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Lesson 8 Elements of Fs

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112 views53 pages

Lesson 8 Elements of Fs

Uploaded by

Soothing Blend
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPTX, PDF, TXT or read online on Scribd
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REVIEW: THRU A

GAME
MECHANICS: Each
group will choose 1
representative to pick 1
question in the box &
answer it in 1 minute on
the illustration board.
MECHANICS: For every
1 correct answer
corresponds to 5 points.
The 1 group will gain the
st

largest score will declare


winner.
MAJOR ACCOUNTS
TYPES OF ACCOUNTS
1. Balance Sheet Accounts
o Assets
o Liabilities
o Owner’s Equity
2. Income Statement Accounts
o Revenues
o Expenses
ASSETS
 Are any resources owned by the
business.

2 Types of Assets:
1. Current Assets
2. Non-current Assets
ASSETS
 Assets should be classified only into two:
current assets and non-current assets. An
entity shall classify an asset as current when:
a. It expects to realize the asset or intends to
sell or consume it, in its normal accounting
cycle.
b. It holds the asset primarily for purpose of
trading.
ASSETS
c. It expects to realize the asset within 12
months after the end of accounting period;
or
d. The asset is cash or a cash equivalent
unless it is restricted from being
exchanged or used to settle a liability for
at least 12 months after the end of the
reporting period.
ASSETS
An entity shall classify all other assets as
non-current. Operating cycle is the time
between the acquisition of materials
entering into a process and its realization
in cash or instrument that is readily
convertible to cash.
CURRENT ASSETS
1. Cash – is bills, coins, bank
balances, money orders, and checks.
2. Cash equivalents – are investment
securities that are meant for short-term
investing.
CURRENT ASSETS
3. Accounts Receivable – are claims
against customers arising from sale of
services or goods on credit
4. Notes Receivable – is written
pledge that the customer will pay the
business a fixed amount of money on
a certain date.
CURRENT ASSETS
5. Inventories – typically involves goods
in 3 stages of production: raw good, in-
progress goods, and finished goods
6. Supplies – is a cost of supplies on
hand at a point in time
7. Prepaid Expense – are expenses paid
for by business in advance.
NON- CURRENT ASSETS
1. Property, plant and equipment – are
long-term assets vital to business
operations and not easily converted into
cash.
oLand Building
oEquipment Furniture & Fixtures
oService Vehicle
NON- CURRENT ASSETS
*Accumulated Depreciation – it is a
contra account that contains the sum of the
periodic depreciation charges. The balance
in this account is deducted from the cost
of the related asset – equipment or
buildings – to obtain book value
NON- CURRENT ASSETS
2. Intangible Assets – These are
identifiable, nonmonetary assets
without physical substance held for
use in the production or supply of
goods and services, for rental to others
or for administrative purposes.
NON- CURRENT ASSETS
2. Intangible Assets –These include
goodwill, patents, copyrights, licenses,
franchises, trademarks, brand names,
secret processes, subscription lists and
non-competition agreements.
LIABILITIES
 Are debts or obligations of the
business to a party other than its
owner. There are two classifications
of liabilities: current or short-term
liabilities and fixed or long-term
liabilities.
LIABILITIES
 An entity shall classify a liability as
current when:
a. It expects to settle the liability in its
normal operating cycle
b. It holds the liability primarily for the
purpose of trading;
LIABILITIES
 An entity shall classify a liability as current
when:
c. The liability is due to be settled within
12months after the end of the reporting period
d. The entity does not have an unconditional
right to defer settlement of the liability for at
least 12months after the end of the reporting
period.
CURRENT LIABILITIES
 Are those which are due for payment
within a short period of time or within
one year from the balance sheet date.
These obligations require a current asset
for payment. Included here are accounts
payable, notes payable, accrued
expenses, and unearned income.
CURRENT LIABILITIES
1. Accounts Payable – are indebtedness
arising from purchase of goods and service in
the ordinary course of business
2. Notes payable – are short-term indebtedness
supported by written promises to pay.
3. Accrued expenses – expenses already
incurred but not yet paid as of the balance sheet
date.
CURRENT LIABILITIES
4. Unearned income – arises when
payments for undelivered goods or
services not yet rendered are received.
This item is included among current
liabilities because there is already an
obligation to deliver the goods or the
services once the payment is received.
FIXED OR LONG-TERM LIABILITIES

Are those which mature beyond one


year from the balance sheet date.
Examples are mortgages payable, bonds
payable, and notes payable due beyond
one year.
OWNER’S EQUITY
1. Capital – this account is used to record the
original and additional investment of the owner
of the business entity.
2. Withdrawals - when the owner of a
business entity withdraws cash or other assets
such are recorded in the drawing or withdrawal
account rather than directly reducing the
owner’s equity account.
REVENUES
 is the increase in economic benefits during
the accounting period in the form of inflows
of cash or other assets or decreases of
liabilities that result in increase in equity.
Income includes revenue and gains.
 Is the cash or other assets earned by the
company’s operations and business activities.
REVENUES
1. Service Revenue – is earned
by performing services for a
customer
2. Sales – is earned as a result
of sale of merchandise
EXPENSES
are decreases in economic benefits during the
accounting period in the form of outflows of
assets or incidences of liabilities that result in
decreases in equity.
Are the cost of an asset used by the company
in its operations to produce revenues.
EXPENSES
1. Cost of Sales – is cost incurred to
purchase or to produce the
products sold to customers during
the period
2. Salaries Expense – is cost
incurred to pay the employees
EXPENSES
3. Utilities Expense – is the cost
incurred by using utilities such as
electricity, water, waste disposal and
heating.
4. Rent Expense – is the expense for
the space, equipment or other asset
rentals.
EXPENSES
5. Supplies Expense – is the expense of
using supplies
6. Insurance Expense – is the portion of
premiums paid on insurance coverage
which has expired.
7. Interest Expense – is the expense
related to the use of borrowed funds
Listed below are 10 business
transactions of During Company
during its first month of operations.
A. Owner invested cash in the business
amounting to P300,000
B. Purchased equipment for cash
amounting to P50,000
C. Purchased inventories through credit
amounting to P35,000
D. Purchased furniture amounting to
P30,000. Made partial payment with
cash P10,000 and incurred an accounts
payable for the balance P20,000
E. Paid cash to be the local
government for business permit
P9,000
F. Made sales of P17,000. P12,000
cash sales and P5,000 credit sales.
g. Paid the accounts payable in
(d)
h. Collected P2,500 out of the
P5,000 credit sales in (f)
i. Paid employee P12,000
A. Cash, Owner’s Capital
B. Equipment, Cash
C. Inventories, Accounts
Payable
D. Furniture, Cash and
Accounts Payable
e. Cash, Taxes and Licenses
Expense
F. Cash, Sales
g. Accounts Payable, Cash
h. Cash, Accounts Receivable
i. Cash, Salary Expense
Chart of Accounts
Cash
Accounts Receivable
Inventories
Equipment
Furniture
Chart of Accounts
Accounts Payable
Owner’s Capital
Sales
Salaries Expense
Taxes and Licenses Expense
CHART OF ACCOUNTS –
list of account titles and
account number of a certain
business to be used in
accounting process.
PRACTICE (60 MINS)
Matching Type
Assets Accounts Receivable
Intangible Assets Liabilities
Notes Receivable PPE
Owner’s Equity Rent Expense
Cash Prepaid Expense
PRACTICE (60 MINS)

____________ 1. It is the
obligations of the company payable
in money, goods or services.
PRACTICE (60 MINS)

____________ 2. These are non-


current tangible assets.
PRACTICE (60 MINS)

____________ 3. These assets are


identifiable, non-monetary assets
without physical substance.
PRACTICE (60 MINS)

____________ 4. It is the claim of


the owner also known as the
capital.
PRACTICE (60 MINS)

____________ 5. It is the most


liquid asset and is the medium of
exchange for business transactions.
PRACTICE (60 MINS)

____________ 6. It is an expense for


leased office space, equipment or
assets rented from others.
PRACTICE (60 MINS)

____________ 7. Examples of
these are cash, account receivable
and prepaid expenses.
PRACTICE (60 MINS)

____________ 8. It is a written
promise from the customer to pay his
receivables on a certain future date
PRACTICE (60 MINS)
Classify each account whether it is an
Asset, Liability, Owner’s Equity,
Revenue or Expense.
___1. Service Revenue
___2. Mortgage Payable
___3. Unearned Revenues
PRACTICE (60 MINS)
Classify each account whether it is an
Asset, Liability, Owner’s Equity,
Revenue or Expense.
___4. Accounts Receivable
___5. Cash
___6. Rent Expense
PRACTICE (60 MINS)
Classify each account whether it is an
Asset, Liability, Owner’s Equity,
Revenue or Expense.
___7. Prepaid Insurance
___8. Capital
___9. Interest Expense
___10. Notes Payable
Thank you

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