Académique Documents
Professionnel Documents
Culture Documents
What is Business?
Integrated set of activities
An organization or economic system
Goods and services are exchanged for
one another or for money
Requires some form of investment
Requires enough customers to whom its
output can be sold on a consistent basis
To make a profit
Types of Business
Service Concern. Derives its income
from services rendered to clients.
Professional Services: Accountant,
Lawyers, Doctors. Non-professional
Services: Laundry Shop, Car Repair
Shop, Janitorial Services.
Merchandising or Trading Concern.
Buying and selling of products. Example:
Grocery Stores.
Manufacturing Concern. Buying raw
materials and supplies to be processed
and converting them to finished product.
Example:
Car
Fundamentals
of Accounting,
Part manufacturer.
1 2014 College of Accountancy by Lowelle Cielo Pacot,
Forms of Business
Sole Proprietorship. One owner
(proprietor)
Partnership. Two or more owners
(partners)
Corporation. Five to Fifteen
incorporators and Unlimited
shareholders.
Sales
Cash
Banks
Retur
n
Operati
ng
Assets
Asse
t
Use
Product
s or
Service
s
Costs
Accounting Defined
A service activity
To provide quantitative information
Financial in nature
About economic activities
Intended to be useful in making
economic decisions
Fundamental Concepts
Entity. The transactions of different
entities should not be accounted for
together.
Periodicity. Entitys life can be
subdivided into equal time periods for
reporting purposes.
Stable Monetary Unit. Reasonable
unit of measure and that its purchasing
power is relatively stable.
Underlying Assumptions
Accrual Basis. Transactions and events
are recognized when they occur and not
as cash is received or paid.
Going Concern. The enterprise will
continue in operation for the foreseeable
future.
Definition: Performance
Income
Increases in economic benefits
In the form of inflows
Enhancements of assets or decrease of
liabilities
Results in increases in equity
Other than those contributions to equity
participants
Expenses
Deceases in economic benefits
In the form of outflows
Depletion of assets or incurrence of
liabilities
Results in decreases in equity
More Exercises
1. At the beginning of the year, the assets of
CA Services were 360,000 and its owners
equity was 200,000. During the year,
assets increased by 120,000 and
liabilities by 20,000. What was the
owners equity at the end of the year?
2. At the beginning of the year, CGC Station
had liabilities of 100,000 and owners
equity of 96,000. If assets increased by
40,000 and liabilities decreased by
30,000, what was the owners equity at
the end of the year?
3. The liabilities of LL Company equal onethird of the total assets, the owners equity
Fundamentals of Accounting, Part 1 2014 College of Accountancy by Lowelle Cielo Pacot,
The Account
The basic summary device of
accounting.
T-account: its simplest form
Account Title
Left side or
Debit side
Right side or
Credit side
Normal Balance
Refers to the side of the account debit
or credit where increases are recorded.
Assets: Debit balance
Liabilities: Credit balance
Owners Equity: Credit balance
Income: Credit balance
Expenses: Debit balance
Withdrawal: Debit balance
Contra-asset: Credit balance
Questions?