Accounting Records _Bam Disimulacion

8/9/2019 Accounting Records _Bam Disimulacion

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Accounting Records

and Systems(MBA 206)

Maria Arlene (Bam) T. DisimulacionConsultant for Marketing, Communications

and M.I.C.E. TourismEmail: [email protected]; [email protected]


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ACCOUNTING PROCESS


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Typically listed in this order:

Balance Sheet Accounts

Assets

LiabilitiesOwner's (Stockholders') Equity

Income Statement Accounts

Operating Revenues

Operating Expenses

Non-operating Revenues and GainsNon-operating Expenses and Losses

CHART OF ACCOUNTS


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Each account in the chart of accounts is typicallyassigned a name and a unique number by whichit can be identified.

Stockholders' Equity

27100 Common Stock, No Par

27500 Retained Earnings

29500 Treasury Stock

Operating Revenues

31010 Sales - Division #1, Product Line 010

Expenses

50100 Marketing Dept. Salaries

59200 Payroll Dept. Supplies

SAMPLE ACCOUNTS


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SOURCE DOCUMENTS

Source documentsare documents, such as cash

slips, invoices, etc. that form the sourceof (and

serve as proof for) a transaction.

Invoices, cash slips, receipts, check counterfoils,

bank deposit slips and even internet payment

confirmations are all source documents.


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JOURNALS

These are chronological (date-order) records of

transactions entered into by a business.

Journals are that first basic entry of debit and

credit for each transaction.


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Sample General Journal


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LEDGER (T-ACCOUNTS)

The ledgeris a collective term for the accounts

of a business.

The accounts are in the shape of a T and thus

are often referred to as T-accounts.

Account Name

DEBIT CREDIT

$ XXX $ XXX


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GENERAL RULES:

DOUBLE-ENTRY ACCOUNTING

1. Assets are always:

increased () by debits and decreased () by credits

2. Liability and Owners Equity accounts are always:

increased () credits and decreased () by debits

3. Owners Equity for a corporation includes:

Capital Stock and the Retained Earnings accounts

4. Revenues, expenses and dividends relate to Owners

Equity through the Retained Earnings account


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GENERAL RULES:

DOUBLE-ENTRY ACCOUNTING

5. Expenses and dividends are

increased (

) by debits and decreased (

) by credits

6. Revenues are

increased () credits and decreased () by debits

7. The difference between Total Revenues and Total

Expenses for a period is Net Income or Net Loss whichincreases () or decreases () Owners Equity


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DEBIT-CREDIT RELATIONSHIPS of

ACCOUNTS

Capital Stock

DR CR

Retained Earnings

DR CR

() (+) () (+)

Owners Equity

DR CR() (+)

Assets

DR CR

Liabilities

DR CR(+) () () (+)

+=

Expenses

DR CR

Revenues

DR CR(+) () () (+)

Dividends

DR CR(+) ()


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A sheet displaying all the accounts of a

business, drawn up as a trial (test)of whether

the total of all the debit balancesequal the

total of all the credit balances

The trial balanceis prepared as a final check

just before thefinancial statementsare drawn

up.

TRIAL BALANCE


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Sample Trial Balance


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ACCOUNTING PROCESS


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ADJUSTING ENTRIES

Adjusting entries are accounting journal entries

that convert a company's accounting records to

the accrual basis of accounting.

An adjusting journal entry is typically made just

prior to issuing a company's financial statements.

.


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ADJUSTING ENTRIES

There are two scenarios where adjusting journal entries

are needed before the financial statements are issued:

Scenario #1

Nothing has been entered in the accounting records for

certain expenses or revenues, but those expenses

and/or revenues did occur and must be included in

the current period's income statement and balance

sheet.


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ADJUSTING ENTRIES

There are two scenarios where adjusting journal entries

are needed before the financial statements are issued:

Scenario #2

Something has already been entered in the accounting

records, but the amount needs to be divided up

between two or more accounting periods.


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ADJUSTING ENTRIES


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FINANCIAL STATEMENTS

Financial statementsare the most important

reports of a business. These statements are

prepared from the information in the trial balance.

The purpose of these statements is to show the

user thefinancial position,financial performance

and cash flowsof a business, as well as other

useful information concerning the business.


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BALANCE SHEET

The balance sheet presents a company's financial

position at the end of a specified date.

Some describe the balance sheet as a "snapshot"of the company's financial position at a point (a

moment or an instant) in time.


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BALANCE SHEET


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INCOME STATEMENT

The income statement is important because it

shows the profitability of a company during the

time interval specified in its heading.

The period of time that the statement covers is

chosen by the business and will vary.


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INCOME STATEMENT


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CLOSING ACCOUNTS

These journal entries are made after the financial

statements have been prepared at the end of the

accounting year.

Most of the closing entries involve the income

statement accounts (revenues, expenses, gains,

losses, and summary/clearing accounts) whose

balances will be transferred to the owner's capital

account or the corporation's retained earnings

account.


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CLOSING ACCOUNTS

Two-fold purpose:

1. Closing is a mechanism to update the retained

earnings account in the ledger to equal the end-of-period balance.

.


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CLOSING ACCOUNTS

Two-fold purpose:

2. Revenue, expense, and dividend accounts

represent amounts for a period of time; one must

"zero out" these accounts at the end of each

period (as a result, revenue, expense, and

dividend accounts are called temporary ornominal accounts). In essence, by zeroing out

these accounts, one has reset them to begin the

next accounting period.

In contrast, asset, liability, and equity accounts

are called real accounts, as their balances are

carried forward from period to period. For

example, one does not "start over" each period

accumulating assets like cash and so on -- their

balances carry forward.


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FOUR-STEP PROCESS OF

CLOSING ACCOUNTS

1. Close revenue accounts (to a unique account

called Income Summary -- a non-financial

statement account used only to facilitate the

closing process)

2. Close expense accounts to Income Summary

3. Close the Income Summary account to

Retained Earnings

4. Close the Dividend account to Retained

Earnings


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CLOSING ACCOUNTS


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FOUR-STEP PROCESS OF

CLOSING ACCOUNTS

By doing this, all revenues and expenses are

"corralled" in Income Summary (the net of which

represents the income or loss for the period).

In turn, the income or loss is then swept to

Retained Earnings along with the dividends.

Recall that beginning retained earnings, plus

income, less dividends, equals ending retained

earnings; likewise, the closing process updates thebeginning retained earnings to move forward to

the end-of-period balance.


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ACCOUNTING PROCESS


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THANK YOU

Maria Arlene (Bam) T. Disimulacion

Documents

Accounting Records _Bam Disimulacion