Accounting: Marketing Academic Year 2021-2022, 1st Semester

ACCOUNTING
MARKETING
Academic year 2021-2022, 1st semester
Associate professor
Raluca GUŞE, PhD.
THE BUCHAREST UNIVERSITY OF ECONOMIC
STUDIES
SYLLABUS. Contents
Item 1. Introduction to accounting: accounting defined, accounting as an information

system, providers and users of accounting information, accounting regulation,
accounting profession, landmarks in accounting evolution.
Item 2. Financial statements and accounting disclosure: balance sheet (assets, equity
and liabilities, fundamental accounting equation, transactions); income
statement (expenses, revenues/income, profit or loss); accounting
principles.
Item 3. Double-entry accounting system: definition, form and structure of the account;
chart of accounts; types and rules of accounts’ operations; analysis of
accounting transactions and events.
Item 4. Accounting information system: source documents, accounting
measurement, general journal, general ledger, trial balance.
Item 5. Recording transactions and events: accounts and analysis of transactions
involving non-current assets, inventories, receivables, cash and cash
equivalents, liabilities, equity, revenues/income, expenses and results.
Item 6. Financial year-end accounting: preparation, presentation and interpretation of
financial statements.
SYLLABUS. References
METHOD Interactive course. Students are recommended to be familiar with the reading
materials and engage in discussions and debates.
REFERENCES
⚫ Lecture notes, 2021-2022.
⚫ Order of the Ministry of Public Finance no. 1802/2014.
⚫ Albu, C., Gârbină, M.M, Ionașcu, M. (2008), Introductory Financial Accounting, Infomega.
⚫ Vulpoi, M., Nichita, M. (2007), Principles of Accounting, Universitatea Româno-Britanică.
⚫ Ponorîcă, A., Popescu, A., Stănilă, O. (2006), Practice Guide of Basic, Financial and
management Accounting, CECCAR.
⚫Manea L., Nichita M. E., Irimescu A., Rapcencu C. (2012) Basics of Accounting. Solve and
learn. Case studies, Fifth Edition, ASE.
⚫Duțescu, A., Olimid, L. (2004), Financial Accounting, CECCAR.
⚫ Lungu, C.I., Caraiani, C., Dascălu, C. (2013), Introducere în contabilitate, ASE.
⚫ Caraiani, C., Dumitrana, M. (coord.) (2011) Bazele contabilității, Universitară.
SYLLABUS. Assessment
Assessment (to be revisited in accordance with University

procedures, at least 30 days before the exam)
⚫ Continuous assessment 50%
⚫ Final exam 50%: online oral examination/other form of
examination to be announced
Minimum performance standard:

⚫ Weighted average of continuous and final
evaluations: 5.00.
CHAPTER 1 INTRODUCTION TO
FINANCIAL ACCOUNTING
1.1 Accounting defined

1.2 Accounting as an information system
⚫ Suppliers of accounting information
⚫ Users of accounting information
⚫ Accounting information
⚫ Availability of accounting information
⚫ Qualitative characteristics (quality standards)
1.3 Accounting regulation
1.4 Accounting profession
ACCOUNTING DEFINED
⚫ Information system
⚫ Studies the effects of economic transactions and events
on:
– an entity’s financial position and
– performance,
⚫ Informs internal and external users

⚫ To support their economic decision-making processes.
SUPPLIERS OF ACCOUNTING INFORMATION
⚫ Economic entities: companies, groups of entities, public

institutions/authorities, financial institutions, non-profit
associations, freelancers engaged in income-generating
activities (PFA).
⚫ Different accounting systems
⚫ The course: for profit companies defined by the Company Law no.
31/1990 as subsequently amended: SNC- general partnerships; SCS -
limited partnership; SCA - limited partnership by shares ; SA - joint-
stock company; SRL - limited liability company.
USERS OF ACCOUNTING INFORMATION
⚫ External: investors, employees, lenders, suppliers and other trade

creditors, customers, government and their agencies, public.
⚫ Internal: management.
⚫ Information needs: performance, risks, dividend policy, solvency (the
ability to pay out debt), business continuity – going concern, social
and environmental impact, fiscal responsibility, etc.
⚫ Different and often conflicting interests in terms of information
nature and content (see investors and financial creditors).
⚫ Information that meet the needs of investors (as main providers of
financial capital) also meet most of the needs of other users.
ACCOUNTING INFORMATION
Financial information Managerial information

• Intended for external users • Intended for internal users
• Provided annually in the form of • Provided in the form of
financial statements management reports
• Regulated • Unregulated
• Highly standardized • Not standardized
• Public • Not public
Examples: total liabilities, tax liabilities, Examples: manufacturing cost per unit,
inventories, receivables, profit, number cost of purchase per unit of raw
of employees, turnover. materials, number of units sold, gross
margin.
FINANCIAL ACCOUNTING MANAGEMENT ACCOUNTING
This course is focused on financial accounting information about an entity’s
financial position, performance and changes in financial position.
FINANCIAL INFORMATION
⚫ Expressed in monetary units of measurement

⚫ FINANCIAL POSITION:
WEALTH = CAPITAL
ASSETS = OWNERS’ EQUITY + LIABILITIES
(Controlled resources) (Sources of funding: liabilities toward owners and third
parties)
⚫ PERFORMANCE
REVENUES – EXPENSES = PROFIT or LOSS
(INCOME)
⚫ CHANGES IN FINANCIAL POSITION
Additional information
AVAILABILITY OF ACCOUNTING INFORMATION
⚫ ANNUALLY (January 01 – December 31)

⚫ Publication of financial statements in April - May
⚫ FINANCIAL STATEMENTS 1+2+5 or 1+2+3+4+5
1. BALANCE SHEET (A, OE, L)
2. INCOME STATEMENT (R, E)
3. CASH FLOW STATEMENT (Δ Cash)
4. STATEMENT OF CHANGES IN EQUITY (Δ OE)
5. NOTES TO ANNUAL FINANCIAL STATEMENTS (Other information)
QUALITATIVE CHARACTERISTICS
⚫ In order to be useful for economic decision-making, the information

provided by the financial statements must meet the qualitative
characteristics of useful financial information (quality standards)
⚫ Fundamental
– Relevance
– Faithful representation: complete, neutral, free from errors
⚫ Enhancing
– Comparability
– Verifiability
– Timeliness
– Understandability
Constraint: cost-benefit ratio
ACCOUNTING REGULATION
⚫ Ministry of Public Finance - Department of legislation and accounting

regulation
⚫ Specialized institutions (National Bank of Romania, Romanian Financial
Supervisory Authority)
⚫ The course: regulations issued by the MPF, for entities and groups of
entities whose securities are not listed on a regulated financial market
(OMPF 1802/2014, enforceable from 01.01.2015)
❑ A. Micro entities (2 indicators do not exceed: Assets 350.000 Euro, Turnover 700.000 Euro,
Number of employees 10)
❑ B. Small entities (2 indicators do not exceed: Assets 4.000.000 euro, Turnover 8.000.000 euro,
❑ C. Medium and large-sized entities (2 indicators are at least: Assets 4.000.000 euro, Turnover
8.000.000 euro, Number of employees 50)
❑ C. Small and medium-sized groups (2 indicators do not exceed : Assets 24.000.000 euro,
Turnover 48.000.000 euro, Number of employees 250)
❑ C. Large groups (2 indicators are at least: Assets 24.000.000 euro, Turnover 48.000.000 euro,
ACOUNTING PROFESSION
⚫ The Body of Expert and Licensed Accountants of Romania - CECCAR (Corpul

Experților Contabili și al Contabililor Autorizați din România): expert
accountant (higher education), licensed accountant.
(certified public accountant - US, chartered accountant - UK)
⚫ The Chamber of Financial Auditors of Romania - CAFR (Camera Auditorilor
Financiari din România): auditor financiar
⚫ The Romanian Chamber of Fiscal Consultants - CCF (Camera Consultanților
Fiscali): consultant fiscal
Internal auditor
Management controller
NATIONAL AND INTERNATIONAL
LANDMARKS IN ACCOUNTING EVOLUTION
⚫ Factors in the evolution of accounting: writing, arithmetic, printing press, legal

systems, exchange, private property, money, credit, capital.
⚫ Single entry accounting (cash receipts, cash disbursements) – freelancers
engaging in income-generating activities
⚫ Double entry accounting (Luca Paciolo, 1494, Wealth = Capital, transactions
recorded in chronological order, debit and credit).
⚫ The patrimonial (legal) perspective
Assets = Liabilities (or Equity) (Pasiv)
Assets are the economic goods over which the entity has legal ownership.
⚫ The economic (contemporary) perspective
Assets = Owners’ equity + Liabilities
Assets are economic resources controlled by an entity (legal ownership is not required).
QUESTIONS AND EXERCISES
⚫ A student intends to establish a company. At this moment, his

personal wealth is made up of an apartment of 100.000 lei, a car of
10.000 lei, 4.000 lei in cash, 200.000 lei in a bank account in his name
and other items such as office equipment and furniture in the of
30.000 lei.
⚫ In October N, the student registered his new company – a limited
liability company, Market SRL – with a capital/equity of 15.000 lei.
⚫ The student contributed to the entity’s capital (invested) by
transferring 6.000 lei form his bank account into the company’s bank
account and with his car, valued by a professional at of 9.000 lei.
⚫ Describe the accounting balance for the company and discuss the
student’s wealth at the end of October.
SC MARKET SRL (legal person)

Assets Amounts as of Owners’ equity Amounts as of
10/31 (lei) and liabilities 31/10 (lei)
Total A Total OE + L
Student (natural person, owner and administrator of Market SRL)

Assets Amounts as Owners’ equity and Amounts as
of 31/10 (lei) liabilities of 31/10 (lei)
⚫ In November, the company acquires land valued at 2.000 lei, which is

paid in cash.
⚫ What is the impact of this transaction on the fundamental

accounting equation? And what is the impact on the student’s
wealth?
⚫ COMPANY
⚫ STUDENT
MARKET SRL (legal person)

Assets Amounts as Owners’ equity and Amounts as
of 30/11 (lei) liabilities of 30/11 (lei)
Associate Professor Raluca GUŞE, PhD.
Department of Accounting and Audit
Faculty of Accounting and Management Information
Systems
Bucharest University of Economic Studies
[email protected]
ACCOUNTING
MARKETING week 2
Academic year 2021-2022, first semester
Associate professor
Raluca GUŞE, PhD.
STUDIES
CHAPTER 2. FINANCIAL REPORTING AND
ACCOUNTING DISCLOSURE
Users’ access to financial information:

Annual disclosures Financial statements
Fundamental FS:
⚫ Balance sheet – List/table of names and monetary values of assets, liabilities, owners’
equity for the current and previous year; provides information about the financial
position.
⚫ Income statement – List of names and monetary values of revenues and expenses, for
the current and previous reporting period; computes profit or loss; provides
information about performance.
Other FS:
⚫ Statement of cash flows: +/- of cash and cash equivalents during the reporting period
⚫ Statement of changes in equity: +/- of owners’ equity items during the reporting
period
⚫ Notes to the financial statements: other information, including non-monetary.
Reporting period: usually January 01 – December 31 (12 months).
BALANCE SHEET – ELEMENTS DEFINED
⚫ An asset is a resource controlled by the entity as a result

of past events and from which future economic benefits
are expected to flow to the entity.
⚫ A liability is a present obligation of the entity arising from

past events, the settlement of which is expected to result
in an outflow from the entity of resources embodying
economic benefits.
⚫ Equity is the owners’ residual interest in the entity’s assets

after deducting all its liabilities (A – L).
BALANCE SHEET – ELEMENTS EXPLAINED
(A) Future economic benefits

⚫ Assets’ potential of assets to contribute, directly or indirectly, to the flow of
cash and cash equivalents to the entity (i.e., raw materials ➔ finished goods
➔ receivables ➔ cash in hand) or
⚫ Assets’ ability to reduce cash outflows (i.e. a new production technology
reduces costs by diminishing losses of raw materials).
(A) Control over an asset = an entity’s ability to:
⚫ Obtain and control the benefits which are expected to flow from the asset;
and
⚫ Restrict the access of third parties to the benefits expected to flow from the
asset.
(L) The outflow of resources in order to settle a liability may occur by the
payment of cash, transfer of other assets, provision of services, or the
replacement of an obligation with another obligation or even equity.
BALANCE SHEET – ELEMENTS.
RECOGNITION CRITERIA
An item that meets the definition of a balance sheet element should be

recognized (incorporated in the balance sheet) if it meets the following criteria:
⚫ It is probable that any future economic benefit associated with the item will
flow to or from the entity.
⚫ The item has a cost or value that can be measured reliably.
Discuss:
⚫ Manager’s verbal commitment to pay a premium to employees
Is it a liability?
⚫ Goodwill
– acquired
– generated internally
Is it an asset?
BALANCE SHEET – HORIZONTAL LAYOUT
A = OE + L
ASSETS N-1 N OWNERS’ EQUITY AND LIABILITIES N-1 N

(Liquidity) (Settlement date)
Non-current assets Owners’ equity (undetermined
(>1 year, use, not sale, settlement date)
amortization/depreciation/
Provisions
impairment)
(uncertain liabilities)
Current assets Liabilities
(< 1 year, use/consumption • non-current (long-term, > 1 year)
or sale, impairment) • current (short-term, < 1 year)
Deferred income
Prepaid expenses
Total assets x y Total owners’ equity and liabilities x y
BALANCE SHEET – LIST LAYOUT
A – L = OE
ELEMENTS N-1 N
A. Non-current assets
B. Current assets
C. Prepaid expenses
D. Liabilities: amounts to be paid within one year
E. Net current assets/[„or”] net current liabilities
F. Total assets minus current liabilities
G. Liabilities: amounts to be paid in more than one year
H. Provisions
I. Deferred income
J. Owners’ equity
A. NON-CURRENT ASSETS
Low liquidity, benefits expected to last for more than one year from
reporting date, to be used for productive/administrative purposes or for
rental; not for sale.
I. Intangible assets: formation expenses, development costs, software,
concessions, trademarks, licenses, goodwill, I-NCA in progress, advance
payments for I-NCA etc.
Value = Initial – Amortization – Impairment
II. Tangible assets: land and buildings, investment property, plant and
equipment, productive biological assets, T-NCA in progress, advance payments
for T-NCA etc.
Value = Initial – Depreciation - Impairment
III. Financial assets: securities (long-term financial investments) and loans
granted to other entities (long-term granted loans).
Value = Initial – Impairment
B. CURRENT ASSETS
High liquidity, held for sale or use in the normal course of business,
expected to be realized in 12 months from the BS date, or cash and cash
equivalents.
I. Inventories: raw materials and consumables, finished goods and goods for
resale, work-in-progress, advance payments for inventories.
II. Accounts receivable/Receivables: trade debtors (including customers,
notes receivable and advance payments for services), amounts owed to other
entities (affiliated/associated/participating interests), other debtors (sundry
debtors), subscribed capital called but not paid.
III. Short-term investments: marketable securities.
IV. Cash and cash equivalents: cash in hand, cash at bank, letters of credit,
cash advances.
Value = Initial - Impairment
C. PREPAID EXPENSES
⚫ Payments made in advance for services that will be

received in the next accounting periods, when they will
be accounted for as expenses.
⚫ Associated with a specific period of time in the future.
⚫ Examples: rent, prepaid insurance premiums,
subscriptions for transportation or subscriptions to
different publications or services, bank fees and
commissions paid to receive long-term loans.
EXERCISES
ASSETS CLASSIFICATIONS (company: bakery)
Buildings Assets (A), Non-current assets (NCA), Tangible assets

(TA), Land and buildings
Motor vehicles A, NCA, TA, Plant and machinery
Cocoa A, Current assets (CA), Inventories, Raw materials and

consumables
Customers A, CA, Receivables, Trade receivables
Rent paid in advance for next year A, Prepaid expenses
Equipment A, NCA, TA, Plant and machinery
Cash in hand A, CA, Cash and cash equivalents
Cash advances A, CA, Cash and cash equivalents
Salaries advances paid to A, CA, Receivables, Other debtors

employees
ACCOUNTING
MARKETING - week 3
Associate professor
Raluca GUŞE, PhD.
STUDIES
CHAPTER 2 – LIABILITIES (L)
Types of liabilities in the balance sheet:
⚫ Non-current liabilities (certain)

⚫ Current liabilities (certain)
⚫ Provisions (uncertain)
⚫ Deferred/prepaid income (certain, income which has not yet
been earned)
CURRENT LIABILITIES
Current liabilities or Short-term liabilities

or
Liabilities – amounts becoming due and payable within one
year
are obligations:
(1) expected to be settled in the normal operating cycle, or

(2) due to be settled within twelve months after the
balance sheet date.
NON-CURRENT LIABILITIES
Non-current liabilities or Long-term liabilities

or
Liabilities – amounts becoming due and payable after more
than one year
are all obligations that are not current liabilities.

LIABILITIES – Classification by nature
Current liabilities (item D) and non-current liabilities (item G) are both

classified by nature into the same categories:
1. Debenture loans (Bond loans) interest
2. Amounts owed to credit institutions (Bank loans) interest
3. Advance payments from customers (Payments received on account of
orders)
4. Trade creditors (suppliers)
5. Notes payable
6. Amounts owed to affiliated undertakings (Amounts owed to affiliated entities)
interest
7. Amounts owed to undertakings (entities) with which the undertaking (entity)
is linked by virtue of participating interests interest
8. Other creditors, including tax and social security authorities
Therefore, the two criteria act simultaneously: due date and nature.
LIABILITIES – Classification by nature
In the absence of other information regarding their settlement date, the

following rules can be followed to classify liabilities:
Long-term liabilities:
⚫ Debenture loans
⚫ Amounts owed to credit institutions
⚫ Amounts owed to affiliated undertakings
⚫ Amounts owed to undertakings (entities) with which the undertaking (entity)
is linked by virtue of participating interests
Short-term liabilities:
⚫ Advance payments from customers
⚫ Trade creditors
⚫ Notes payable
⚫ Other creditors, including tax and social security authorities
LIABILITIES – Example of classification
A company has a long term bank loan 100.000 lei, of which the amount
of 20.000 lei is payable within three months form the balance sheet
date.
The company reports two liabilities into the balance sheet:
G. 2. Non-current liabilities: Amounts owed to credit institutions 80.000
lei.
D. 2. Current liabilities: Amounts owed to credit institutions: 20.000 lei.
In both cases, the name of the liability is Long term bank loan.
Classification does not change the name of a liability, it only affects its
placement in the balance sheet.
LIABILITIES - PROVISIONS
Uncertain liabilities in terms of probability, settlement date or value,

that are usually recognized at the end of the financial year. Provisions
are recognized when:
(1) an entity has a present obligation (legal or constructive) as a result
of a past event;
(2) it is probable that an outflow of resources embodying economic
benefits will be required to settle the obligation; and
(3) a reliable estimate can be made of the amount of the obligation.
LIABILITIES - PROVISIONS
Romanian accounting regulations define provisions as liabilities of

uncertain timing or amount. Main categories:
1. Provisions for employee benefits
2. Provisions for taxation
3. Other provisions: for litigations, customer warranties,
decommissioning tangible non-current assets and other similar actions,
for restructuring costs, for termination of employment contracts, for
concession agreements, for environmental protection expenses, for
liabilities incurred jointly with a third party.
LIABILITIES – DEFERRED (or prepaid) INCOME
Revenue received in advance but which is not yet earned.

Includes investment subsidies and prepaid income.
⚫ Investment subsidies (Subsidies related to assets): Government
grants received by the reporting entity for the acquisition or
production of equipment and assets of similar nature.
⚫ Prepaid income: revenues/income received in advance but that is
not yet earned, because it relates to the next accounting period(s):
rent, insurance premiums, subscriptions received in advance etc.
Short-term prepaid income and long-term prepaid income are
presented separately.
EXERCISES
LIABILITIES CLASSIFICATIONS (company: bakery)

Suppliers L, CL, Trade creditors
Taxes payable L, CL, Other creditors
Long-term bank loans L, NCL, Amounts owed to credit institutions
Interest payable L, CL, Amounts owed to credit institutions
Debenture loans L, NCL, Debenture loans
Sundry creditors L, CL, Other creditors

Salaries payable L, CL, Other creditors
Cash advances from customers L, CL, Cash advances from customers
Cash advances received for next Deferred/prepaid income (short-term)
year’s rent
OWNERS’ EQUITY (OE)
Fundamental types of owners’ equity in the balance sheet:
⚫ Share capital (source of funding for assets received form

shareholders/members when the company was formed, or
additional contributions were received).
⚫ Profit (source of funding for assets generated by the company
through it activities/operations/transactions).
OE – Structure
⚫ (+) Share capital Subscribed paid-up capital, Subscribed nonpaid-up

capital
⚫ (-) Own shares
⚫ (+) Premiums related to capital Share premiums, Share premiums for
contributions in kind, Merger premiums, Bond conversion premiums
⚫ (+) Revaluation reserves
⚫ (+) Reserves Legal reserves, Statutory or contractual capital reserves,
Other reserves
⚫ (+/-) Retained earnings Profit (+) or loss (-) from previous
financial years, brought forward
⚫ (+/-) Profit or loss for the financial year P/L for the current financial year
⚫ (-) Profit distribution (appropriation)
OE – Characteristics of share capital
SHARE CAPITAL
⚫ Subscribed paid-up capital = share capital against which the company has
already received the payments from the shareholders, either in cash or other
consideration (in kind).
⚫ Subscribed non-paid-up capital = share capital that the shareholders have
committed/promised/subscribed to provide to the entity but have not yet paid
or delivered.
All shares issued by a company have the same nominal value.
Share capital = Number of shares issued x Nominal value
⚫ Own shares = shares issued by the reporting entity which have been re-
acquired in order to be distributed to employees or third parties or decrease
the share capital (“non-assets”: do not generate economic benefits).
OE – Characteristics of premiums
PREMIUMS RELATED TO CAPITAL = contributions in cash (or in kind)

form shareholders above the nominal value of the subscribed shares; or the
difference between the subscription value (negociated) and the nominal value
(fixed, same as the original NV) of new shares issued to increase share capital.
⚫ Share premiums: occur when the new share capital is paid in cash.
⚫ Share premiums for contribution in kind: occur when the new share capital is
paid in kind.
⚫ Merger premiums: occur when the increase in share capital is the result of a
merger with another entity.
⚫ Bond conversion premiums: occur when the increase in share capital is realized
by converting bonds (L) into shares (OE).
OE – Characteristics of revaluation reserves
and reserves
REVALUATION RESERVES = surpluses arising when non-current assets are

revalued, as the difference between the revalued amount or fair value of the asset
(higher) and the value previously carried in the balance sheet or the carrying
amount (lower).
Revaluations of non-current assets, mostly tangible assets, are performed when
management considers that the carrying amount determined on the base of historical
costs (minus amortization, depreciation and impairment) no longer reflects the fair value
at the balance sheet date and therefore it is not reliable information.
RESERVES = fractions of annual profits, within the limits of legal regulations,
retained in the business and not distributed to the owners.
⚫ Legal reserves: created in the amount required by legal regulations.
⚫ Statutory capital reserves: created in compliance with provisions from the
articles of association.
⚫ Other reserves: optional reserves as decided by the General Shareholders’
Meeting, in compliance with legal provisions.
OE – Characteristics of retained earnings, profit or
loss for the financial year and profit distribution
RETAINED EARNINGS (profit or loss brought forward) = total or partial

amount of profit or loss from previous financial years, which has not yet been
distributed to other destinations and/or will be distributed in the future.
⚫ Profit carried forward: can be used in the future to create reserves, to
compensate for losses or distributed to shareholders as dividends
⚫ Loss carried forward: must be compensated using the profit of the next financial
years, reserves, share premiums or share capital.
PROFIT OR LOSS FOR THE FINANCIAL YEAR = P/L for the current
financial year = Revenues – Expenses from the financial year, including income tax
expenses, as determined in the income statement.
PROFIT DISTRIBUTION = profit for the financial year that was distributed to
certain destinations at the balance sheet date.
Other balance sheet information - Indicators
HORIZONTAL BALANCE SHEET

⚫ Total assets = Non-current assets + Current assets + Prepaid expenses
⚫ Total owners’ equity plus liabilities = Owners’ equity + (Provisions + Non-current
liabilities + Current liabilities + Deferred income)
VERTICAL BALANCE SHEET

⚫ Net current assets (if +) or Net current liabilities (if -) = Current assets + Prepaid
expenses (short-term) – Current liabilities – Deferred income (short-term)
⚫ Total assets minus current liabilities = Net current assets or Net current
liabilities + Prepaid expenses (long-term) + Non-current assets
How to prepare the Balance Sheet
CASE 1. Preparing the BS using a list of BS items

Step 1. List of items: Includes assets, owners’ equity, liabilities.
Step 2. Classification of items into main categories of A, OE, or L (in writing - optional).
Step 3. Preparing the Balance Sheet by listing the items according to the layout and their
classification: first two levels (A, B… and I, II…) mandatory, third level (1, 2, 3…) to be used
when necessary.
CASE 2. Preparing the BS using a list of BS and Income Statement items
Step 1. List of items: Includes assets, owners’ equity, liabilities, revenues and expenses.
Step 2. Classification of items into main categories of A, OE, L, R or E (in writing - optional).
Step 3. Preparing the Income Statement using revenues and expenses from the list.
Step 4. Preparing the Balance Sheet by listing the A, OE and L items according to the layout and
their classification: first two levels (A, B… and I, II…) mandatory, third level (1, 2, 3…) to be used
when necessary. OE in the Balance sheet must include the value of Profit or loss for the
financial year as disclosed in the Income Statement.
Corrective/rectifying items from the Balance Sheet
RECTIFYING ITEMS adjust balance sheet values. Rectifying items are not
visible or explicitly presented in the balance sheet, but are used to calculate the
value of other balance sheet items.
⚫ Depreciation (for tangible assets)/Amortization (for intangible assets): A (-)
⚫ Impairment of assets (for all types of assets, current and non-current) : A (-)
⚫ Premiums on redemption of bonds and other debt: : L (-)
⚫ Profit distribution: OE (-)
⚫ Own shares: OE (-)
Classification of rectifying items must specify the position of the original item in
the BS. Example: Item – buildings depreciation.
Rectifying asset, found as negative amount in: A, NCA, TA, Land and buildings.
Use of corrective items in the BS: Examples
1. Industrial equipment: acquisition cost 200.000, depreciation up to the

balance sheet date 30.000. Position and value in the balance sheet:
Assets Non-current assets Tangible assets
Land and buildings 170.000 lei
The BS value of the equipment was calculated using the formula:
Original value 200.000 – Depreciation 30.000 – Impairment 0 = 170.000,
Therefore, the company does not overstate its assets. Instead, all probable
losses are taken into consideration when the BS is prepared.
Theoretical background: historical cost and conservatism/prudence.

CHAPTER 2. Use of corrective items in the
BS: Examples
2. Building acquired two years ago, acquisition cost of lei 20.000, useful life 20 years, fair
value 15.000. Position and value in the balance sheet:
Assets Non-current assets Tangible assets
Land and buildings 15.000 lei
Theoretical background: conservatism /prudence forbids the overstatement of assets.
The company has two choices:
a. To prepare the balance sheet using the historical cost and conservatism concept, which
means it can choose between the known alternatives:
⚫ 20.000 (original value) – 2.000 (depreciation) = 18.000 and
⚫ 15.000 (fair value).
To choose 18.000 is an overstatement. Therefore, an impairment of 3.000 is recognized
(18.000 – 15.000), which diminishes the historical cost.
The BS value of the equipment is calculated using the formula:
Original value 20.000 – Depreciation 2.000 – Impairment 3.000 = 15.000
b. To prepare the balance sheet using the fair value (thus abandoning historical cost as a
basis of measurement and replacing it with fair value).
In both cases, the company is required to disclose the basis of measurement in the notes.
BS: Examples
3. Goods for resale, acquisition cost 10.000, market value 8.000.

Position and value in the balance sheet:
Assets Current assets Inventories
Finished goods and goods for resale 8.000 lei
Theoretical background: conservatism/prudence forbids the overstatement of
assets.
The company can choose between the known alternatives:
⚫ 10.000 (original value or historical cost) and
⚫ 8.000 (fair value)
To choose 10.000 is an overstatement. Therefore, an impairment of 2.000 is
recognized (10.000 – 8.000), which diminishes the historical cost.
The BS value of the goods for resale is calculated using the formula:
Original value 10.000 – Impairment 2.000 = 8.000
BS: Examples
4. Profit for the accounting period 20.000, of which 5.000 distributed to legal
reserves, subscribed capital 40.000. The remainder of the profit will be carried
forward in the next period, since the General Shareholders’ Meeting did not offer
any indication about other destinations.
Owners’ equity in the balance sheet:
BS items from OE Previous Current year Next year (Assuming no other
year transactions occur involving OE)
Share capital 40.000 40.000 40.000
Reserves – legal 0 5.000 5.000
reserves
Retained earnings 0 0 15.000
Profit for the 20.000 0
financial year
Profit distribution 0 (5.000) 0
ACCOUNTING
MARKETING - week 4
Associate professor
Raluca GUŞE, PhD.
STUDIES
CHAPTER 2. INCOME STATEMENT – CONCEPTS
Income statement - informs users about company performance during the

reporting period. DYNAMIC APPROACH
Concepts:
⚫ Revenues Profit (or loss) = Revenues – Expenses
⚫ Expenses
Vertical layout
Classification of revenues and expenses by nature:
Operating revenues/expenses/profit or loss
Financial revenues/expenses/profit or loss
Gross profit/loss, Net profit/loss
Alternative classification - by function: manufacturing, administration, distribution
expenses.
Turnover = revenues from the sale of inventories and services.
CHAPTER 2. IS – REVENUES
Revenues are defined as:

⚫ Increases in economic benefits during the accounting period;
⚫ In the form of inflows or enhancements of assets (A +) or decreases of
liabilities (L – );
⚫ That result in increases in equity (OE +), other than those relating to
contributions from equity participants.
What about increases in economic benefits that are not related to the
current accounting period, but to the next?
⚫ Do not result in increases in equity.

⚫ Are presented as deferred income in the Balance Sheet – a liability.
CHAPTER 2. IS - REVENUES
Examples of revenues and their corresponding effects in terms of changes

of assets or liabilities:
Revenue Effect on assets or liabilities
Revenues from the sale of finished goods + A: Customers
Revenues from services rendered + A: Customers
Interest revenues + A: Cash
Revenues from the manufacturing of finished + A: Finished goods
goods
Rent revenues + A: Customers or
- L: Deferred income
(if revenue was received in the previous
accounting period, for the current one)
Revenues from discounts received - L: Suppliers
Classification of revenues:
OPERATING REVENUES • Revenues from the sale of inventories, tangible and
intangible assets
• Revenues from services rendered
• Rent revenues
• Revenues from manufacturing finished goods and
other products, tangible and intangible assets
• Revenues from penalties
• Other operating revenues
FINANCIAL REVENUES • Revenues from dividends or interest received
• Foreign exchange gains
• Financial discounts received
• Revenues from the sale of short-term or long-term
financial investments
• Other financial revenues
Example
Company A receives rent in advance, in December N for the next 37 months: 37,000
lei, of which monthly rent is 1,000 lei, including the current month. Presentation:
Information December 31, N Dec. 31, Dec. 31, N+1 Dec. 31, N+2
N+1
INCOME STATEMENT
Operating revenues – 1,000 12,000 12,000 12,000
Rent revenues
BALANCE SHEET 37,000 0 0 0
Assets - Cash
Liabilities – Long-term 24,000 12,000 0 0
deferred income
Liabilities – Short-term 12,000 12,000 12,000 0
deferred income
CHAPTER 2. IS - EXPENSES
Expenses are defined as:

⚫ Decreases in economic benefits during the accounting period;
⚫ In the form of outflows or depletions of assets (A –) or incurrences of
liabilities (L +);
⚫ That result in decreases in equity (OE +), other than those relating to
distributions to equity participants.
What about decreases in economic benefits that are not related to the
current accounting period, but to the next?
⚫ Do not result in decreases in equity.

⚫ Are presented as prepaid expenses in the Balance Sheet – an asset.
Examples of expenses and their corresponding effects in terms of changes of assets

or liabilities:
Expense Effect on assets or liabilities
Expenses related to raw materials - A: Raw materials
Services expenses + L: Suppliers
Electricity expenses + L: Suppliers
Tax expenses + L: Taxes payable
Rent expenses: - A: Prepaid expenses
(if rent was paid in the previous accounting period,
for the current one) or
+ L: Suppliers
Expenses from discounts granted - A: Customers
Classification of expenses:
OPERATING EXPENSES • Expenses related to raw materials and other inventories
• Services expenses
• Salaries and social security expenses
• Amortization, depreciation and impairment expenses
• Taxes, compensations, fines and penalties expenses
• Expenses related to inventories, tangible and intangible
assets disposed of (following sales)
• Other operating expenses
FINANCIAL EXPENSES • Interest expenses
• Foreign exchange losses
• Financial discounts granted
• Expenses/losses from the sale of short-term or long-term
financial investments
• Other financial expenses
CHAPTER 2. INCOME STATEMENT –
CONDENSED LAYOUT
Condensed/Simplified Income Statement as of 31.12.N

(list layout, classification by nature)
Elements N-1 N
OPERATING REVENUES
OPERATING EXPENSES
A. Operating profit or loss (Operating revenues – Operating expenses)

FINANCIAL REVENUES
FINANCIAL EXPENSES
B. Financial profit or loss (Financial revenues – Financial expenses)

C. Gross current profit or loss (Operating profit or loss + Financial profit or loss or Total
revenues – Total expenses)
INCOME TAX EXPENSE
F. Net profit or loss for the period (Gross profit or loss – Income tax expense)
Same as Profit or loss for the financial year from OE!!! (balance sheet)
ACCOUNTING
MARKETING Week 5
Associate professor
Raluca GUŞE, PhD.
STUDIES
CHAPTER 2
TRANSACTIONS
Transactions are actions that affect a company’s financial position and/or

performance, by generating changes of:
⚫ ASSETS
⚫ OWNERS’ EQUITY
⚫ LIABILITIES
⚫ REVENUES
⚫ EXPENSES
The fundamental accounting equation is true at all times. Therefore:
⚫ If a transaction generates an increase (+ x) or a decrease (- x) in the value of an
element from the financial statements, then the equation can be rewritten to
reflect the change and the accounting balance.
IMPACT OF TRANSACTIONS ON FINANCIAL POSITION
Equations for transactions that only affect financial position:

⚫A + x – x = OE + L Ex.: Collection of receivables in cash
⚫A = (OE + x – x) + L Ex.: Incorporating reserves into share capital
⚫A = OE + (L + x – x) Ex.: Payment of suppliers from overdrafts
⚫A = (OE + x) + (L – x) Ex.: Conversion of bonds into shares
⚫A = (OE – x) + (L + x) Ex.: Withdrawal of shareholders’
contribution
⚫A + x = (OE + x) + L Ex.: Revaluation of NCA, capital subscriptions
⚫A + x = OE + (L + x) Ex.: Acquisitions of inventories, NCA; loans
⚫A – x = (OE – x) + L Ex.: Negative revaluations of NCAs
⚫A – x = OE + (L – x) Ex.: Repayment of loans, payment of
suppliers
EXAMPLES (A – IMPACT ON FINANCIAL POSITION)
T1. The entity transfers lei 6,000 from cash in hand to cash at bank.
A + x – x = OE + L
Cash at bank Cash in hand
+ lei 6,000 - lei 6,000
T2. Based on the decision of the General Shareholders’ Meeting, lei 3,000
the entity’s reserves are used to increase the value of share capital.
A = (OE + x - x) + L
Subscribed and paid share capital Reserves
+ lei 3,000 - lei 3,000
T3. The company pays lei 1,000 to its suppliers from a short-term bank loan.
A = OE + (L + x - x)
Short-term bank loan Suppliers
+ lei 1,000 - lei 1,000
T4. The entity decides to convert liabilities of lei 3,000 into share capital, by
converting bonds into shares.
A = (OE + x) + (L – x)
Subscribed and paid share capital Bond loans
+ lei 3,000 - lei 3,000
T5. The General Shareholders’ Meeting approved a shareholder’s request to
withdraw his initial contribution of lei 5.000 to the share capital.
A = (OE - x) + (L + x)
Subscribed and paid share capital Shareholders liabilities
- lei 5,000 + lei 5,000
T6. The value of buildings increases by lei 1,000 as a result of revaluation.
A + x = (OE + x) + L
Buildings Revaluation reserves
+ lei 1,000 + lei 1,000
T7. The entity purchases goods for resale (merchandise) of lei 2,000 from a
supplier.
A+x = OE + (L + x)
Goods for resale Suppliers
+ lei 2,000 - lei 2,000
T8. The value of buildings decreases by lei 400 as a result of revaluation..
A - x = (OE - x) + L
Buildings Revaluation reserves
- lei 400 - lei 400
T9. The entity repays a lei 6,000 bank loan from its bank account.
A - x = OE + (L - x)
Cash at bank Bank loans
- lei 6,000 - lei 6,000
EXAMPLES (A – IMPACT REFLECTED IN THE
BALANCE SHEET)
Assets OB +/- CB Owners’ equity OB +/- CB

and liabilities
Buildings 25,000 + 1,000 (T6) 25,600 Share capital 30,000 + 3,000 (T2) 31,000
- 400 (T8) + 3,000 (T4)
- 5,000 (T5)
Raw materials 3,000 3,000 Revaluation 1,000 + 1,000 (T6) 1,600
reserves - 400 (T8)
Goods for 2,000 + 2,000 (T7) 4,000 Reserves 4,000 - 3,000 (T2) 1,000
resale
Customers 4,000 4,000 Bond loans 3,000 - 3,000 (T4) 0
Cash at bank 9,000 + 6,000 (T1) 9,000 Bank loans 5,000 + 1,000 (T3) 0
- 6,000 (T9) - 6,000(T9)
Cash in hand 7,000 - 6,000 (T1) 1,000 Suppliers 3,000 - 1,000 (T3) 4,000
+ 2,000 (T7)
Other liabilities 4,000 + 5,000 (T5) 9.000
Total A 50,000 - 3,400 46,600 Total OE +L 50,000 - 3,400 46,600

IMPACT OF TRANSACTIONS ON FINANCIAL POSITION
AND PERFORMANCE
Equations for transactions that affect financial position (directly) and performance
(indirectly, through profit or loss):
⚫ A – x = (OE – x) + L Ex.: Consumption and removal from stock of inventories
– Assets decrease, A –
– Expenses increase, E +, thus generating a decrease of profit, OE +
⚫ A = (OE + x) + (L – x) Ex.: Discounts received, reversal (annulment) of provisions
– Liabilities decrease, L –
– Revenues increase, R +, thus generating an increase of profit, OE +
⚫ A = (OE – x) + (L + x) Ex.: Receiving services, recording salaries and taxes
– Liabilities increase, L +
– Expenses increase, E +, thus generating a decrease of profit, OE –
⚫ A + x = (OE + x) + L Ex.: Sale of assets and services, manufacturing assets
– Assets increase, A +
– Revenues increase, R +, thus generating an increase of profit, OE +
EXAMPLES (B – IMPACT ON FINANCIAL POSITION
AND PERFORMANCE)
T10. The entity consumes raw materials of lei 2,000.

A-x = (OE – x) + L
Raw materials Profit (- lei 2,000)
+ lei 2,000 Expenses related to raw materials (+ lei 2,000)
T11. The entity records lei 1,000 energy consumption for the current
period, based on the invoice received from the supplier.
A = (OE - x) + (L + x)
Profit (- lei 1,000) Suppliers
Electricity expenses (+ lei 1,000) + lei 1,000
T14. The entity receives a financial discount of lei 500 from a supplier, provided it
agrees to pay the invoice before the settlement date.
A = (OE + x) + (L - x)
Profit (+ lei 500) Suppliers (- lei 500)
Revenues from financial discounts received (+ lei 500)
EXAMPLES (B – IMPACT ON FINANCIAL POSITION
AND PERFORMANCE)
T12. The entity sells goods for resale at a selling price of lei 5,000.
A + x = ( OE + x) + L
Customers Profit (+ lei 5,000)
+ lei 5,000 Revenues from the sale of goods for resale ( + 5,000)
T13. The entity removes from stock the goods for resale sold to
customers at an acquisition cost of lei 1,000.
A - x = ( OE - x) + L
Goods for resale Profit (- lei 1,000)
- lei 1,000 Expenses related to goods for resale ( + 1,000)
NOTE. SALE TRANSACTIONS CONSIST OF TWO SEPARATE STAGES:

SALE (value = selling price): Increase of customers and increase of revenues.
REMOVAL FROM STOCK (value = cost of goods sold): Decrease of assets and
increase of expenses.
TRANSACTIONS – IMPACT REFLECTED IN THE
BALANCE SHEET AND INCOME STATEMENT
Assets OB +/- CB Owners’ equity OB +/- CB

(same as CB and liabilities
from BS 1)
Buildings 25,600 25,600 Share capital 31,000 31,000
Raw 3,000 - 2,000 (T10) 1,000 Revaluation 1,600 1,600

materials reserves
Goods for 4,000 - 1,000 (T13) 3,000 Reserves 1,000 1,000
resale
Customers 4,000 + 5,000 (T12) 9,000 Profit or loss for 0 - 2,000 (T10) + 1,500
the financial year - 1,000 (T11) (profit)
+ 5,000 (T12)
- 1,000 (T13)
+ 500 (T14)
Cash at 9,000 9,000 Suppliers 4,000 + 1,000 (T11) + 4,500
bank - 500 (T14)
Cash in 1,000 1,000 Other liabilities 9,000 9,000
hand
Total A 46,600 + 2,000 48,600 Total OE +L 46,600 + 2,000 48,600

OPTIONAL MATERIAL
The following will not be included in the exam:

⚫ Statement of cash flows
⚫ Statement of changes in equity
⚫ Notes to the annual financial statements
⚫ Accounting principles
CHAPTER 2 – MANDATORY TEST, week 7
The following topics will be included in the test (week 7, to be announced

on Thursday, November 4):
⚫ Balance sheet
⚫ Income statement
⚫ Transactions
Pages 2-38 of case studies and exercises must be finalized in week 7
(partial evaluation during the tutorials).
ACCOUNTING
MARKETING Weeks 6, 7
Associate professor
Raluca GUŞE, PhD.
STUDIES
CHAPTER 3. DOUBLE ENTRY ACCOUNTING SYSTEM
Day-to-day accounting uses the instrument called ACCOUNT to recognize the

effects of transactions. There is an account for each item in the Balance Sheet and
Income Statement.
Main categories of accounts are: assets accounts, liabilities accounts, owners’
equity accounts, expenses accounts, revenues accounts (same as their
classification in the financial statements).
In Romanian accounting, assets and expenses accounts are called assets accounts.
Liabilities, owners’ equity and revenues accounts are called “pasiv” accounts.
All accounts used in Romanian accounting are listed in the Chart of accounts.
Accounts are grouped into classes and groups. There are numerical symbols
attached to each class of accounts, group of accounts or account.
Accounts’ symbols are made up of 3 or 4 digits: 301 Raw materials (assets account),
401 Suppliers (liabilities account), 1061 Legal reserves (owners equity account), 605
Electricity expenses (expenses account), 706 Rent revenues(revenues account).
THE ACCOUNT - SYMBOLS
Account symbols:
a b c d Class
Group
1st degree synthetic account
2nd degree synthetic account
Example:
1 0 1 1 Class 1 – Capital accounts

Group 10 - Capital and reserves
1st degree synthetic account - 101 Capital
2nd degree synthetic account - 1011 Subscribed and not paid up capital
CHART OF ACCOUNTS
Chart of accounts structure (to be used when searching an accounts’ symbol):

1 Capital accounts Owners’ equity
Symbol Provisions
1ab or 1abc Loans and similar (non-current) debts: bond loans, bank
loans, financial leases etc.
2 Non-current assets Intangible assets, Tangible assets, Financial assets
Symbol accounts Depreciation and amortization
2ab or 2abc Impairment of non-current assets
3 Inventories and work in Inventories
progress accounts Impairment of inventories
4 Third party accounts Receivables, Prepaid expenses
Current liabilities, Deferred revenues and investment
subsidies
Impairment of receivables
5 Treasury accounts Short term investments, Cash and cash equivalents
Short term bank loans
Impairment of treasury items
6 Expenses accounts Operating and financial expenses
7 Revenues accounts Operating and financial revenues
ACCOUNTS RULES/FUNCTION
ACCOUNTS RULES – SIMPLIFIED

ASSETS, EXPENSES
D C
OB
+ –
CDB
The rule for assets and expenses accounts also applies to profit appropriation and own
shares (negative OE items).
OWNERS’ EQUITY, LIABILITIES, REVENUES
D C
OB
– +
CCB
The rule for owners' equity and liabilities accounts also applies to amortization,
depreciation and impairment of assets (rectifying assets or negative assets).
STRUCTURE OF THE ACCOUNT
ACCOUNT STRUCTURE
⚫ Account title and symbol Numerical symbol and name
⚫ Debit and credit sides Left (debit) and right (credit) sides
⚫ Explanation Date/trans. number and corresponding
account
⚫ Current amounts (Ro. Rulaje) CDA and CCA
⚫ Total amounts (Ro. Total sume) TDA and TCA
⚫ Account balance (Ro. Sold) Opening balance and closing balances, on
the debit or credit side of the account (ODB,
OCB, CDB, CCB).
Closing balances are written on the opposite side as compared to their type. For
example, if TDA > TCA, then the account has a closing debit balance (CDB) written
on the credit side of the account.
PURPOSE OF THE ACCOUNT
Purpose of the account - example regarding Cash in hand, pp. 56-57

01.05 – The entity receives dividends of lei 200 in cash form an affiliated entity
+ Cash in hand 200 lei
+ Revenues from dividends 200 lei
01.06 – The entity pays in cash an advance to inventories suppliers (lei 320) and a
commission (lei 20)
- Cash in hand 320 lei - Cash in hand 20 lei
- Advances for inventories 320 lei - Commissions expenses 20 lei
01.08 – The entity receives cash from customers (lei 300), form sundry debtors (lei 500),
and a rent in advance for the next financial year (lei 40) + Cash in hand 300 lei + Cash
in hand 500 lei + Cash in hand 40 lei
- Customers 300 lei - Sundry debtors 500 lei + Deferred income 40
01.10 – The entity pays its suppliers (lei 400) and a fine (lei 100) in cash
- Suppliers 400 lei - Fines expenses 100 lei Information T-account
ACCOUNT - EXAMPLE
Example of an account: 5311 Cash in hand, assets account

D 531 CASH IN HAND C
ODB 1,000
Jan 05/Rev. from dividends 200 Jan 06/Adv. payments for inv. 320
Jan 08/Customers 300 Jan 06/Commissions expenses 20
Jan 08/Sundry debtors 500 Jan 10/Suppliers 400
Jan 08/Deferred income 40 Jan 10/Fines expenses 100
CDA 1,040 CCA 840
TDA 2,040 TCA 840
CDB 1,200
ACCOUNTING CYCLE
1 to 6 are monthly operations, 7 to 9 are closing-year (year-end) accounting

operations performed in December
1. Source documents indicate transactions
2. Transactions are analyzed to find the JOURNAL ENTRY
3. Journal entries are written in the General Journal
4. Information is transferred from the General Journal (chronological order) into the
General Ledger (collection of T-accounts)
5. T-accounts are closed to determine the closing balances
6. Operations are checked using a Trial Balance
7. Annual inventorying (stock-taking) is performed, followed by recording
transactions meant to correct any mistakes and inaccuracies (General Journal,
General Ledger steps)
8. A new Trial Balance is prepared after the corrections were made
9. Financial Statements are prepared using the second trial balance from December.
ANALYSIS OF TRANSACTIONS ➔ JOURNAL ENTRIES
Journal entries are:

⚫ Simplified forms of writing changes generated by transactions.
⚫ Result of the accounting analysis of transactions – process of deciding what
accounts are affected by the transaction and how they are affected
(increases or decreases of value, written on the debit or credit side of the
accounts).
Example of accounting analysis (simplified form to be prepared for the final
exam). An entity acquires timber of 500 lei from suppliers, to use in the
manufacturing process.
Transaction name: Acquisition of raw materials
Changes, accounts rules, accounts symbols:
• Increase of raw materials, A +, Debit, 301 Raw materials
• Increase of liability toward suppliers, L +, Credit, 401 Suppliers
Journal entry (simple, two accounts):
301 = 401 lei 500

exam). ALFA pays lei 1,000 to suppliers, of which lei 600 is paid from the
checking account and lei 400 is paid in cash.
Transaction name: Payment of suppliers in cash and from the bank account
⚫ Decrease of liabilities towards suppliers, L -, Debit, 401 Suppliers
⚫ Decrease of cash in hand, A -, Credit, 5311 Cash in hand in lei
⚫ Decrease of cash at bank, A -, Credit, 5121 Cash at bank in lei
Journal entry (combined/complex, more than two accounts):
401 = % lei 1,000
5311 lei 400
5121 lei 600
TRANSFER OF INFORMATION FROM JOURNAL
ENTRIES INTO ACCOUNTS
Information from the journal entries is transferred into T-accounts.

Example: 401 Suppliers. We assume that the opening balance for Suppliers is
3.000 lei (value of liabilities towards suppliers at the beginning of the month). As
a result of transactions A and B, the account 401 Suppliers includes the following
information:
D 401 SUPPLIERS C
3.000 OCB
B/5121, 5311 1.000 500 A/301
CDA 1.000 500 CCA

TDA 1.000 3.500 TCA
CCB 2.500
ACCOUNTING CYCLE – EXAMPLE 1
EXAMPLE 1/66
Follow the accounting cycle for Alfa S.A., given the information available for the
month of October N = KEEP ALFA'S ACCOUNTING RECORDS IN OCTOBER
On 10.01.N, Alfa S.A. has the following opening balances (all amounts in lei):
101 Capital – 10,000, 401 Suppliers – 5,000, 411 Customers – 12,000, 512 Cash at
bank – 3,000.
In October, Alfa engages in the following transactions, as shown by source
documents:
⚫ The entity pays a lei 2,000 liability to suppliers using the cash from the bank
account (Payment order no. 135/10.02, issued by ALFA S.A.).
⚫ The entity acquires raw materials of lei 4,000 and goods for resale of lei 1,000
(Invoice no. 12/10.10, received form the supplier BETA S.R.L.).
⚫ The entity receives lei 7,000 in the bank account from customers (Statement of
account no. 1.245/10.22, received from Alfa’s bank).
ANALYSIS OF TRANSACTIONS
STAGE 1. Collecting source documents and analysing transactions

Transaction 1. Payment to suppliers
⚫ Decrease of cash, A -, Credit, 5121 Cash at bank in lei
⚫ Decrease of trade liabilities, L -, Debit, 401 Suppliers
401 = 5121 2,000 lei
Transaction 2. Acquisition of inventories
⚫ Increase of trade liabilities, L +, Credit, 401 Suppliers
⚫ Increase of inventories, A +, Debit: 301 Raw materials
371 Goods for resale
% = 401 5,000 lei
301 4,000 lei
371 1,000 lei
Transaction 3. Collection of receivables
⚫ Increase of cash, A +, Debit, 5121 Cash at bank in lei
⚫ Decrease of trade receivables, A -, Credit, 4111 Customers
5121 = 4111 7,000 lei
GENERAL JOURNAL
GENERAL LEDGER = T-ACCOUNTS
STAGE 3. Systematic recording of transactions in the General Ledger (simplified – T-accounts)

GENERAL LEDGER
Month: OCTOBER, Year: N S.C. ALFA S.A.
D 101 Capital C D 401 Suppliers C
OB 10,000 1/5121 2,000 OB 5,000
2/301 4,000
2/371 1,000
CDA 0 CCA 0 CDA 2,000 CCA 5,000
CCA 0 TCA 10.000 CCA 2,000 TCA 10,000
CCB 10,000 CCB 8,000
GENERAL LEDGER = T-ACCOUNTS
D 411 Customers C D 5121 Cash at bank in lei C

OB 12,000 3/5121 7,000 OB 3,000 1/401 2,000
3/4111 7,000
CDA 0 CCA 7,000 CDA 7,000 CCA 2,000

CCA 12.000 TCA 7,000 CCA 10,000 TCA 2,000
CDB 5,000 CDB 8,000
D 301 Raw materials C D 371 Goods for resale C

OB 0 OB 0
2/401 4,000 2/401 1,000
CDA 4,000 CCA 0 CDA 1,000 CCA 0

CCA 4,000 TCA 0 CCA 1,000 TCA 0
CBD 4,000 CDB 1,000
TRIAL BALANCE
ACCOUNTING
MARKETING Week 7
Associate professor
Raluca GUŞE, PhD.
STUDIES
Day-to-day accounting uses the instrument called ACCOUNT to recognize the

effects of transactions. There is an account for each item in the Balance Sheet and
Income Statement.
Main categories of accounts are: assets accounts, liabilities accounts, owners’
equity accounts, expenses accounts, revenues accounts (same as their
classification in the financial statements).
In Romanian accounting, assets and expenses accounts are called assets accounts.
Liabilities, owners’ equity and revenues accounts are called “pasiv” accounts.
All accounts used in Romanian accounting are listed in the Chart of accounts.
Accounts are grouped into classes and groups. There are numerical symbols
attached to each class of accounts, group of accounts or account.
Accounts’ symbols are made up of 3 or 4 digits: 301 Raw materials (assets account),
401 Suppliers (liabilities account), 1061 Legal reserves (owners equity account), 605
Electricity expenses (expenses account), 706 Rent revenues(revenues account).
THE ACCOUNT - SYMBOLS
Account symbols:
a b c d Class
Group
1st degree synthetic account
2nd degree synthetic account
Example:
1 0 1 1 Class 1 – Capital accounts

Group 10 - Capital and reserves
1st degree synthetic account - 101 Capital
2nd degree synthetic account - 1011 Subscribed and not paid up capital
CHART OF ACCOUNTS
Chart of accounts structure (to be used when searching an accounts’ symbol):

1 Capital accounts Owners’ equity
Symbol Provisions
1ab or 1abc Loans and similar (non-current) debts: bond loans, bank
loans, financial leases etc.
2 Non-current assets Intangible assets, Tangible assets, Financial assets
Symbol accounts Depreciation and amortization
2ab or 2abc Impairment of non-current assets
3 Inventories and work in Inventories
progress accounts Impairment of inventories
4 Third party accounts Receivables, Prepaid expenses
Current liabilities, Deferred revenues and investment
subsidies
Impairment of receivables
5 Treasury accounts Short term investments, Cash and cash equivalents
Short term bank loans
Impairment of treasury items
6 Expenses accounts Operating and financial expenses
7 Revenues accounts Operating and financial revenues
ACCOUNTS RULES/FUNCTION
ACCOUNTS RULES – SIMPLIFIED

ASSETS, EXPENSES
D C
OB
+ –
CDB
The rule for assets and expenses accounts also applies to profit appropriation and own
shares (negative OE items).
OWNERS’ EQUITY, LIABILITIES, REVENUES
D C
OB
– +
CCB
The rule for owners' equity and liabilities accounts also applies to amortization,
depreciation and impairment of assets (rectifying assets or negative assets).
STRUCTURE OF THE ACCOUNT
ACCOUNT STRUCTURE
⚫ Account title and symbol Numerical symbol and name
⚫ Debit and credit sides Left (debit) and right (credit) sides
⚫ Explanation Date/trans. number and corresponding
account
⚫ Current amounts (Ro. Rulaje) CDA and CCA
⚫ Total amounts (Ro. Total sume) TDA and TCA
⚫ Account balance (Ro. Sold) Opening balance and closing balances, on
the debit or credit side of the account (ODB,
OCB, CDB, CCB).
Closing balances are written on the opposite side as compared to their type. For
example, if TDA > TCA, then the account has a closing debit balance (CDB) written
on the credit side of the account.
PURPOSE OF THE ACCOUNT
Purpose of the account - example regarding Cash in hand, pp. 56-57

01.05 – The entity receives dividends of lei 200 in cash form an affiliated entity
+ Cash in hand 200 lei
+ Revenues from dividends 200 lei
01.06 – The entity pays in cash an advance to inventories suppliers (lei 320) and a
commission (lei 20)
- Advances for inventories 320 lei - Commissions expenses 20 lei
01.08 – The entity receives cash from customers (lei 300), form sundry debtors (lei 500),
and a rent in advance for the next financial year (lei 40) + Cash in hand 300 lei + Cash
in hand 500 lei + Cash in hand 40 lei
- Customers 300 lei - Sundry debtors 500 lei + Deferred income 40
01.10 – The entity pays its suppliers (lei 400) and a fine (lei 100) in cash
- Suppliers 400 lei - Fines expenses 100 lei Information T-account
ACCOUNT - EXAMPLE
Example of an account: 5311 Cash in hand, assets account

D 531 CASH IN HAND C
ODB 1,000
Jan 05/Rev. from dividends 200 Jan 06/Adv. payments for inv. 320
Jan 08/Customers 300 Jan 06/Commissions expenses 20
Jan 08/Sundry debtors 500 Jan 10/Suppliers 400
Jan 08/Deferred income 40 Jan 10/Fines expenses 100
CDA 1,040 CCA 840
TDA 2,040 TCA 840
CDB 1,200
ACCOUNTING CYCLE
1 to 6 are monthly operations, 7 to 9 are closing-year (year-end) accounting

operations performed in December
1. Source documents indicate transactions
2. Transactions are analyzed to find the JOURNAL ENTRY
3. Journal entries are written in the General Journal
4. Information is transferred from the General Journal (chronological order) into the
General Ledger (collection of T-accounts)
5. T-accounts are closed to determine the closing balances
6. Operations are checked using a Trial Balance
7. Annual inventorying (stock-taking) is performed, followed by recording
transactions meant to correct any mistakes and inaccuracies (General Journal,
General Ledger steps)
8. A new Trial Balance is prepared after the corrections were made
9. Financial Statements are prepared using the second trial balance from December.
Journal entries are:

⚫ Simplified forms of writing changes generated by transactions.
⚫ Result of the accounting analysis of transactions – process of deciding what
accounts are affected by the transaction and how they are affected
(increases or decreases of value, written on the debit or credit side of the
accounts).
exam). An entity acquires timber of 500 lei from suppliers, to use in the
manufacturing process.
Transaction name: Acquisition of raw materials
• Increase of raw materials, A +, Debit, 301 Raw materials
• Increase of liability toward suppliers, L +, Credit, 401 Suppliers
Journal entry (simple, two accounts):
301 = 401 lei 500

exam). ALFA pays lei 1,000 to suppliers, of which lei 600 is paid from the
checking account and lei 400 is paid in cash.
Transaction name: Payment of suppliers in cash and from the bank account
⚫ Decrease of liabilities towards suppliers, L -, Debit, 401 Suppliers
⚫ Decrease of cash in hand, A -, Credit, 5311 Cash in hand in lei
Journal entry (combined/complex, more than two accounts):
401 = % lei 1,000
5311 lei 400
5121 lei 600
TRANSFER OF INFORMATION FROM JOURNAL
ENTRIES INTO ACCOUNTS
Information from the journal entries is transferred into T-accounts.

Example: 401 Suppliers. We assume that the opening balance for Suppliers is
3.000 lei (value of liabilities towards suppliers at the beginning of the month). As
a result of transactions A and B, the account 401 Suppliers includes the following
information:
D 401 SUPPLIERS C
3.000 OCB
B/5121, 5311 1.000 500 A/301
CDA 1.000 500 CCA

TDA 1.000 3.500 TCA
CCB 2.500
ACCOUNTING
MARKETING - Week 8
Associate professor
Raluca GUŞE, PhD.
STUDIES
Objective:
⚫ Analysis of transactions, including recognition of revenues
and expenses
⚫ Closing the accounts
– Closing permanent accounts (see example 1, page 67)
– Closing temporary accounts such as revenues and expenses accounts
⚫ Preparing the financial statements
Example 2, page 70
ANALYSIS OF TRANSACTIONS – REVENUES AND
EXPENSES ACCOUNTS
Transaction 1. Consumption of raw materials of lei 200 (consumption note).

Consumption of raw materials transaction name
⚫ Inventories decrease, A -, Credit, 301 Raw materials analysis
⚫ Operating expenses increase, E +, Debit, 601 Expenses related to raw materials
601 = 301 200 lei journal entry
Transaction 2. The electricity invoice of lei 1,600 is received from the provider
(invoice) and paid using cash from the bank account (payment order).
2.1. Recording the electricity invoice (or Recording the consumption of electricity)
⚫ Operating expenses increase, E +, Debit, 605 Electricity expenses
⚫ Trade liabilities increase, L +, Credit, 401 Suppliers
605 = 401 1,600 lei
2.2. Payment of supplier form the bank account:
⚫ Trade liabilities decrease, L -, Debit, 401 Suppliers
⚫ Cash at bank decreases, A -, Credit, 5121 Cash at bank in lei
401 = 5121 1,600 lei
EXPENSES ACCOUNTS
Transaction 3. The income tax of lei 100 owed to the fiscal authorities is
recorded (accounting note).
Recognizing/recording the income tax liability:
⚫ Tax liabilities increase, L +, Credit, 4411 Income tax payable
⚫ Operating expenses increase, E +, Debit, 691 Income tax expense
691 = 4411 100
Transaction 4. The sum of lei 2,000 is received into the bank account as interest
(statement of account).
Receiving dividends into the bank account:
⚫ Cash at bank increases, A +, Debit, 5121 Cash at bank in lei
⚫ Financial revenues increase, R +, Credit, 766 Interest revenues
5121 = 766 2,000
EXPENSES ACCOUNTS
Transaction 5. ALFA provides financial consultancy services to a customer, for a lei

5,000 fee (invoice).
Providing consultancy services to customers:
⚫ Increase of trade receivables, A +, Debit, 4111 Customers
⚫ Increase of operating revenues, R +, Credit, 704 Revenues from services
rendered (Services revenues)
4111 = 704 5,000
Transaction 6. The entity acquires goods for resale at an acquisition cost of lei
10,000 from a supplier (invoice), and then sells 50% of the goods for resale at a
selling price of 23.000 lei (invoice, accounting note). Both transactions are settled
using cash from the bank account (payment order, statement of account).
The following transactions are included in this example: Acquisition, Sale, Removal
from stock, Payment of liabilities, Collection of receivables.
EXPENSES ACCOUNTS
6.1. Acquisition of goods for resale from suppliers (invoice received from
suppliers)
⚫ Increase of inventories, A +, Debit, 371 Goods for resale
⚫ Increase of trade liabilities, L +, Credit, 401 Suppliers
371 = 401 10,000 lei
6.2. Payment of lei 10,000 to suppliers from the bank account (payment order)
Payment of suppliers from the bank account
401 = 5121 10,000 lei
(see previous journal entry to identify the amount of money to be paid to the
supplier)
EXPENSES ACCOUNTS
REMEMBER: Sales transactions usually involve two values: price and cost. Two values
generate two separate journal entries:
Sale - purpose is to recognize the selling price as a revenue and a receivable
6.3. Sale of goods for resale for a selling price or lei 23,000 (invoice issued by Alfa).
⚫ Trade receivables increase, A +, Debit, 4111 Customers
⚫ Operating revenues increase, R +, Credit, 707 Revenues from the sale of goods for
resale
4111 = 707 23,000 lei
Removal from stock - purpose is to remove (delete) the goods sold from the
company’s accounting records, by recognizing an expense and a decrease of assets.
6.4. Removal from stock of goods for resale sold at a cost of acquisition of lei 5.000
(Accounting note).
⚫ Inventories decrease, A -, Credit, 371 Goods for resale
⚫ Operating expenses increase, E +, Debit, 607 Expenses related to goods for resale
607 = 371 5,000 lei
EXPENSES ACCOUNTS
6.5. Collecting 23,000 lei from customers into the bank account (Statement of
account)
⚫ Trade receivables decrease, A -, Credit, 4111 Customers
⚫ Cash at bank increases, A+, Debit, 5121 Cash at bank in lei
5121 = 4111 23,000
CLOSING THE ACCOUNTS
Permanent accounts are Balance Sheet accounts (A, OE, L) or classes 1 to 5 from the
Chart of accounts. Permanent accounts have debit, credit or zero balances.
Closing permanent accounts means identifying their closing balance. Steps taken
(directly into the T-account):
1. Current amounts (CDA and CCA)
2. Total amounts (TDA and TCA)
3. Closing balance (CDB or CCB)
Temporary accounts are Income Statement accounts (E and R) or classes 6 and 7
from the Chart of accounts.
Temporary accounts must have a zero closing balance (accounting regulations).
Closing temporary accounts means:
A. Recording a transaction by which temporary accounts transfer all of their current
amounts into the permanent account 121 profit or loss, and then
B. Following the three steps above to identify their closing balance (which will be
zero if "A" was recorded) into the T-accounts.
CLOSING REVENUES ACCOUNTS
Transaction 7. Closing all revenues accounts based on transactions 1- 6 from the

previous example:
⚫ Revenues decrease by transferring their current amounts into the income
statement, R -, Debit, 704, 766, 707
⚫ Profit increases, OE +, Credit, 121 Profit or loss for the financial year
% = 121 30,000 lei
704 5,000
766 2,000
707 23,000
The effect of transaction 7 is visible in all revenues accounts and account 121.
To illustrate: T-accounts for 704 and 121.
CLOSING EXPENSES ACCOUNTS
Transaction 8. Closing all expenses accounts based on transactions 1- 6 from the

previous example:
⚫ Expenses decrease by transferring their current amounts into the income
statement, E -, Credit, 601, 605, 691, 607
⚫ Profit decreases, OE -, Debit, 121 Profit or loss for the financial year
121 = % 6,900 lei
601 200
605 1,600
691 100
607 5,000
The effect of transaction 8 is visible in all expenses accounts and account 121.
To illustrate: see T-accounts for 601 and 121.
EFFECT OF CLOSING REVENUES AND EXPENSES IN
T-ACCOUNTS
FUNCTION OF ACCOUNT 121
Account 121 Profit or loss for the financial year

⚫ The closing balance of the account 121 Profit (loss) for the period is a
CREDIT balance, which indicates a PROFIT: Revenues > Expenses.
⚫ The closing balance of the account 121 Profit (loss) for the period is a
DEBIT balance, which indicates a LOSS: Revenues < Expenses.
PREPARING FINANCIAL STATEMENTS – OPTIONAL
ASSIGNMENT
Financial statements are prepared using the trial balance as of December 31,
after the annual inventorying.
Closing balances of accounts from classes 1 to 5 indicate the value of assets,
owners’ equity and liabilities in the Balance Sheet. Closing credit balances of
amortization, depreciation and impairment accounts are deducted from closing
debit balances of assets.
Total amounts of accounts from classes 6 and 7 (closing balances are zero)
indicate the values of revenues and expenses in the Income Statement.
Accounts are grouped into sub-categories and categories of BS and IS items.
OPTIONAL ASSIGNMENT: PAGES 74-79 OF LECTURE NOTES
Chapter 4 is also optional. The same information is provided in Chapter 5, in a

different form.
ACCOUNTING
Marketing Week 9
Associate professor
Raluca GUŞE, PhD.
STUDIES
CHAPTER 5. ANALYSIS OF TRANSACTIONS
VALUE-ADDED TAX
⚫ Is an indirect tax on the final consumption of goods and services

⚫ Authorities collect VAT by taxing each sale or acquisition transaction in the
entire supply chain, from the producer to the final consumer.
Therefore:
⚫ During the accounting period, the entities recorded as VAT contributors and
subject to VAT regulations are required to record the VAT for each sale and
acquisition.
VAT is 19% * cost of goods and services exchanged.
The total value of the invoice includes the price of goods or services transferred,
plus VAT.
Therefore, an invoice includes the following information of interest in terms of
accounting recognition (all amounts in lei):
INVOICES INCLUDING VAT
Information from invoices Case E1 Case E2

Price of goods/services P 1,000 8,000 7,140/1.19 = 6,000
VAT 19%*P or 0.19*P 190 8,000 * 0.19 = 6,000 * 0,19 =
= 1,520 1,140
Total invoice 119%*P or 1.19*P 1,190 8,000 + 1.520 = 7,140
(Price + VAT) = 9.520
⚫ E1: "Raw materials of lei 8,000 are acquired, VAT 19%” or "The consumption of
electricity of lei 8,000, VAT 19% is recorded, based on the invoice”.
⚫ E2: "Goods for resale are acquired based on the invoice of lei 7,140, of which VAT
19%” or "Services expenses are recorded, based on the invoice of lei 7,140, VAT
19%”.
OUTPUT VAT – SALES/INVOICES ISSUED
The seller collects the VAT from the buyer, for each sale transaction.
The seller is expected to transfer the VAT collected to the fiscal authorities.
Therefore, the VAT related to sale transactions is a fiscal liability and it is called
output VAT (or VAT collected: Ro. TVA colectată).
The account used to record output VAT is 4427.
Transaction 1. Alfa provides services to a client, for a selling price of lei 30,000, VAT
19%. The total value of the invoice is 35,700 = 30.000 + 30,000 x 0,19 or 30,000 x
1,19 (Sale of services).
⚫ Receivables increase, A +, debit, 4111 Customers
⚫ Operating revenues increase, R +, Credit, 704 Services revenues
⚫ Tax liabilities increase, L +, Credit, 4427 Output VAT
4111 = % 35,700
704 30,000
4427 5,700
INPUT VAT – ACQUISITIONS/INVOICES RECEIVED
If a buyer that was taxed for a purchase is not the final consumer of goods and
services (this is the case for most entities, who buy goods and services in order to
provide other goods and services to final consumers), then the buyer has the right
be reimbursed for the VAT by the fiscal authorities.
Therefore, the VAT for acquisition transactions is a tax receivable, called input VAT
(or VAT deductible: Ro. TVA deductibilă).
The account used to record input VAT is 4426.
Transaction 2. Alfa S.A. acquires raw materials at an acquisition cost of lei 10.000,
VAT 19%. The total amount payable is lei 11.900.
⚫ Inventories increase, A +, Debit, 301 Raw materials
⚫ Tax receivables related to VAT increase, A +, Debit, 4426 Input VAT
% = 401 Suppliers 11,900
301 10,000
4426 1,900
INPUT VAT – ACQUISITIONS/INVOICES RECEIVED
Transaction 3. Alfa S.A. receives and records the invoice of lei 2.380, of which
VAT 19%, for transport services rendered by third parties.
Operating expenses increase, E +, Debit, 624 Transportation expenses
Trade liabilities increase, L +, Credit, 401 Suppliers
Tax receivables increase, A +, Debit, 4426 input VAT
% = 401 2,380
624 2,000
4426 380
CLOSING THE VAT ACCOUNTS
4426 Input VAT and 4427 Output VAT are temporary accounts.
⚫ As such, they must be balanced at the end of the accounting period (they must
have a zero closing balance).
⚫ The amounts recorded in 4426 and 4427 during the accounting period are
transferred into permanent VAT accounts at the end of the accounting period.
⚫ The transfer is performed during the transaction called the closing of the VAT
accounts. The purpose of this transaction is to determine the value of the VAT to
be settled with the state budget, while closing the temporary 4426 and 4427 VAT
accounts with a zero balance.
Permanent VAT accounts to be used at the end of the accounting period:
⚫ 4423 VAT-payable (liability);
⚫ 4424 VAT-receivable (receivable, asset).
The settlement between the entity and the fiscal authorities is done for the
difference between input VAT and output VAT.
Considering transactions 1, 2 and 3, the T-accounts for 4426 and 4427 provide
the following information:
⚫ Input VAT recorded during the accounting period on the debit side of the
account 4426 is CDA of 4426 = 1,900 + 380 = 2,280, a tax receivable.
⚫ Output VAT recorded during the accounting period on the credit side of the
account 4427 is CCA of 4427 = 5,700, a tax liability.
In this case, tax receivables 2,280 < tax liabilities 5,700. It indicates that the
company has a tax liability of 5,700 – 2,280 = 3,420, which must be recognized
in a permanent VAT account at the end of the period: account 4423 VAT
payable.
(transaction on the next slide)
Transaction 4. Closing the VAT accounts, when input VAT 2,280 < output VAT 5,700,
generating VAT payable of 3,420.
⚫ Tax receivables regarding the VAT recorded in a temporary account decrease, A -,
Credit, 4426 Input VAT
⚫ Tax liabilities regarding the VAT regarding the VAT recorded in a temporary
account decrease, L -, Debit, 4427 Output VAT
⚫ Tax liabilities regarding the VAT to be recorded in a permanent account increase, L
+, Credit, 4423 VAT payable
4427 = % 5,700
4426 2,280
4423 3,420
As a result of transaction 4, the 4426 and 4427 account are balanced, and the 4423
account has a closing credit balance, indicating a tax liability that can be paid in the
following accounting period from the bank account, similar to all other liabilities
(decrease in liabilities and decrease in cash).
D 4426 Input VAT C D 4427 Output VAT C

OB 0 OB 0
2/401 1,900 4/4427 2,280 1/4111 5,700 4/4426 2,280
3/401 380 4/4423 3,420
CDA 2,280 CCA 2,280 CDA 5,700 CCA 5,700
TDA 2,280 TCA 2,280 TDA 5,700 TCA 5,700
D 4423 VAT payable C

OB 0
4/4427 3,420
CDA 0 CCA 3,420

TDA 0 TCA 3,420
CCB 3,420
(tax liability)
Closing the VAT accounts when input VAT = output VAT.

ALFA recorded sales of lei 20.000, VAT 19% and purchases of lei 20.000, VAT 19%.
The recorded VAT: input VAT = lei 3.800 and output VAT = lei 3.800. Close the VAT
accounts.
In this case, input VAT = output VAT, and the company does not have to settle the
VAT with the State budget. Closing the VAT accounts simply means to decrease the
value of the VAT recorded during the month.
Closing the VAT accounts

⚫ Tax receivables decrease, A -, Credit, 4426 Input VAT
⚫ Tax liabilities decrease, L -, Debit, 4427 Output VAT
4427 = 4426 3,800
Closing the VAT accounts when output VAT = 0.

Alfa a received and recorded invoices of lei 36.000, of which VAT is 19%. No invoices
were issued during the month. Close the VAT accounts.
In this case, output VAT = 0 (no sales) and input VAT = 0.19 x (36.000/1.19) = 5,748.
Closing the VAT accounts means that the company must transfer the tax receivable
from a temporary account to a permanent account.

⚫ Tax receivables increase, A +, Debit, 4424 VAT receivable
4424 = 4426 5,748
Closing the VAT accounts when input VAT = 0.

Alfa issued invoices of lei 12.000, of which VAT = 19%. No acquisition invoices were
recorded during the month. Close the VAT accounts.
In this case, input VAT = 0 (no acquisitions) and input VAT = 0.19 x (12.000/1.19) =
1,916. Closing the VAT accounts means that the company must transfer the tax
liability from a temporary account to a permanent account.

⚫ Tax liabilities increase, L +, Credit, 4423 VAT payable
4427 = 4423 1,916
Closing the VAT accounts when input VAT > output VAT.
Alfa issued invoices of lei 23.800, of which VAT = 19% and received invoices of lei
17,850, of which VAT = 19%. Close the VAT accounts.
In this case, output VAT = 0.19 x 23,800/1.19 = 3,800 (acquisitions) and input VAT =
0.19 x (17,850/1.19) = 2,850.
Tax receivables 3,800 > Tax liabilities 2,850.
Closing the VAT accounts means that the company must recognize a tax receivable of
3,800 – 2,850 = 950.
% = 4426 3,800
4427 2,850
4424 950
ACCOUNTING
Marketing Week 10
Associate professor
Raluca GUŞE, PhD.
STUDIES
TRANSACTIONS - ACQUISITIONS
Acquisition transactions involve the measurement of:

⚫ Cost of purchase or cost of acquisition, which is the value of all goods and
services acquired. It is equal to: purchase price + additional expenses such as
transport costs, non-refundable fees and commissions – discounts received
from suppliers.
⚫ VAT receivable = cost of purchase x 19%.
Source documents for acquisitions: invoices or bills.

An invoice indicates an acquisition, not a payment. Therefore, acquisitions require
the recognition of a liability:
⚫ suppliers (in the case of inventories and services), account 401 or
⚫ suppliers of non-current assets, account 404.
TRANSACTIONS - ACQUISITIONS
Acquisitions of non-current tangible and intangible assets generate the following

changes:
⚫ Increase of NCAs
⚫ Increase of trade liabilities (suppliers of NCAs)
⚫ Increase of tax receivables (input VAT)
Acquisitions of inventories generate the following changes:
⚫ Increase of inventories
⚫ Increase of trade liabilities (suppliers)
Acquisitions of services generate the following changes:
⚫ Increase of operating expenses
⚫ Increase of trade liabilities (suppliers)
In the lecture notes there are presented acquisitions of financial assets and short-term
investments – optional.
EXAMPLES – ACQUISITIONS OF NCAs
Transaction 1/91. Alfa S.A. acquires a license for a purchase price of lei 20,000, VAT
19%, based on the invoice no. 1123/October 20.
Acquisition of intangible NCAs:
⚫ Intangible assets increase, A +, Debit, 205 Concessions, licenses….
⚫ Trade liabilities increase, L +, Credit, 404 Suppliers of NCAs
% = 404 23,800
205 20,000
4426 3,800
EXAMPLES – ACQUISITIONS OF NCAs
Transaction 2/91. The entity records the acquisition of an equipment based on the
invoice no. 234/October 22, which contains the following information: purchase
price lei 10,000, transport costs lei 2,000, costs of site preparation lei 1,000, VAT
19%.
Cost of purchase = 10,000 + 2,000 + 1,000 = 13,000
Acquisition of tangible NCAs:
⚫ Tangible assets increase, A +, Debit, 2131 Equipment
⚫ Trade liabilities increase, L +, Credit, 404 Suppliers of NCAs
% = 404 15,470
2131 13,000
4426 2,470
EXAMPLES – ACQUISITIONS OF INVENTORIES
Transaction 1/95. ALFA purchases raw materials of lei 180 from its suppliers,
transport expenses lei 20, VAT 19%.
Cost of purchase = 180 + 20 = 200 lei
Achiziție de stocuri:
⚫ Inventories increase, A + , Debit, 301 Raw materials
⚫ Trade liabilities increase, L + , Credit, 401 Suppliers
⚫ Tax receivables increase, A + , Debit, 4426 Input VAT
% = 401 238 lei (200 + 38 or 200 x 1,19)
301 200 lei
4426 38 lei (200 x 0,19)
Transaction 3/95. ALFA purchases IT equipment based on the invoice 98/November

22: 2 keyboards for a purchase price of lei 250 lei each (small inventories), a printer
for a purchase price of lei 1,000 (small inventories), 20 DVDs for a purchase price of
lei 5 each, VAT 19% (consumables).
Acquisition of inventories:
⚫ Increase of inventories, A + , Debit, 303 Small inventories and 302 Consumables
⚫ Increase of trade liabilities, D + , Credit, 401 Suppliers
⚫ Increase of the tax receivables related to VAT, A + , Debit, 4426 Input VAT
% = 401 1,904
303 1,500
302 100
4426 304 (0.19 x 1,600)
Transaction 5/95. ALFA purchases goods for resale based on the invoice no.
453/November 15, which comprises the following information: purchase price lei
1.000, transport expenses lei 200, commercial discount (rebate) for quality defects lei
100, VAT 19%.
Cost of purchase = 1,000 + 200 – 100 = 1,100
Acquisition of inventories:
⚫ Inventories increase, A +, Debit, 371 Goods for resale
⚫ Tax receivables related to VAT increase, A +. Debit, 4426 Input VAT
% = 401 1,309
371 1,100
4426 209
EXAMPLES – ACQUISITIONS OF SERVICES
Transaction 1/104. ALFA records the invoice received for the consumption of
electricity in the amount of lei 1,500, VAT 19%.
Acquisition of services:
⚫ Operating expenses increase, E +, Debit, 605 Electricity, heating and water
expenses
⚫ Tax receivables related to VAT increase, A +. Debit, 4426 Input VAT
% = 401 1,785
605 1,500
4426 285
TRANSACTIONS – MANUFACTURING ASSETS
Manufacturing transactions (production of assets) generate the following changes:

⚫ Increase of assets
⚫ Increase of operating revenues
Examples of manufacturing transactions from the lecture notes:

Transaction 7/96. The entity produces finished goods from the production process,
for a manufacturing cost of lei 900.
Manufacturing finished goods:
⚫ Increase of inventories, A +, Debit, 345 Finished goods
⚫ Increase of operating revenues, R +, Credit, 711 Revenues associated with the
cost of inventories
345 = 711 900
Similar transactions can be recorded for semi-finished goods, residual products,
work-in-progress and other products.
EXAMPLES - MANUFACTURING ASSETS
Transaction 4/91. The entity produces furniture, at a production cost of lei 3,500
(raw materials 1,000 + direct labor 1,500 + equipment depreciation 1,000).
Manufacturing tangible NCAs:
⚫ Increase of NCAs, A +, Debit, 214 Fixtures, fittings and other tangible assets
⚫ Increase of operating revenues, R +, Credit, 722 Capitalized costs of tangible
non-current assets (or “Revenues from the production of tangible NCAs”
214 = 722 3,500
Transaction 5/91. The entity produces a software application, intended for use in
the accounting department, at a production cost of lei 10,000 (depreciation 2,000 +
salaries 8,000).
Manufacturing intangible NCAs:
⚫ Increase of NCAs, A +, Debit, 208 Other intangible assets
⚫ Increase of operating revenues, R +, Credit, 721 Capitalized costs of intangible
non-current assets (or “Revenues from the production of intangible NCAs”
208 = 721 10,000
TRANSACTIONS – CONSUMPTION OF INVENTORIES,
AMORTIZATION & DEPRECIATION OF NCAs
Consumptions of inventories generate the following changes:

⚫ Decrease of inventories
⚫ Increase of operating expenses
When they are consumed, inventories disappear (physically) from the company’s
warehouse.
Consumption of NCAs is called amortization or depreciation. When they are used,

NCAs do not disappear from the company. Therefore, recording amortization or
depreciation does not change the value of NCAs directly. Instead, it increases
amortization/depreciation.
Recording amortization/depreciation of NCAs generates the following changes:
⚫ Increase of amortization/depreciation
⚫ Increase of operating expenses (account 6811 Expenses related to the
amortization/depreciation of NCAs)
This transaction is recorded at the end of each month.
EXAMPLES – CONSUMPTION OF INVENTORIES
Transaction 2/95. Raw materials of lei 140 are consumed.

Consumption of inventories:
⚫ Decrease of inventories, A -, Credit, 301 Raw materials
⚫ Increase in operating expenses, E +, Debit, 601 (Expenses related to) Raw
materials
602 = 301 140
Transaction 4/95. The keyboards acquired at transaction 3/96 are put into use.
Consumption of inventories:
⚫ Decrease of inventories, A -, Credit, 303 Small inventories
⚫ Increase in operating expenses, E +, Debit, 603 (Expenses related to) Small
inventories
603 = 303 500
EXAMPLES – AMORTIZATION & DEPRECIATION OF
NCAs
Transaction 7/92. The entity records the depreciation of tangible assets of lei 2,000
and the amortization of intangible assets of lei 1,000, for the current month.
Recording amortization and depreciation:

⚫ Increase of operating expenses, E +, Credit, 6811 Expenses related to the
amortization/depreciation of NCAs
⚫ Increase of depreciation/amortization, De + or Am +, Credit (or De+, A -, +, A -,
Credit), 280 Amortization of intangible NCAs and 281 Depreciation of Tangible
NCAs
6811 = % 3,000
280 1,000
2811 2,000
TRANSACTIONS - SALES
Sales of assets transactions are followed by the removal from stock of the goods
sold (which must be eliminated from the balance sheet after the sale).
Sale transactions involve two different amounts: selling price and cost of goods
sold.
Sale = recognition of the selling price as revenue.
Removal from stock = recognition of cost of goods sold, usually as an expense
(see additional information for NCAs, finished goods and services).
Therefore, sale of assets = two separate transactions.

TRANSACTIONS – SALES OF NCAs
Sale of NCAs:
⚫ Increase of operating revenues (Account 7583 Proceeds from disposal of assets
and other capital transactions or “Revenues from the sale of NCAs”)
⚫ Increase of receivables (Sundry debtors)
⚫ Increase of tax liabilities (Output VAT)
Removal from stock (or disposal of) NCAs must consider the value of the
corresponding amortization and depreciation:
⚫ Decrease of NCAs
⚫ Decrease of amortization or depreciation (if any)
⚫ Increase of operating expenses, for the net value of the asset (initial value –
amortization or depreciation) (Account 6583 Net value of assets disposed of and
other capital transactions or “Expenses related to the sale of NCAs”)
NCAs are disposed of as a result of sales or dismantling, donation, destruction etc.
Same rules apply as in the case of removal from stock.
EXAMPLES – SALES OF NCAs
Transaction 9/92. A lei 48,000 car, currently depreciated for lei 48,000, is sold for
a selling price of lei 10,000, VAT 19%. Sale of NCAs:
⚫ Increase of operating revenues, R +, Credit, 7583 Revenues from the sale of
NCAs
⚫ Increase of receivables, A +, debit, 461 Sundry debtors
⚫ Increase of tax liabilities, L +, Credit, 4427 Output VAT
461 = % 11,900
7583 10,000
4427 1,900
Disposal of a fully depreciated NCA (initial value 48,000, depreciation 48,000, net
value 0):
⚫ Decrease of NCAs, A -, Credit, 2133 Motor vehicles
⚫ Decrease of depreciation, De -, Debit or De -, (A -) -, A +, Debit, 2813
Depreciation of plant and machinery and motor vehicles
2813 = 2133 48,000
Transaction 10/92. A lei 4,000 computer, current accumulated depreciation lei

1.000, is sold for a selling price of lei 2,000, VAT 19%. Sale (see analysis of
Transaction 9/92):
461 = % 2,380
7583 2,000
4427 380
Disposal of a partly depreciated NCA (initial value 4,000, depreciation 1,000, net
value 3,000):
⚫ Decrease of NCAs, A -, Credit, 214 Fixtures, fittings and other tangible assets
⚫ Decrease of depreciation, De -, Debit, 2814 Depreciation of fixtures, fittings and
other tangible assets
⚫ Increase of operating expenses, E +, Debit, 6583 Net value of assets disposed of
and other capital transactions (or “Expenses related to the sale of NCAs”)
% = 214 4,000
2814 1,000
6583 3,000
Transaction 11/93. The entity sells industrial equipment of lei 10,000, accumulated
depreciation at the date of sale: 0, for a selling price of lei 15,000, VAT 19%.
Sale of a NCA (see analysis of Transaction 9/92):
461 = % 17,850
7583 15,000
4427 2,850
Disposal of a non-depreciated NCA (initial value 10,000, depreciation 0, net value

10,000):
⚫ Decrease of NCAs, A -, Credit, 2131 Equipment
⚫ Increase of operating expenses, E +, Debit, 6583 Net value of assets disposed of
and other capital transactions (or “Expenses related to the sale of NCAs”)
6583 = 2131 10,000
EXAMPLES – DISMANTLING NCAs
Transaction 8/92. A computer is dismantled; the computer was acquired two

years ago for a cost pf purchase of lei 3,000 and is now fully depreciated: the
value of the accumulated depreciation at the date of dismantling is lei 3,000.
Dismantling NCAs – recorded similarly to disposals of NCAs/removals from stock

(initial value 3,000, depreciation 3,000, net value 0):
⚫ Decrease of NCAs, A -, Credit, 214 Fixtures, fittings, and other tangible assets
⚫ Decrease of depreciation, De -, Debit, 2814 Depreciation of fixtures, fittings,
and other tangible assets
2814 = 214 3,000
TRANSACTIONS – SALES OF INVENTORIES AND
SERVICES
Sale of goods for resale:

Sale (price): Removal from stock (cost):
• Increase of operating revenues • Increase of operating expenses
• Increase of trade receivables (customers) • Decrease in inventories
• Increase of tax liabilities (output VAT)
Sale of finished goods (and other products):
Sale (price): Removal from stock (cost):

• Increase of operating revenues • Decrease of operating revenues (711)
• Increase of trade receivables (customers) • Decrease in inventories
• Increase of tax liabilities (output VAT) (there is no expenses account available in the
chart of accounts to be used for this transaction)
Sale/Rendering services:
Sale (price): ---
• Increase of operating revenues
• Increase of trade receivables (customers)
• Increase of tax liabilities (output VAT)
EXAMPLES – SALES OF INVENTORIES
Transaction 6/96. ALFA sells goods for resale for a selling price of lei 1,700, VAT
19%, based on the invoice no. 65/November 20. The cost of purchase for the goods
sold is lei 1,100.
Sale of goods for resale (selling price)
goods for resale
4111 = % 2,023
707 1,700
4427 323
Removal from stock of the goods for resale (cost of purchase)
⚫ Increase of operating expenses, E +, Debit, 607 Expenses related to goods for
resale
⚫ Decrease of inventories, A -, Credit, 371 Goods for resale
607 = 371 1,100
EXAMPLES – SALES OF INVENTORIES
Transaction 8/96. ALFA sells finished goods for a selling price of lei 1,200, VAT 19%.
The production cost of the goods sold is lei 700.
Sale of finished goods (selling price)
finished goods
4111 = % 1,428
7015 1,200
4427 228
Removal from stock of the finished goods (production cost)
⚫ Decrease of operating revenues, R -, Debit, 711 Revenues associated with the
cost of inventories
⚫ Decrease of inventories, A -, Credit, 345 Finished goods
711 = 345 700
EXAMPLES – SALES/ RENDERING SERVICES
Transaction 1/98. ALFA recognizes rent of lei 2,500 for different locations used by third parties,
VAT 19%, as stipulated in the invoices issued based on the rental contracts.
Sale of services (provided in the current financial year):
⚫ Increase of operating revenue, R +, Credit, 706 Rental and royalty income (Rent revenues)
4111 = % 2,975
706 2,500
4427 475
Transaction 7/99. The entity recognizes the invoice issued during the current period for rent
related to the next financial year, of lei 100, VAT 19%.
Sale of services (provided in the next financial year):
⚫ Increase of deferred revenues, R +, Credit, 472 Deferred income
4111 = % 119
472 100
4427 19 See also transaction 9/106
ACCOUNTING
MARKETING Week 11
Associate professor
Raluca GUŞE, PhD.
STUDIES
CHAPTER 5. TRANSACTIONS - RECEIVABLES
Transactions related to receivables include sales, which generate the increase of:
⚫ Trade receivables, such as customers (sales of inventories and services) and
⚫ Other debtors, such as sundry debtors (sales of tangible and intangible assets).
Other types of transactions that generate increases of receivables are:
⚫ Granting loans: + Loans granted to associated/affiliated entities, - Cash
⚫ Payment of salaries in advance: + Employee receivables, - Cash
⚫ Advance payments to suppliers: + Advance payments, - Cash
⚫ Issuing and transferring shares to shareholders, in exchange for the promise of a
contribution in cash or kind: + Shareholders receivables, + Share capital subscribed and
not paid
Receivables decrease when they are settled: collected (in cash or kind or services) or replaced
by other receivables or deducted from corresponding liabilities:
⚫ Collecting receivables in cash or kind: - Receivables, + Cash or other types of assets
⚫ Replacing customers by notes receivable: - Customers, + Notes receivables (when bills of
exchange or promissory notes are received from customers)
⚫ Deducting advances from salaries payable: - Employee receivables, - Salaries payable
EXAMPLES – LONG-TERM (FINANCIAL) RECEIVABLES
Transaction 6/92. The entity grants a loan of lei 20,000 to an affiliated entity, which
is transferred directly from the bank account.
Granting long-term loans
⚫ Increase in long-term receivables, A +, Debit, 2671 Amounts owed by affiliated
entities (this is a financial NCA)
2671 = 5121 20,000
When the receivable is collected, the changes are reversed, and therefore the
repayment of the loan granted generates a decrease of receivables and an increase
in cash, journalized as follows:
5121 = 2671 20,000
EXAMPLES – TRADE RECEIVABLES
(see previous presentation for sales of inventories, NCAs and services)
Transaction 2/98. ALFA receives the rent receivables directly into its bank account
(references Transaction 1/98 that generated a 2,975 receivable in the account 4111
Customers).
Collecting cash from customers:
⚫ Decrease in receivables, A -, Credit, 4111 Customers
5121 = 4111 2,975
When other receivables are collected, the changes are similar.
Transaction 9/100. The entity receives lei 500 in cash from a sundry debtor.
Collecting cash from sundry debtors:
⚫ Decrease in receivables, A -, Credit, 461 Sundry debtors
⚫ Increase of cash, A +, Debit, 5311 Cash in hand in lei
5311 = 461 500
EXAMPLES – TRADE RECEIVABLES
Transaction 8/99. The entity receives a promissory note of lei 450 from a customer
Accepting a note receivable form a customer:
⚫ Receivables towards customers decrease, A -, Credit, 4111 Customers
⚫ Notes receivables increase, A +, Debit, 413 Bills of exchange receivable (notes
receivable)
413 = 4111 450
Notes receivable can be collected in cash from their issuer, or from the bank, or used to
pay off a liability.
Receiving cash in bank in exchange for notes Using bills of exchange to settle liabilities
receivable: towards suppliers:
• Decrease of notes receivable, A -, Credit, • Decrease of notes payable, A -, Credit, 403
413 Notes receivable Notes payable
• Increase of cash, A +, Debit, 5121 Cash at • Decrease in trade liabilities, L -, debit, 401
bank in lei Suppliers
5121 = 413 450 401 = 403 450
EXAMPLES – EMPLOYEES RECEIVABLES
Transaction 3/98. During the current month, there were granted lei 15,000 in cash to
employees, as salaries advances (see also 10/106).
In this case, the employees receive cash before complying with their monthly
obligation to provide services to the company. Therefore, the company is entitled to
receive services from the employees until the end of the month for which the
payment was made.
Payment of salaries advances:
⚫ Employee receivables increase, A +, Debit, 425 Advances to employees
⚫ Cash decreases, A -, Credit, 5311 Cash in hand in lei
425 = 5311 15,000
This receivable will be settled at the end of the month (see the full set of transactions
related to salaries in the following slides).
TRANSACTIONS – SHAREHOLDERS RECEIVABLES
A set of transactions involving receivables refers to shareholders receivables: (A)

establishing/forming a company and (B) increasing an existing company’s share capital by
new contributions from shareholders.
⚫ Transactions with shareholders usually involve the share capital.
⚫ Correspondence between assets accounts (NCAs, inventories, cash) and Share capital
accounts (paid or not paid share capital) are not allowed by regulations, due to the
fact that the exchange of assets between the company and its shareholders is a
process and not a isolated transaction.
Therefore, there was created the account 456 Transactions with shareholders related to
capital to mediate the relationship between the company and its shareholders regarding
the share capital.
456 is a bifunctional account, meaning that it is used either as a receivable, or a liability,
as needed.
EXAMPLES – SHAREHOLDERS RECEIVABLES
Establishing a company – Step 1 - Subscriptions

Transaction 4/99. When the entity BETA is formed, the share capital subscribed by the
shareholders is lei 4,000, as 100 shares with a nominal value of lei 40 each. The shares are
subscribed for future contributions in cash.
Formation of a company:
⚫ Shareholders receivables increase, A +, Debit, 456 Transactions with shareholders
related to capital
⚫ Share capital increases, OE +, Credit, 1011 Subscribed and not paid in share capital
456 = 1011 4,000
When a company is formed, shareholders pay the nominal value of each share received
from the company.
Establishing a company – Step 2 - Contributions

Transaction 5/99. The shareholders make the deposits corresponding to the subscribed
capital, directly into the entity’s bank account. This transaction is a collection of
receivables, in cash.
Receiving cash contributions to share capital from shareholders:
⚫ Shareholders receivables decrease, A -, Credit, 456 Transactions with shareholders
related to capital
⚫ Cash increases, A +, Debit, 5121 Cash in bank in lei
5121 = 456 4,000
Considering T4/99 and T5/99, it follows that the company has received the contributions
from the shareholders. However, the share capital recorded on the credit side of the
account 1011 Subscribed and not paid in share capital at T4/98 suggests otherwise.
Therefore, there is an inconsistency in the accounting records which must be resolved so
that the share capital is recorded as paid in, after the contribution is received.
The share capital problem is solved with a separate transaction (see next slide).
Establishing a company – Step 3 – Solving the share capital inconsistency

Transaction 6/99. Transformation of the subscribed and not paid in share capital into
subscribed and paid in share capital.
Transformation of share capital:
⚫ Decrease of share capital not paid, OE -, Debit, 1011 Subscribed and not paid in share
capital
⚫ Increase of share capital paid, OE +, Credit, 1012 Subscribed and paid in share capital
1011 = 1012 4,000
This transaction is mandatory and it is triggered by the collection (in cash or kind) of
shareholders receivables related to share capital.
For similar examples, see transactions: 1/108 (subscriptions), 2/109 (contributions in

cash), 3/109 (contributions in kind), 4/109 (transformation of share capital), and 3/91.
TRANSACTIONS – CASH
Transferring cash from the bank to the cashier‘s desk (or reversed) generates changes of
Cash in hand and Cash at bank which are not affected at the same time. Therefore, the
two items cannot be placed in the same journal entry.
A. Cash withdrawals from the bank account:
- Cash at bank
+ Internal cash transfers
B. Cash deposits to the cashiers’ desk:
- Internal cash transfers
+ Cash in hand
Receiving interest into the bank account
+ Cash at bank
+ Financial revenues
Paying interest from the bank account (if there is no liability and the bank withdraws the
cash on its own, for the current month, based on the contact – overdrafts)
- Cash at bank
+ Financial expenses
EXAMPLES – CASH TRANSFERS
Examples of transactions involving cash (other than cash payments and receipts):
Transaction 3/103. The entity transfers lei 300 from its bank account to cash in hand.
The cash transfer from the bank account to cash in hand generates two journal entries:
3.1 Withdrawal of cash from the bank account:
⚫ Increase of cash in transit, A +, Debit, 581 Internal transfers
581 = 5121 300
3.2 Deposit of cash to the cashiers’ desk:
⚫ Decrease of cash in transit, A -, Credit, 581 Internal transfers
⚫ Increase of cash in hand, A +, Debit, 5311 Cash in hand in lei
5311 = 581 300
Same method is applied to Transaction 4/103.
4.1. Withdrawal of cash from the cashier’s desk:
581 = 5311 50
4.2. Deposit of cash into the bank account:
5121 = 581 50
EXAMPLES – SHORT-TERM BANK LOANS
Transaction 1/100. ALFA receives a bank loan of lei 3,000 for a period of 10
months, directly into its bank account.
⚫Cash at bank increases, A +, debit, 5121 Cash at bank in lei
⚫Short-term bank loans increase, L +, credit, 5191 Short-term bank loans
5121 = 5191 3,000 lei
Transaction 2/100. The entity repays part of a short-term bank loan of lei 80, using
cash form the bank account.
⚫Cash at bank decreases, A -, credit, 5121 Cash at bank in lei
⚫Short-term bank loans decrease, L -, debit, 5191 Short-term bank loans
5191 = 5121 80 lei
EXAMPLES – INTEREST
Transaction 7/102. The entity receives interest of lei 100 for the balance of its
current bank account.
⚫ Cash at bank increases, A +, debit, 5121 Cash at bank in lei
⚫ Financial revenues increase, R +, credit, 766 Interest revenues/income
5121 = 766 100 lei
Transaction 8/102. The entity pays interest of lei 100 for the current month,
related to a short-term bank loan, from its bank account.
⚫ Cash at bank decreases, A -, credit, 5121 Cash at bank in lei
⚫ Financial expenses increase, E +, debit, 666 Interest expenses
666 = 5121 100 lei
TRANSACTIONS – PAYROLL/ EMPLOYEES
Granting salaries advances to employees (during the month):

- Cash
+ Receivables toward employees
Recording salaries payable (end of the month):
+ Salaries payable
+ Operating expenses
Recording employees’ contributions to social security, health insurance, tax on salaries:
- Salaries payable
+ Tax liabilities
Deducting salaries advances from salaries payable:
- Salaries payable
- Advances to employees
Recording company’s contribution to social security:
+ Tax liabilities
Paying salaries and contributions:
- Salaries and contributions payable
- Cash
ACCOUNTING
MARKETING Week 12
Associate professor
Raluca GUŞE, PhD.
STUDIES
CHAPTER 5. TRANSACTIONS – LIABILITIES
Transactions related to liabilities include acquisitions, which generate increases of trade

liabilities, such as:
⚫ Suppliers (acquisitions of inventories and services) and
⚫ Suppliers of non-current assets (acquisitions of NCAs).
Other types of transactions that generate increases of liabilities are:
⚫ Receiving loans from banks and other credit institutions, or other entities: + Financial
liabilities, + Cash
⚫ Receiving services from other entities than suppliers (state, employees): + Tax or
employee liabilities, + Operating expenses
⚫ Receiving advance payments from customers: + Payments on account received, + Cash
⚫ Accepting the withdrawal of shareholders: + Shareholders liabilities, - Share capital
Liabilities decrease when they are settled by being paid or replaced by other liabilities:
⚫ Paying liabilities in cash or kind: - Liabilities, - Cash or other types of assets
⚫ Replacing suppliers by notes payable: - Suppliers, + Notes payable (when bills of exchange
or promissory notes are issued for the benefit of suppliers)
⚫ Deducting advances from salaries payable: - Employee receivables, - Salaries payable
TRANSACTIONS – PAYROLL/ EMPLOYEES
Granting salaries advances to employees (during the month):

- Cash
+ Receivables toward employees
Recording salaries payable (end of the month):
+ Salaries payable
Recording employees’ contributions to social security, health insurance, tax on salaries:
- Salaries payable
+ Tax liabilities
Deducting salaries advances from salaries payable:
- Salaries payable
- Advances to employees
Recording company’s contribution to social security:
+ Tax liabilities
Paying salaries and contributions:
- Salaries and contributions payable
- Cash
EXAMPLES – PAYROLL/ EMPLOYEES
Transaction 10/106. During the current month, ALFA grants part of the employees’
salaries in cash, in advance, in the amount of lei 20,000 (the first instalment).
⚫ Cash in hand decreases, A - , Credit, 5311 Cash in hand in lei
⚫ The receivable toward employees increases, A + , Debit, 425 Advances to
employees
425 = 5311 20,000 lei
Transaction 11/106. At the end of the month, the entity record salaries owed to
employees for services rendered, of lei 50,000. Recording salaries payable:
⚫ Increase of employees liabilities, L +, Credit, 421 Employees - salaries payable
⚫ Increase of operating expenses, E +, Debit, 641 Salaries expenses
641 = 421 50,000 lei
Transaction 12/106. The entity records the deductions from salaries: lei 12,500
the employees’ social security contributions (25%), lei 5,000 the employees’
health insurance contribution (10%), lei 20.000 advances paid to employees and
lei 3.250 taxes on salaries (10% of salaries, excluding contributions). Deductions
from salaries payable:
⚫ Decrease of employee liabilities, L -, Debit, 421 Employees- salaries payable
⚫ Increase of tax liabilities, L +, Credit, 4315 Employees’ contribution to social
security, 4316 Employees’ contribution to health insurance, 444 Tax on
salaries
⚫ Decrease of employee receivables, A -, Credit, 425 Advances to employees
421 = % 40,750 lei
4315 12,500
4316 5,000
444 3,250
425 20,000
Transaction 13/106. The entity records its own social security obligations related to
salaries of lei 1,125 (2.25%). Recording the entity’s contribution to social security:
⚫ Increase of operating expenses, E +, debit, 646 Expenses related to the company’s
contribution to social security
⚫ Increase of tax liabilities, L +, credit, 436 Company’s contribution to social security
646 = 436 1,125
Transaction 14/107. The entity pays the amounts owed to its employees, of lei 50,000 –
40,750 = 9,250 (second instalment, closing credit balance of account 421, to be paid in
the next month). Payment of salaries:
⚫ Decrease of employees liabilities, L -, Debit, 421 Employees- salaries payable
421 = 5121 9,250
Transaction 15/107. The entity pays its obligations to third parties related to salaries of
lei 12,500 + 5,000 + 3,250 (employees’ contributions) + 1,125 (company’s contribution)
from its bank account. – recorded as any other payment of liabilities (decrease of
liabilities, decrease of cash). Payment of tax liabilities.
EXAMPLES – TRADE LIABILITIES
Trade liabilities such as Suppliers of non-current assets (404) and Suppliers (401) are
created as a result of acquisitions of non-current assets, inventories and services.
These transactions have been covered by previous presentations. Examples: 1, 2/91;
1, 3, 5/95; 1/104.
The following transactions illustrate the settlement of trade liabilities (their
decreases of value)
Transaction 2/105. The entity pays suppliers the consideration for the consumption
of electricity of lei 1,500, VAT 19% using cash from the bank account.
Payment of liabilities using cash at bank:
401 = 5121 1,785
EXAMPLES – TRADE LIABILITIES
Transaction 7/105. Alfa issues a promissory note of lei 100 for the benefit of a
supplier.
Payment of liabilities using notes payable:
⚫ Increase of notes payable, L +, Credit, 403 Bills of exchange payable (or Notes
payable)
401 = 403 100
Transaction 8/105. Alfa transfers from the bank account the lei 100 consideration
for the outstanding (mature) promissory note. Payment of notes payable using
cash at bank:
⚫ Decrease of notes payable, L -, Debit, 403 Suppliers
⚫ Increase of notes payable, L +, Credit, 403 Bills of exchange payable (or Notes
payable)
401 = 403 100
TRANSACTIONS – FINANCIAL LIABILITIES
Receiving loans:
+ Bank loans (long-term or short-term)
+ Cash
Repaying loans:
+ Bank loans (long-term or short-term)
+ Cash
Recording interest payable (at the end of each month):
+ Financial expenses
+ Interest payable (for long-term loans or short-term loans)
Paying interest:
- Interest payable
- Cash
EXAMPLES – FINANCIAL LIABILITIES
Transaction 4/105. Alfa receives a lei 10,000 five-year bank loan, on December 1, directly
into the bank account.
Receiving long-term loans:
⚫ Increase of financial liabilities, L +, Credit, 1621 Long-term bank loans
5121 = 1621 10,000
Transaction 5/105. Alfa recognizes interest owed to the bank of lei 200 related to the
long-term bank loan.
Recording interest payable:
⚫ Increase of financial liabilities, L +, Credit, 2682 Accrued interest related to long-term
bank loans
⚫ Increase of financial expenses, E +, Debit, 666 Interest expenses
666 = 1682 200
EXAMPLES – FINANCIAL LIABILITIES
Transaction 6/105. Alfa pays the annual instalment of lei 1,200 related to the long-term
bank loan: the loan of lei 1,000 and the interest if lei 200.
Repayment of long-term bank loans (plus interest) :
⚫ Decrease of financial liabilities, L -, Debit, 1621 Long-term bank loans
1682 Accrued interest…..
% = 5121 1,200
1621 1,000
1682 200
Note: In the case of short-term loans, the liabilities account is 5191 Short-term loans.
Therefore, receiving a short-term loans can be recorded using the journal entry:
5121 = 5191 amount received (see analysis of 4/100)
Repaying a short-term loan can be recorded as: (see analysis of 6/100)
5191 = 5121 amount paid
TRANSACTIONS – OWNERS' EQUITY
Owners' equity transactions include transactions by which share capital is formed,

increased or decreased, reserves and premiums are created or used (converted into
share capital used to cover losses), profit is obtained or distributed etc. Examples:
⚫ Creating a company = 3 steps: issuing shares, receiving contributions, renaming
the share capital - see Receivables
⚫ Increases of share capital through new contributions = same 3 steps, include
premiums if subscription value > nominal value
⚫ Withdrawal of shareholders = 2 steps: withdrawal of shareholders and repayment
of contributions
⚫ Incorporation of premiums, reserves of retained earnings into share capital
⚫ Use of reserves, premiums or share capital to cover losses
⚫ Revaluation of NCAs
⚫ Closing revenues and expenses accounts
⚫ Distributing profit
EXAMPLES – FORMATION OF A COMPANY
Transactions have already been included in previous presentations – shareholders receivables:

transactions 4, 5, and 6/page 99. The following are journal entries based on the same analyses.
Transaction 1/108. When ALFA is established, the share capital subscribed by its shareholders is
lei 70.000, in the form of 2.000 shares of lei 35 nominal value (of the 2.000 shares, 1.200 will be
paid by contributions in cash, and 800 by contributions in kind). STEP 1 - SUBSCRIPTION
456 = 1011 70,000 lei
Transaction 2/109. The shareholders submit their contributions in cash directly into the entity’s
bank account, for 1,200 shares x nominal value of lei 35 per share. STEP 2 - CONTRIBUTIONS
5121 = 456 42,000 lei
Transaction 3/109. The shareholders submit their contributions in kind, as follows: a lei 20,000
building and lei 8,000 raw materials, in exchange for 800 shares x nominal value of lei 35 per
share. STEP 2 - CONTRIBUTIONS
% = 456 28,000 lei
212 20,000 lei
301 8,000 lei
Transaction 4/109. The entity transforms the subscribed and not paid-up share capital into
subscribed and paid-up share capital. STEP 3 – RENAMING SHARE CAPITAL
1011 = 1012 70,000 lei
EXAMPLES – NEW CONTRIBUTIONS FROM SHAREHOLDERS
Step 1 - Subscriptions
Transaction 7/109. The company increases the share capital by issuing 100 new shares,
with a nominal value of lei 35 per share and a subscription value of lei 50 per share.
When new shares are issued, there are negotiations between the company and its
shareholders related to the selling price of the shares: selling price (subscription value) >
nominal value. The difference between the two values is recorded as a premium.
Increase of share capital as a result of new subscriptions:
⚫ Shareholders receivables increase, A +, Debit, 456 Transactions with shareholders
related to capital
⚫ Share capital increases, OE +, Credit, 1011 Subscribed and not paid in share capital
⚫ Share premiums increase, OE +, Credit, 1041 Share premiums
456 = % 5,000 Subscription value: 100 x 50 = 5,000
1011 3,500 Nominal value: 100 x 35 = 3,500
1041 1,500 Surplus of SV over NV: 5,000 – 3,500
Step 2 - Contributions
Transaction 8/110. The entity receives the consideration for the new shares issued at
transaction 7 into its bank account.
Receiving cash contributions to share capital from shareholders:
⚫ Shareholders receivables decrease, A -, Credit, 456 Transactions with shareholders
related to capital
⚫ Cash increases, A +, Debit, 5121 Cash in bank in lei
5121 = 456 5,000
The transaction is recorded at the subscription value of the new shares, which is the
amount promised by the shareholders in exchange for the new shares.
As the company received a contribution from a shareholder, the share capital problem will
be solved in the following journal entry.
Step 3 - Solving the share capital inconsistency

Transaction 9/110. Transformation of the subscribed and not paid in share capital into
subscribed and paid in share capital.
Transformation of share capital:
⚫ Decrease of share capital not paid, OE -, Debit, 1011 Subscribed and not paid in share
capital
⚫ Increase of share capital paid, OE +, Credit, 1012 Subscribed and paid in share capital
1011 = 1012 3,500
This transaction is recorded at the nominal value of the new shares, as it involves the
share capital and not the relationship with the shareholders.
TRANSACTIONS – DECREASES OF SHARE CAPITAL
Shareholders liabilities occur when contributions to share capital are repaid to the shareholders
upon their withdrawal from the company. Shareholders’ withdrawal is solved by using the
account 456 Transactions with shareholders related to capital as a liabilities account, to avoid
direct correspondence of share capital and cash accounts.
Transaction 5/109. Upon the shareholders’ request, the General Shareholders’ Meeting
approves the future refund of lei 500 from the share capital.
Withdrawal of a shareholder:
⚫ Decrease of share capital, OE -, Debit, 1011 Subscribed and paid in share capital
⚫ Increase of shareholders liabilities, L +, Credit, 456 Transactions with shareholders related
to capital
1012 = 456 500
Transaction 6/109. Shareholders are paid the amount of lei 500 from the bank account for the
share capital withdrawn, as stipulated in the General Shareholders’ Meeting decision.
Payment of shareholders liabilities from the bank account:
⚫ Decrease of shareholders liabilities, L -, Debit, 456 ….
456 = 5121 500
TRANSACTIONS – RESERVES AND PREMIUMS
Reserves and premiums increase when they are created:

Distribution of profits to reserves: + Reserves, + Profit distribution
Subscriptions of share capital at a price higher than nominal value: + Share capital, +
Premiums, + Shareholders receivables (see Shareholders receivables section)
Recording NCA positive revaluations: + Revaluation reserves, + NCA
Reserves and premiums decrease when they are used to increase share capital, other OE
or to cover losses brought forward:
Incorporation of reserves/premiums into share capital: - Reserves/Premiums, + Share
capital subscribed and paid
Using reserves/Share premiums to cover losses from previous years: -
Reserves/Premiums, + Retained earnings
Recording NCA negative revaluations: - Revaluation reserves, - NCA
EXAMPLES – RESERVES AND PREMIUMS
Transaction 10/110. The entity transfers lei 1,500 from the share premiums to share
capital.
Transfer of premiums to share capital:
⚫ Decrease of share premiums, OE -, Debit, 1041 Share premiums
⚫ Increase of share capital, OE +, Credit, 1012 Share capital subscribed and paid
1041 = 1012 1,500
Transaction 11/110. The entity uses a lei 20 reserve to offset a loss brought forward
from previous years.
Covering losses brought forward using reserves:
⚫ Decrease of reserves, OE -, Debit, 106 Reserves
⚫ Increase of retained earnings, OE +, Credit, 117 Retained earnings (or Decrease of
losses brought forward, OE -, -, same as OE +, Credit)
106 = 117 20
TRANSACTIONS – EXCLUDED FROM THE EXAM
Transactions from Chapter 5 which are not covered by these presentations either
by a general model or an example will not be included in the final exam.
See lecture notes for a full list of transactions that will be included in the exam.
ACCOUNTING
MARKETING Week 13
Associate professor
Raluca GUŞE, PhD.
STUDIES
CHAPTER 5. CLOSING VAT ACCOUNTS
Based on transactions from pages 86-87 lecture

notes
Discuss what has been postponed:

Closing VAT accounts, page 88 lecture notes
CLOSING VAT ACCOUNTS
4426 Input VAT and 4427 Output VAT are temporary accounts.
As such, they must be balanced at the end of the accounting period (zero closing
balance).
The amounts recorded in 4426 and 4427 during the accounting period are
transferred into permanent VAT accounts at the end of the accounting period.
The transfer is performed during the transaction called the closing of the VAT
accounts.
The purpose of this transaction is to determine the value of the VAT to be
settled with the state budget, while closing the temporary 4426 and 4427 VAT
accounts with a zero balance.
Permanent VAT accounts to be used at the end of the accounting period:
⚫ 4423 VAT-payable (liability);
⚫ 4424 VAT-receivable (receivable, asset).
The settlement between the entity and the tax authorities is done for the
difference between input VAT and output VAT.
Considering transactions 1/86, 2/87 and 3/87, the T-accounts for 4426 and 4427
provide the following information:
⚫ Input VAT recorded during the accounting period on the debit side of the
account 4426 is CDA of 4426 = 1,900 + 380 = 2,280, a tax receivable.
⚫ Output VAT recorded during the accounting period on the credit side of the
account 4427 is CCA of 4427 = 5,700, a tax liability.
In this case, tax receivables 2,280 < tax liabilities 5,700. It indicates that the
company has a tax liability of 5,700 – 2,280 = 3,420, which must be recognized in a
permanent VAT account at the end of the period: account 4423 VAT payable.
(transaction on the next slide)
Transaction 4/88. Closing the VAT accounts, when input VAT 2,280 < output VAT 5,700,
generating VAT payable of 3,420.
⚫ Tax receivables regarding the VAT recorded in a temporary account decrease, A -,
Credit, 4426 Input VAT
⚫ Tax liabilities regarding the VAT regarding the VAT recorded in a temporary account
decrease, L -, Debit, 4427 Output VAT
⚫ Tax liabilities regarding the VAT to be recorded in a permanent account increase, L +,
Credit, 4423 VAT payable
4427 = % 5,700 lei
4426 2,280 lei
4423 3,420 lei
As a result of transaction 4/88, the 4426 and 4427 accounts are balanced, and the 4423
account has a closing credit balance, indicating a tax liability that can be paid in the
following accounting period from the bank account, similar to all other liabilities (decrease
in liabilities and decrease in cash).
D 4426 Input VAT C D 4427 Output VAT C

OB 0 OB 0
2/401 1,900 4/4427 2,280 1/4111 5,700 4/4426 2,280
3/401 380 4/4423 3,420
CDA 2,280 CCA 2,280 CDA 5,700 CCA 5,700
TDA 2,280 TCA 2,280 TDA 5,700 TCA 5,700
D 4423 VAT payable C

OB 0
4/4427 3,420
CDA 0 CCA 3,420

TDA 0 TCA 3,420
CCB 3,420
(tax liability)
Closing the VAT accounts when input VAT = output VAT.
ALFA recorded sales of lei 20.000, VAT 19% and purchases of lei 20.000, VAT 19%.
The recorded VAT: input VAT = lei 3.800 and output VAT = lei 3.800. Close the VAT
accounts.
In this case, input VAT = output VAT, and the company does not have to settle the
VAT with the State budget. Closing the VAT accounts simply means to decrease the
value of the VAT recorded during the month.

4427 = 4426 3,800
Closing the VAT accounts when output VAT = 0.
Alfa a received and recorded invoices of lei 36.000, of which VAT is 19%. No invoices
were issued during the month. Close the VAT accounts.
In this case, output VAT = 0 (no sales) and input VAT = 0.19 x (36.000/1.19) = 5,748.
Closing the VAT accounts means that the company must transfer the tax receivable
from a temporary account to a permanent account.

4424 = 4426 5,748
Closing the VAT accounts when input VAT = 0.
Alfa issued invoices of lei 12.000, of which VAT = 19%. No acquisition invoices were
recorded during the month. Close the VAT accounts.
In this case, input VAT = 0 (no acquisitions) and input VAT = 0.19 x (12.000/1.19) =
1,916. Closing the VAT accounts means that the company must transfer the tax
liability from a temporary account to a permanent account.

⚫ Tax liabilities increase, L +, Credit, 4423 VAT payable
4427 = 4423 1,916
Closing the VAT accounts when input VAT > output VAT.
Alfa issued invoices of lei 23.800, of which VAT = 19% and received invoices of lei 17,850,
of which VAT = 19%. Close the VAT accounts.
In this case, output VAT = 0.19 x 23,800/1.19 = 3,800 (acquisitions) and input VAT = 0.19 x
(17,850/1.19) = 2,850.
Tax receivables 3,800 > Tax liabilities 2,850.
Closing the VAT accounts means that the company must recognize a tax receivable of
3,800 – 2,850 = 950.

% = 4426 3,800
4427 2,850
4424 950
ACCOUNTING
MARKETING Week 14
Associate professor
Raluca GUŞE, PhD.
STUDIES
EXAM
Zoom.us link created for the exam opens 5 minutes before the announced time.
Students and required to observe the following rules extracted from their study contracts:
⚫ Access to zoom.us link is granted to 2nd and 3rd year students whose wright to take the
exam is confirmed by the Faculty's administrative office one day prior to the exam.
⚫ Mandatory presentation of the student ID card or ID card for access to the exam (hall or
zoom.us meeting).
⚫ During the online exam, online.ase.ro and zoom.us (audio and video) will be used
simultaneously. Lack of permanent connection throughout the exam on either platform will
results in the student’s absence from the exam.
⚫ Use of written/electronic sources of information and communication during the exam is
forbidden after the exam link is accessed, except for necessary interactions with the
examination committee.
⚫ Questions displayed in sequential mode; questions cannot be revisited.
⚫ Students are not allowed to leave the exam (hall or zoom.us meeting) during the
examination.
Any violation of these rules will be resolved according to the University regulations. For more
details, see the University Code of Student Rights and Obligations.
Not included in the exam
⚫ Transactions that are not covered by presentations 1 - 13

⚫ Computations regarding the income tax will not be included in exam
papers
⚫ Chapter 6 is optional. Year-end accounting was discussed in previous
lectures regarding the accounting cycle (exercise 2 from Chapter 3)
RESULTS
Evaluation results will be transmitted to students

using the dedicated online platform.
REVIEW
⚫ Balance Sheet, Income Statement: format, elements, correlations.

⚫ Definitions, classifications and characteristics of elements from the
Financial Statements: Assets, liabilities, owners' equity, revenues, expenses.
⚫ Account: Rules, form (T-account), closing the accounts (procedures for
permanent accounts and temporary accounts), economic meaning of
information from the accounts (opening/closing balance, current amounts,
total amounts).
⚫ Analysis of transactions: Acquisitions, sales, payments and cash receipts,
consumption, amortization/depreciation, production, etc.
⚫ Documents: Categories (financial statements, source documents, journals,
trial balance), accessibility and purpose.
⚫ Accounting measurement: purchase cost, manufacturing cost, impairment.
SELF-ASSESSMENT TEST
and
EXAM SIMULATION - ONLINE.ASE.RO
GOOD LUCK!

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ACCOUNTING

Item 1. Introduction to accounting: accounting defined, accounting as an information

Assessment (to be revisited in accordance with University

Minimum performance standard:

1.1 Accounting defined

⚫ Informs internal and external users

⚫ Economic entities: companies, groups of entities, public

⚫ Different accounting systems

⚫ External: investors, employees, lenders, suppliers and other trade

Financial information Managerial information

⚫ Expressed in monetary units of measurement

⚫ ANNUALLY (January 01 – December 31)

⚫ In order to be useful for economic decision-making, the information

⚫ Ministry of Public Finance - Department of legislation and accounting

⚫ The Body of Expert and Licensed Accountants of Romania - CECCAR (Corpul

⚫ Factors in the evolution of accounting: writing, arithmetic, printing press, legal

⚫ A student intends to establish a company. At this moment, his

SC MARKET SRL (legal person)

Student (natural person, owner and administrator of Market SRL)

⚫ In November, the company acquires land valued at 2.000 lei, which is

⚫ What is the impact of this transaction on the fundamental

MARKET SRL (legal person)

Users’ access to financial information:

⚫ An asset is a resource controlled by the entity as a result

⚫ A liability is a present obligation of the entity arising from

⚫ Equity is the owners’ residual interest in the entity’s assets

(A) Future economic benefits

An item that meets the definition of a balance sheet element should be

ASSETS N-1 N OWNERS’ EQUITY AND LIABILITIES N-1 N

⚫ Payments made in advance for services that will be

Buildings Assets (A), Non-current assets (NCA), Tangible assets

Cocoa A, Current assets (CA), Inventories, Raw materials and

Rent paid in advance for next year A, Prepaid expenses

Equipment A, NCA, TA, Plant and machinery

Cash in hand A, CA, Cash and cash equivalents

Cash advances A, CA, Cash and cash equivalents

Salaries advances paid to A, CA, Receivables, Other debtors

Types of liabilities in the balance sheet:

⚫ Non-current liabilities (certain)

Current liabilities or Short-term liabilities

(1) expected to be settled in the normal operating cycle, or

Non-current liabilities or Long-term liabilities

are all obligations that are not current liabilities.

Current liabilities (item D) and non-current liabilities (item G) are both

In the absence of other information regarding their settlement date, the

Uncertain liabilities in terms of probability, settlement date or value,

Romanian accounting regulations define provisions as liabilities of

Revenue received in advance but which is not yet earned.

LIABILITIES CLASSIFICATIONS (company: bakery)

Sundry creditors L, CL, Other creditors

Fundamental types of owners’ equity in the balance sheet:

⚫ Share capital (source of funding for assets received form

⚫ (+) Share capital Subscribed paid-up capital, Subscribed nonpaid-up

PREMIUMS RELATED TO CAPITAL = contributions in cash (or in kind)

REVALUATION RESERVES = surpluses arising when non-current assets are

RETAINED EARNINGS (profit or loss brought forward) = total or partial

HORIZONTAL BALANCE SHEET

VERTICAL BALANCE SHEET

CASE 1. Preparing the BS using a list of BS items