BUSINESS

IMPLEMENTATION
Learning Competencies
Implement the business plan;
Operate the business;
Sell the product/service to potential customers;
Identify the reasons for keeping business records;
Perform key bookkeeping tasks;
Interpret financial statements
Prepare an income statement and balance sheet
Identify where there is profit or loss for a business;
Generate an overall report on the activity
PLANNING isone thing,
IMPLEMENTATION is another.

IMPLEMENTING the business would

involve operating the business, which
may involve selling of goods/services to
potential customers.
To be effective...
Decisions must be based on RELIABLE
and UP-TO-DATE information.

To do this, as an entrepreneur, you need

to maintain RECORDS of all the
transactions the enterprise has made.
Financial Record Keeping
The recording of transactions within
the business is called bookkeeping.

Records are called books of

accounts.
Effects of transactions are drawn out of
the books of accounts and are
summarized in a report called income
statement or profit and loss
statement.
The resulting effect on the financial
status of the firm is also drawn out from
the books of accounts and reflected in a
report called the balance sheet.
Thus, this system is referred to as the
accounting system and the outputs are
called accounting records and
reports.
The Flow of Business Transactions
Transactions occur daily (cash, sales, cash
disbursements, credit sales)
Proper supporting documents are prepared
Debits and credits are recorded in the journals
Summary totals are posted on the ledger
Preparation of the balance sheet and income
statement
Chart of Accounts
shows the list of accounts and their
arrangement in the ledger
each account is given a number for
reference purposes
no strict rules in the assignment of
account numbers; usual arrangement
follows the sequence of accounts in the FS
Chart of Accounts
1 Assets
Account No.
11 Cash
12 Petty Cash
13 Accounts Receivable
14 Merchandise Inventory
15 Supplies
16 Office Equipment
19 Accumulated Depreciation
Chart of Accounts
2 Liabilities
Account No.
21 Accounts Payable
22 Salaries Payable
23 Taxes Payable
Chart of Accounts
3 Capital
Account No.
31 Capital
32 Drawings (Withdrawals)
33 Daily Summary of Sales/Cash Receipts
Chart of Accounts
4 Income
Account No.
41 Sales
42 Miscellaneous Income
Chart of Accounts
5 Expenses
Account No.
51 Salaries and Wages Expense
52 Rent Expense
53 Supplies Expense
54 Interest Expense
55 Purchase Expense
56 Depreciation Expense
57 Advertising Expense
58 Telephone Expense
59 Miscellaneous Expense
Books of Accounts
Journal
General Ledger
Journal
 a chronological record of business
transactions of the enterprise
also referred to as the book of original
entry
two types: general and special journal
 Sample Form of General Journal
Date Accounts and Explanations Ref. Debit Credit
10/10 Cash 11 10,000
Sales 41 10,000
Cash sales of the day
10/11 Office Equipment 16 3,000
Cash 11 3,000
Purchase desk calculator
10/11 Salaries and Wages 51 14,000
Cash 11 14,000
Payment of the salaries for
the week ending Oct. 11

10/12 Office Equipment 16 35,000

Accounts Payable 21 35,000
Purchase from AJ Electronics
(1) computer unit on account
General Journal
Column Headings:

DATE COLUMN – shows the date when the

transactions took place
PARTICULARS – shows the items or accounts
debited and credited and a brief explanation
of what the transaction is all about
FOLIO – shows the number of an account in a
ledger or page of a ledger to which it was
transferred. Also called reference.
DEBIT COLUMN – the money column showing the
peso amount of the value received in a
transaction.
CREDIT COLUMN – this is the money column
showing the peso amount of the value parted
with in a transaction.
Types of Special Journals
purchase journal (for credit purchases)
sales journal (for credit sales)
cash disbursement journal (payments
on cash basis)
cash receipts journal (all cash sales and
payments received from credit
customers)
Journalizing
the act of recording transactions in the
journal
The entry that is recorded in the journal is
called a journal entry.
When transactions are being recorded, there
also developed a related equation as:

DEBIT = CREDIT
Debit means “left”
Credit means “right”

DEBIT = CREDIT
VALUE RECEIVED = VALUE PARTED WITH
 What it OWNS= What it OWES

ASSETS = EQUITIES (creditors & owners)

ASSETS = LIABILITIES + OWNERS’ EQUITY

ASSETS – resources owned by the business

LIABILITIES – claims of creditors

OWNERS’ EQUITY – claims of owner/s

ASSETS – the normal balance is Debit; to increase is
to Debit

LIABILITIES – the normal balance is Credit; to increase

is to Credit

OWNERS’ EQUITY – the normal balance is Credit; to

increase is to Credit
We debit to: We credit to:
Increase Asset Decrease Asset
Decrease Liability Increase Liability
Decrease Owners’ Increase Owners’
Equity Equity
Increase Drawing Decrease Drawing
Furthermore,
INCOME and EXPENSES are factors that
affect OWNERS’ EQUITY:

INCOME increases OWNERS’ EQUITY

EXPENSE decreases OWNERS’ EQUITY
We debit to: We credit to:
Decrease Income Increase Income
Increase Expenses Decrease Expenses
Sample Journal Entry:
Transaction 1 – Bought a delivery car on
June 7, 20A for cash P600,000.

Analysis:
Value Received: Delivery Car (Asset)
Value Parted With: Cash (Asset)
We then say:

Debit Asset: Delivery Equipment

Credit Asset: Cash

Journal Entry:
6/7 Delivery Equipment P600,000
Cash P600,000
Purchase of delivery car.
Transaction 2 – Bought laundry supplies on
credit from SM City-Davao on June 8,
P35,000.

Analysis:
Value Received: Laundry Supplies (Asset)
Value Parted With: Accounts Payable (Liability)
We then say:

Debit Asset: Laundry Supplies

Credit Liability: Accounts Payable

Journal Entry:
6/8 Laundry Supplies P 35,000
Accounts Payable P 35,000
Purchase of laundry supplies on credit
Illustrative Activity: Journalizing
Use the accounts below in preparing the journal entries for the
following business transactions:

CASH
ACCOUNTS RECEIVABLE
OFFICE SUPPLIES
ACCOUNTS PAYABLE
MARIO CRUZ, CAPITAL
MARIO CRUZ, DRAWING
SERVICE FEES
RENT EXPENSE
Jan 1 - Mario Cruz invested cash of P100,000
to start his business.
15 - Paid rent for the month, P2,000.
18 - Bought office supplies for cash, P500.
20 - Bought office supplies from Crown
Bookstore on account, P 1,000.
25 - Paid the account with Crown
Bookstore in full.
Jan. 26 - Received cash of P15,000 from client
for services rendered.
27 - Billed a customer for services rendered, P
3,000.
28 - Collected the account of a customer
previously billed, P 3,000.
30 - The owner, Mario Cruz, withdrew cash of
P 5,000 from the business for personal use.
Answer: 1)
Jan 1 - Mario Cruz invested cash of P100,000 to
start his business.

Value Received: Cash (Asset)

Value Parted With: Mario Cruz, Capital (Owners’ Equity)

Jan.1 Cash P 100,000

Mario Cruz, Capital P 100,000
Answer: 2)
Jan. 15 – Paid rent for the month, P2,000.

Value Received: Rent Expense (Expense)

Value Parted With: Cash (Asset)

Journal Entry:
Jan. 15 Rent Expense P 2,000
Cash P2,000
Answer: 3)
Jan. 18 - Bought office supplies for cash, P500.

Value Received: Office Supplies (Asset)

Value Parted With: Cash (Asset)

Journal Entry:
Jan. 18 Office Supplies P 500
Cash P 500
Answer: 4)
Jan. 20 - Bought office supplies from Crown
Bookstore on account, P 1,000.

Value Received: Office Supplies (Asset)

Value Parted With: Accounts Payable (Liability)

Journal Entry:
Jan. 20 Office Supplies P 1,000
Accounts Payable P 1,000
Answer: 5)
Jan. 25 - Paid the account with Crown Bookstore in
full.

Value Received: Accounts Payable (Liability)

Value Parted With: Cash (Asset)

Journal Entry:
Jan. 25 Accounts Payable P 1,000
Cash P 1,000
Answer: 6)
Jan. 26 - Received cash of P15,000 from client for
services rendered.

Value Received: Cash (Asset)

Value Parted With: Service Fees (Income)

Journal Entry:
Jan. 26 Cash P 15,000
Service Fees P 15,000
Answer: 7)
Jan. 27 - Billed a customer for services rendered,
P 3,000.

Value Received: Accounts Receivable (Asset)

Value Parted With: Service Fees (Income)

Journal Entry:
Jan. 27 Accounts Receivable P 3,000
Service Fees P 3,000
Answer: 8)
Jan. 28 - Collected the account of a customer
previously billed, P 3,000.

Value Received: Cash (Asset)

Value Parted With: Accounts Receivable (Asset)

Journal Entry:
Jan. 28 Cash P 3,000
Accounts Receivable P 3,000
Answer: 9)
Jan. 30 - The owner, Mario Cruz, withdrew cash of
P 5,000 from the business for personal use.

Value Received: Mario Cruz, Drawing (Owners’ Equity)

Value Parted With: Cash (Asset)

Journal Entry:
Jan. 30 Mario Cruz, Drawing P 5,000
Cash P 5,000
Posting
means transferring the amount from the
general journal to the appropriate
accounts in the ledger
General Ledger
where all entries in the general journal are
properly transferred (posted).
is a collection of accounts, usually bound,
showing the different transactions affecting
the items (accounts) in the financial
statements
provides a summary of all the changes that
affect each particular account
Sample Form of General Ledger
CASH
Account No. 11
Date Particulars Ref. Debit Date Particulars Ref. Credit
10/10 Sales J-1 10,000
10/11 Office Eqpt. J-1 3,000
10/11 Salaries J-1 14,000
Sample Form of General Ledger
OFFICE EQUIPMENT
Account No. 16
Date Particulars Ref. Debit Date Particulars Ref. Credit
10/11 Desk J-1 3,000
Calculator
10/12 Computer J-1 35,000
Sample Form of General Ledger
ACCOUNTS PAYABLE
Account No. 21
Date Particulars Ref. Debit Date Particulars Ref. Credit
10/12 AJ J-1 35,000
Electronics
Sample Form of General Ledger
SALARIES AND WAGES
Account No. 51
Date Particulars Ref. Debit Date Particulars Ref. Credit
10/11 For the J-1 14,000
week ending
10/11
At the end of the accounting period, the
debit and credit balance of each account
must be determined so as to come up
with a trial balance.
Footing
The process of adding each of the amounts
in the debit and credit columns of the
ledger, and determining the balance thereof.
If debit total is greater than the credit total,
the account is said to have a debit balance.
If credit total is greater than the debit total,
the account is said to have a credit balance.
Sample Posting and Footing
(based on the Illustrative Problem)
CASH
Dr. Cr.
Jan. 1 P 100,000 Jan. 15 P 2,000
Jan. 26 15,000 Jan. 18 500
Jan. 28 3,000 Jan. 25 1,000
Jan. 30 5,000
118,000 8,500
Balance 109,500
Your turn...
What about for the ACCOUNTS
RECEIVABLE account? How would the
posting and footing be done?
Answer:
ACCOUNTS RECEIVABLE
Dr. Cr.
Jan. 27 3,000 Jan. 28 3,000

Balance 0
Trial Balance
a list of all accounts with their respective
balances at the end of a certain period
prepared after the transactions have
been posted and their balances
determined
Steps in preparing a trial balance:
1. List the account titles in order of classification of
accounts: Assets, Liabilities, Owners’ Equity, Income,
and Expenses.
2. Obtain the account balances of each account from the
ledger and enter debit balances in the debit column
and the credit balances in the credit column.
3. Determine the total of the debit column and the total
of the credit column.
4. Compare the totals. It should be equal. Double rule
the totals.
Sample Trial Balance
BUENA INTERNET SERVICE
Trial Balance
January 31, 20A
Debit Credit
Cash P
94,700
Accounts Receivable 10,000
Supplies 1,500
Accounts Payable P 1,000
Anna Buena, Capital 80,000
Service Income 33,000
Utilities Expense 1,800
Salaries Expense 4,000
Rent Expense 2,000
P 114,000 P
114,000
Adjusting Entries
Correction of errors
Accruals/Prepayments
Depreciation
Correction of Error
Ex: A purchase of office supplies,
amounting to P2,000 has been recorded
as follows:

Office Equipment P 2,000

Cash P 2,000
Wrong Entry:
Office Equipment P 2,000
Cash P 2,000
Correct Entry:
Office Supplies P 2,000
Cash P 2,000
Adjusting Entry:
Office Supplies P 2,000
Office Equipment P 2,000
Accruals/Prepayments

Accrued Expenses – expense already

incurred but not yet paid
Prepayments – accounts that are paid in
advance, but have not yet been incurred
To record an accrued expense on electricity:

Light and Water Expense P xxx

Light and Water Payable P xxx
To record a prepayment on rent amounting to
P 3,000:
Prepaid Rent P 3,000
Cash P 3,000
To record an expired portion of the prepaid
rent amounting to P 1,000 at the end of the
period:
Rent Expense P 1,000
Prepaid Rent P 1,000
Depreciation
- is the systematic allocation of the cost of
plant, property, and equipment over its
estimated useful life.
- recorded at the end of the accounting
period
The straight-line depreciation method is
the most common method for
depreciating an asset.

Depreciation = (Purchase Price – Salvage Value)/Est. Useful Life

Salvage Value (Residual/Scrap Value)
The amount at which the asset can be
sold at the end of its estimated useful life.
Asset Life or Estimated Useful Life

Buildings: 40-100 years

Ships: 20-40 years
Machinery: 3-15 years
Vehicles: 3-7 years
Pro-forma Entry for Depreciation:

Depreciation Expense P xxx

Accumulated Depreciation P xxx
Adjusted Trial Balance
All adjustments must be journalized in the
general journal.
Amounts on the adjusting entries need to be
posted to the proper ledgers
Adjusted balances (considering the
adjustments made) should be reflected in the
Adjusted Trial Balance.
Financial Statements
the means of conveying to interested
parties (owner, management, gov’t.
agencies, creditors, suppliers,
customers) the performance of the
enterprise for a given period (Income
Statement), and its financial condition
as of a specific date (Balance Sheet).
Income Statement
shows the revenues realized by the
business, as well as the costs and expenses
incurred in the realization of said revenues.
also called as profit and loss statement
revenues are compared with expenditures
to determine the result of operation
If revenues exceed expenditures, the
difference is called net profit, and is
added to the owners’ equity in the
balance sheet
If expenditures are more than revenues,
net loss results and is deducted from the
owners’ equity
Income Statement Classifications
Revenues – consist of the sale of goods
or services during the period for which
the statement was prepared.

Expenditues – consist of production,

selling, and other expenses incurred in
generating the revenues.
Classifications of Expenditures
Cost of Sales
for the trading firm, this consists of the cost
of the merchandise and the cost of
transporting or bringing the products to the
firm
for the manufacturing firm, this consists of
the materials, labor, and other costs necessary
in the production of the products sold
Selling Expenses
Expenses incurred in making sales.
Exs. are salaries of salesmen,
commissions paid, advertising and
promotional expenses, etc.
General and Administrative Expenses
include salaries of office personnel, rental, taxes,
professional fees, and other payables necessary
in the overall administration of the business

small businesses usually lump the selling

expenses and the general and administrative
expenses together, and call it operating expenses
 SHIRT TALES T-SHIRT PRINTING
Income Statement
For the month ended, December 31, 2009

Sales P 30,000
Less: Cost of Sales
Beginning Inventory P 9,400
Add: Purchases 10,000
Freight-in 600
Total Goods Available for Sale P20,000
Less: Ending Inventory 8,000 12,000
Gross Profit on Sales P18,000
 Less: Operating Expenses
Salaries P 4,000
Rentals 600
Commissions 2,000
Delivery Expenses 400
Professional Fees 1,000
Taxes 800
Light and Water 200 P 9,000
Net Income Before Interest and Taxes P 9,000
Less: Interest Expense 500
Income from Operations P 8,500
Less: Income Tax 2,500
Net Profit for the Month P 6,000
Balance Sheet
a formal statement that presents the
financial condition of the company as of
a specific date
shows what the enterprise owns
(assets), what it owes (liabilities), what
the owner has invested, and the accrued
expenses or losses (equity).
Balance Sheet
based on the accounting equation:

Assets = Liabilities + Owners’ Equity

 SHIRT TALES T-SHIRT PRINTING
Balance Sheet
As of December 31, 2009
ASSETS
Current Assets
Cash 2,300
Accounts Receivable 20,000
Inventory 4,700
Prepaid Expense 300
Total Current Assets 27,300
Fixed Assets
Machinery and Eqpt. 35,000
Furniture and Fixtures 7,700
Total Fixed Assets 42,700
Less: Depreciation 1,100
Net Book Value 41,600
Other Assets
Patent 10,000
Total Assets 78,900
 LIABILITIES AND OWNERS’ EQUITY
Current Liabilities
Accounts Payable 6,700
Accrued Liabilities 1,200
Total Current Liabilities 7,900
Long-term Liabilities
DBP Loan
30,000
Total Liabilities 37,900
Owners’ Equity
Shirt Tales, Capital 35,000
Accumulated Profits 6,000
Total Owners’ Equity 41,000
Total Liabilities and Owners’ Equity 78,900
Balance Sheet Classifications
1. ASSETS
1.1 Current Assets
1.2 Fixed Assets
1.3 Other Assets

2. LIABILITIES
2.1 Current Liabilities
2.2 Long-term Liabilities

3. OWNERS’ EQUITY
1. ASSETS
items of value owned by the enterprise and include:
Cash on Hand/Cash in Bank
Accounts Receivable
Notes Receivable
Interest Receivable
Merchandise Inventory
Prepaid Rent
Supplies
Land
Building
Machinery and Equipment
1.1 Current Assets
Consist of cash and other assets that are
expected to be converted into cash during the
normal cycle of the business.
The normal operating cycle is generally one year.
Exs. include Cash, Marketable Securities,
Accounts Receivable, Inventories of Raw
Materials, Supplies and Finished Goods, and
Prepaid Expenses, Unexpired Insurance
1.2 Fixed Assets
Assets that are acquired for long-
term use.
Exs. Land, Building, Machinery,
Equipment, Furniture and Fixtures
acquired to be used in the business.
1.3 Other Assets
These include patents, goodwill, and
others which do not fall under the
above-definitions.
Goodwill is the difference between
the price paid to acquire a business
(or part of a business) and the value of
the tangible assets acquired.
2. LIABILITIES
These are amounts owed by the
business.
Classified into current and long-term.
2.1 Current Liabilities
Obligations that are expected to become due within
the normal operating cycle
Exs. Accounts Payable
Notes Payable
Interest Payable
Rent Payable
Salaries and Wages Payable
Taxes Payable
Utilities Payable
2.2 Long-term Liabilities
normally borrowings from banks and/or other
financial institutions.
to be paid for a longer period of time than the
normal operating cycle, usually three years or
more.
normally documented by promissory notes and
backed by assets serving as security or collateral
Exs. Mortgage Payable, Loan Payable
3. OWNERS’ EQUITY
refers to the amounts invested by the
owner/s in the firm and includes profits
retained in the business.
affected by the additional investments or
withdrawal of the owner/s, and by the
addition/deduction of the net profit/loss
for the year.
Valuing Assets
Current Assets – usually valued at cost.
Accounts Receivable is valued at net of
Allowance for Doubtful Accounts
Fixed Assets – for most fixed assets
(except land), value is assumed to
diminish over time. Depreciable assets
are valued at cost, net of depreciation.
Cash Flow Statement
a supporting document that shows the
sources and purpose of cash payments
during an accounting period.
gives a full and complete picture of cash
receipts and disbursements for a period.
can be used in the preparation of cash
budget.
 SHIRT TALES T-SHIRT PRINTING
Cash Flow Statement
As of December 31, 2009
CASH INFLOW
Cash Sales P 25,000
Collection of Receivables 6,500
Total Cash Inflow P 31,500
CASH OUTFLOW
Purchase of Raw Materials P 9,400
Labor 6,000
Manufacturing Overhead (net of 1,200
depreciation)
Operating Expenses 9,000
Payables Settled 1,900
Total Cash Outflow P 27,500
Net Cash Inflow (Outflow) P 4,000
Add: Cash Balance, beginning 1,300
Total Cash Available P 5,300

Less: Amortization
Principal 0
Interest 500
Total Amortization 500

Income Tax 2,500

Cash Balance, Ending P 2,300
What to do with net profit...
Pay it out to the owners (dividend)
Keep it in the firm (retained profit or
retained earnings)

by retaining profits, the firm is able to acquire

more assets, and is more able to grow or
expand
References:
Entrepreneurship in the Philippine Setting
by: Winifreda T. Asor, PhD
C2009; Rex Book Store
Fundamentals of Accounting (Simplified Procedural
Approach) 2014-2015 Edition
by: Rafael M. Lopez, Jr.
Simple Bookkeeping-Training Kit
by: Marites S. Gadia, CPA, MBA