Celinmar Briones Montes

MA EPM 1
How you handle money is a reflection of your soul. Money is the great magnifier. It
simply magnifies that which is within you. If you’re a broken person, money will make
you more broken. If you’re a selfish person, money will make you more selfish. But if
deep within you, you’re good and humble and kind and generous and selfless and
disciplined, money will magnify all that fantastic stuff in you.
If you’re already rich on the inside—God doesn’t mind you being rich on the outside.
Because the Bible says, Let the Lord be magnified, who has pleasure in the
prosperity of His servant (Psalms 35:27).
May this presentation enlighten us how to control our finances by learning some
basic terms in accounting..
Unlocking of Difficult Terms

Accounting Equation

Balance Sheet Accounts

What is Asset?

What is Liability?

What is Equity?

Capital

Quiz
• Balance Sheet Accounts - used to track the changes in value of
things you own or owe.
• Assets– group of things that you own.
• Tangible– clear enough or definite enough to be easily seen, felt, or
noticed
• Intangible – abstract or is hard to define or measure
• Patent – an official right to be the only person or company allowed
to make or sell a new product for a certain period of time
• Liquidity - speed at which something can be converted into cash.
• Appreciate – increase of value
• Depreciate – lose of original value
• Liability – debt
• Debenture – type of savings bond which offers a fixed rate of
interest over a long period.
• Overdraft – spending money more than you have in a bank
• Equity - what is left over after you subtract your liabilities from your
assets
• Income – something that is earned or received
• Dividend – part of a company’s profits shared by its shareholders
• Expenses – money that something costs you
 Unlocking of
Difficult Terms

Accounting
Equation Assets, Liabilities, Equity, Income and Expenses

Balance Sheet
Accounts

What is
Asset?

What is
Liability?

What is Equity?

Accounting Equation
Income and
Expenses
(Assets - Liabilities = Equity + (Income - Expenses)
QUIZ
 Unlocking of
Difficult Terms

Accounting
Equation

Balance Sheet - are used to track the changes in value of things you
Accounts
own or owe.
What is
Asset?

What is
Liability?
The three so-called Balance Sheet
Accounts are Assets, Liabilities, and Equity.
What is Equity?

Income and
Expenses

QUIZ
 Unlocking of
Difficult Terms

Accounting
Equation

Balance Sheet • possession of something that will

Accounts
bring benefits in the future.
What is
Asset?
• group of things that you own
• anything that will add
What is
Liability? future
What is Equity? value to your business.
Income and
Expenses

QUIZ
 Unlocking of
Difficult Terms

Accounting
Equation

Balance Sheet
Accounts

What is
Asset?

What is
Liability?

What is Equity?

Income and
Expenses

QUIZ
 Unlocking of
Difficult Terms

Accounting
Equation What is the test of whether
Balance Sheet
Accounts
something is considered an asset
for your business? Well, one asks,
―Is the _______ something I own will
What is
Asset?

What is
Liability?
bring me benefits in the future?‖
What is Equity?

Income and
Expenses

QUIZ
If you owned the land, would it
be an asset for your business?
Not sure? Well, do you expect
to receive
benefits for your business in
the future from the land?
Of course. So what are the
benefits it will bring? Well, you
can construct a building on it that
you can use for business. Even
selling it would bring benefits, in
the form of cash.
How about a computer that you
own – is this an asset? Will it
bring you benefits in the future?
Well, amongst other things, you
can store and retrieve large
amounts of information and use
it to communicate with suppliers
and customers.
So yes, a computer
is certainly an asset.
What about a motor vehicle –
is this an asset? Does it
have benefits for your
business, and if so, what are
they?
Yes, there are benefits for
your business... You can use
the motor vehicle to pick up
and deliver goods. So yes,
this is also an asset.
What about cash? Is cash
an asset?
Cash is certainly an
asset.
What are the benefits of
having cash? Simple: you
can pay for things! That
is certainly useful (and
indeed essential) for a
business.
 Unlocking of
Difficult Terms

Accounting
Equation

Balance Sheet
Assets can be tangible or intangible.
Accounts

Tangible assets are physical entities such as land,

What is
Asset? buildings, vehicles, equipment, and inventory.

What is
Liability?
Intangible assets include Accounts Receivables,
patents, and contracts.
What is Equity?

Income and
Expenses

QUIZ
 Unlocking of
Difficult Terms

Accounting
Equation
Assets are also grouped according to their liquidity, or the speed
at which they can be converted into cash.
Balance Sheet
Accounts
Current assets can be converted into cash in 12 months or less.
What is
Asset? Non-Current/Fixed assets are tangible assets with a life span of
at least one year and usually longer. High-cost fixed assets such
What is
Liability?
as machinery and computer systems are not expensed, but their
value is depreciated, or "written off," over a number of years
What is Equity? according to one of several depreciation schedules.

Income and
Expenses

QUIZ
 Asset Type of Asset Benefits
Machine Non-current Used for the production of goods for
sale to customer.
Office Building Non-current Provides space to employees for
administering company affairs.
Vehicle Non-current Used in the transportation of company
products and also for commuting.
Inventory Current Cash is generated from the sale of
inventory.
Cash Current Used to pay any expenses

Receivables Current Will eventually result in inflow of cash.

 Unlocking of
Difficult Terms

Accounting
Equation

• A present obligation of the enterprise arising

Balance Sheet
Accounts from past events, the settlement of which is
expected to result in an outflow from the
What is
Asset? enterprise of resources embodying economic
benefits.
What is
Liability?
• A debt of the business.
What is Equity?

Income and
Expenses

QUIZ
YOU ------------> OWE ------------> BANK
 Unlocking of
Difficult Terms
TYPES OF LIABILITIES
Accounting
Equation
• Current liabilities are debts that are paid in 12 months or less,
and consist mainly of monthly operating debts. Current liabilities
Balance Sheet
Accounts are usually paid with current assets, i.e. Cash. A
company's working capital is the difference between its current
What is assets and current liabilities. Managing short-term debt and
Asset?
having adequate working capital is vital to a company's long-term
success.
What is
Liability?
• Long-term liabilities are typically mortgages or loans used to
What is Equity?
purchase fixed assets, and are paid off in years instead of
months.
Income and
Expenses

QUIZ
 Liability Classification
Long Term Bank Loan Non-current
Bank Overdraft Current
Short Term Bank Loan Current
Debenture Non-current
Tax Payable Current
 Unlocking of
Difficult Terms

Accounting
Equation

Balance Sheet • is the same as "net worth." It represents

Accounts
what is left over after you subtract your
What is
Asset?
liabilities from your assets. It can be
thought of as the portion of your assets
What is
Liability? that you own outright, without any debt.
What is Equity?

Income and
Expenses

QUIZ
 Unlocking of
Difficult Terms

Accounting
Equation

Balance Sheet
• is of utmost importance to the business owner
Accounts
because it is the owner's financial share of the
What is
company. Worded another way, Equity is that
Asset?
portion of the total assets of the company
What is that the owner fully owns. Equity may be in
Liability?
assets such as buildings and equipment, or
What is Equity? cash.
Income and
Expenses

QUIZ
 Unlocking of
Difficult Terms

For example, if you purchase a $30,000 vehicle with a

Accounting
Equation $25,000 loan and $5,000 in cash, you have acquired an
asset of $30,000, but have only $5,000 of equity.
Balance Sheet
Accounts

What is
Asset?

• We can see how this equation works with our

What is
Liability? example: $30,000 Asset = $25,000 Liability + $5,000
Owner Equity.
What is Equity?

Income and
Expenses

QUIZ
 Unlocking of
Difficult Terms

Accounting
Equation

Balance Sheet
Accounts
A ―net worth‖ statement or ―balance sheet‖ is designed
to provide you with a picture of the financial soundness
What is of your business at a specific point in time. Net worth
Asset?
statements are often prepared at the beginning and
What is
ending of the accounting period (i.e. January 1), but can
Liability?
be done at any time.
What is Equity?

Income and
Expenses

QUIZ
 Unlocking of
Difficult Terms

Accounting
Equation
• is the payment you receive for your time, services
Balance Sheet
you provide, or the use of your money.
Accounts
• will always increase the value of your Assets and
What is thus your Equity.
Asset?
Examples:
What is
Liability? Commissions, tips, dividend income from stocks,
and interest income from bank accounts
What is Equity?

Income and
Expenses

QUIZ
 Unlocking of
Difficult Terms

Accounting
Equation
• The term Capital has several meanings and it is used in
many business contexts. In general, capital is accumulated
Balance Sheet
Accounts
assets or ownership. More specifically,
• Capital is the amount of cash and other assets owned by a
What is business. These business assets include accounts
Asset? receivable, equipment, and land/buildings of the business.

What is
• Capital can also represent the accumulated wealth of a
Liability? business, represented by its assets less liabilities.
• Capital can also mean stock or ownership in a company.
What is Equity?

Income and
Expenses

QUIZ
 Unlocking of
Difficult Terms

Accounting
Equation
It is a possession of something that will bring benefits
in the future.
Balance Sheet
Accounts

What is Assets
Asset?

Liability
What is
Liability? Equity
What is Equity?
Income

Income and
Expenses

QUIZ
 Unlocking of
Difficult Terms

Accounting What do you call the present obligation of the enterprise

Equation
arising from past events, the settlement of which is
Balance Sheet
expected to result in an outflow from the enterprise of
Accounts resources embodying economic benefits?
What is Assets
Asset?

Liabilities
What is
Liability?
Net worth
What is Equity?
Expenses
Income and
Expenses

QUIZ
 Unlocking of
Difficult Terms

Accounting
Equation It is the same as "net worth." It represents what is left over
after you subtract your liabilities from your assets. It can be
Balance Sheet
Accounts
thought of as the portion of your assets that you own
outright, without any debt.
What is
Asset? Expenses

What is Equity
Liability?

Income
What is Equity?

Liability
Income and
Expenses

QUIZ
 Unlocking of
Difficult Terms

Accounting
Equation It is the payment you receive for your time,
Balance Sheet
services you provide, or the use of your
Accounts
money.
What is
Asset? Income
What is
Liability?
Expenses
What is Equity? Asset
Income and Liability
Expenses

QUIZ
Back Back Back Back
to Q1 to Q2 to Q3 toQ4
Back Back Back Back
to Q1 to Q2 to Q3 toQ4
Back Back Back Back
to Q1 to Q2 to Q3 toQ4
Back Back Back Back
to Q1 to Q2 to Q3 toQ4
Back Back Back Back
to Q1 to Q2 to Q3 toQ4
 Unlocking of
Difficult Terms

Accounting
Equation
• Created by: Celinmar B. Montes
Balance Sheet
• www. gnucash.org
Accounts • www. accounting-simplified.com
• www.keynotesupport.com
What is • http://www.accounting-basics-for-students.com
Asset?
• http://accesstocapital.com/what-is-capital/
• http://biztaxlaw.about.com/od/glossaryc/g/capital.htm
What is
Liability? • NGAS Manual for Local Government Units and National
Government Agencies www.coa.gov.ph
What is Equity?
• www.youtube.com

Income and
Expenses

QUIZ