIONAL ASSESSMENT OF ACCOUNTANCY

STUDENTS” (2021). The majority of the respondents got the rating of

competent during the national assessment as first-takers. The reason is that

they are skilled enough because of the prior review sessions and accounting

subjects while being enrolled as accountancy students. Based on the self-

assessment guide, majority of the respondents are skilled in almost the entire

core competencies of the Bookkeeping NCIII. It showed that majority of the

respondents are competent in journalizing, posting, preparing trial balance,

and preparing financial reports. The reason is that during training, these

core competencies were continuously being practiced through solving problems

that require the full accounting cycle. The found study is important because it

shows the mastery of the students in Accounting cycle.

The core course work required in Accounting takes much continuous

studying and preparation. Students must excel in various disciplines such as

Analytical, Mathematics, Economics, Business subjects and different courses

under the Accountancy umbrella to achieve the necessary skills and

accounting subjects have to be structured because a business- minded person

will help him achieve business acumen and confidence in the field, Besides a

Candidate for Board Examination needs a lot of preparation and determination

to pass successfully.