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Financial Accounting and Reporting

The document provides an overview of financial accounting and reporting, highlighting its purpose to inform both external and internal users for decision-making. It outlines different forms of business, types of businesses, and the fundamental and enhancing qualitative characteristics of accounting. Additionally, it explains the accounting equation, the steps of the accounting cycle, and various source documents used in accounting.

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15 views

Financial Accounting and Reporting

The document provides an overview of financial accounting and reporting, highlighting its purpose to inform both external and internal users for decision-making. It outlines different forms of business, types of businesses, and the fundamental and enhancing qualitative characteristics of accounting. Additionally, it explains the accounting equation, the steps of the accounting cycle, and various source documents used in accounting.

Uploaded by

sinatoyakoto051
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Financial Accounting and Reporting

Accounting - A process of identifying, recording, and communicating economic information


that is useful in the decision making.
1. To provide external users with information useful to making business/investment decisions,
2. To provide internal users with information that is useful to managing the business.
Fra Luca Pacioli - formulated double entry recording system and published a book entitled
“Summa Di Arithmetica Geometria proportioni and Proportionista”
Forms of Business
1. Sole Proprietorship - 1 owner (DTI)
2. Partnership - 2 or more owners (SEC)
3. Corporation - less than 15 incorporators (SEC)
4. Cooperative - not less than 15 members (CDA)

Type of Businesses
1. Service - Performs services to customer
2. Merchandising - buying goods and selling it as it is.
3. Manufacturing - purchasing raw materials and making it something produced out of it.
- The accounting standards in The Philippines are represented by Philippines Financial
Reporting Standards (PFRS)

Fundamental Qualitative Characteristic of Accounting


Relevance Faithful Representation
1. Confirmatory Value 1. Free of Error
2. Predictive Value 2. Completeness
3. Materiality 3. Neutrality
Enhancing Qualitative Characteristics of Accounting
Verifiability Understandability
Comparability Timeliness

THE ACCOUNTING EQUATION


Typically Expressed as
Asset = Liability + Capital
Asset = Liability + Capital - Expense + Revenue
Asset - economic resources you control that have resulted from past events and can provide
economic benefits.
Liability - Present obligation that have resulted from past events and can require you to give
up economic resources when settling them.
Equity - Asset - Liability
Revenue - Increases in economic benefit during the period in the form of increases in asset,
or decreases of liabilities, that is resulted in increases in equity.
Expenses - decreases in economic benefits in the form of decreases in asset, or increases in
liabilities, in result of decrease in equity.

A Debit to an entry to an account


- Increases Asset or Expense
- Decreases Liabilities, Capital, or Revenue

A Credit to an entry to an account


- Decreases Asset or Expense
- Increases Liabilities, Capital, or Revenue

Journal - “Book of original account” -


Types of Journal
1. Special Journal
- Sales Journal - record sales on account.
- Purchases Journal - Record purchases on account.
- Cash Receipt Journal - Record all transactions involves cash receipts.
- Cash Disbursement Journal - Record all transactions involves cash payments.
2. General Journal - (Notes Payable, Adjusting Entries, Reversing Entries etc.
Kinds of Ledger
1. General Ledger - Contains all accounts appearing in trial balance.
2. Subsidiary Ledger - Contains “Controlling Accounts”

STEPS OF THE ACCOUNTING CYCLE


1. Identifying and analyzing
2. Journalizing
3. Posting
4. Unadjusted Trial Balance
5. Adjustments
6. Adjusted Trial Balance
7. Worksheet
8. Financial Statements
9. Closing Entries
10. Post Closing Trial Balance
11. Reversing Entries
Source Documents
1. Sales Invoice - Use for sale of goods or rendering services
2. Purchase Order - Issued by a buyer indicating types, quantity, and price of ordered goods.
3. Delivery Receipts - Document signed by the receiver of a shipment acknowledging the
receipt of the goods.
4. Bank Deposit Slip - Evidence to a bank account shows date, name and number, and the
amount deposited.
5. Bank Statement - Report issued by the bank that shows deposit and withdrawals during the
period.
6. Check - Instrument that orders a bank (drawee) to pay the bearer thereof (payee)
7. Statement of Accounts - Report a business sends to its customer listing the transactions
with the customer during a period.

TRIAL BALANCE
- List of general ledger to check the equality of total debits and credits in the ledger.
- List of ALL ACCOUNTS and their BALANCES

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