Basic Acctg Concepts

Anything that has to do with commerce, producing, trading, dealing of goods and services.

Primary motive is PROFIT.

Provides for the satisfaction of people’s needs an wants

Creates jobs Provides for the government funds thru

taxes Helps the government for economic

development

When the owner gets back his initial capital Return of Capital When the owner gets more than what he

investedReturn on Capital

Through ACCOUNTING.

The language of business. A service activity that analyzes, measures,

summarizes , reports and interprets economic activity of a business whose primary function is to provide basis for decision making.

Financial Reports/Financial Statements/ Financial Information/Accounting Information/ Accounting Reports:

INCOME STATEMENTCAPITAL STATEMENT/STOCKHOLDERS’

EQUITYBALANCE SHEETCASH FLOW STATEMENT

Person/s interested in the business.1. Internal Owner/s, Manager, Employees2.External

Government, Creditors, Suppliers, Customers

1. Sole Proprietorship - focus for Prinac 12. Partnership3. Corporation4. Cooperatives5. Not-for-profit Organizations

1. Service – focus for Prinac 12. Merchandising/Trading3. Manufacturing4. Hybrid/Combination

Effective communication Skills Interpersonal Skills Intellectual Skills creative & critical thinking analytical thinker problem solver decision-maker

Understandability Relevance Materiality Reliability Faithful representation Neutrality Comparability Consistency Substance over form

Broad laws or rules adopted as guides in identifying, measuring and reporting financial information.

Pronounced by PICPA through its Accounting Standards Council called Financial Reporting Standards Council.

1. Cost concept2. Business entity concept3. Going concern concept4. Reporting period5. Objectivity concept6. Disclosure concept7. Unit of Measure8. Prudence9. Accrual

Shows the result of business operation for a given period of time.

Contains Revenues/Income and Expenses. Single step form for service business. Functional form for merchandising and

manufacturing business.

REVENUES are income earned by the business by rendering service, whether cash is received or not.

Service Income, Tuition Fee, Agency Fee

EXPENSES are costs incurred necessary in generating income, whether cash is paid or not.

Rent Expense, salaries exp., utilities exp.

Revenues : Agency Fee/Income P300,000Expenses: Rent Expense P50,000 Salaries Expense 70,000 Utilities Expense 30,000 Documentations Exp. 20,000 Transportation Exp. 5,000 Total 175,000Net Income P125,000

Shows movements in the Capital Account for a given period of time.

Beginning Capital, Net income or loss, Additional investment and Drawings/Personal

Capital or Owner’s Equity is the interest or claim of the owner over the business after creditors have been paid.

Partners’ Equity for PartnershipStockholders’ Equity for Corporation

Gonzales, Capital 1/1 P 600,000Net Income 125,000Gonzales, Drawing

( 50,000)Gonzales, Capital 12/31 P

675,000

Shows the financial position or condition of the business as of a particular cut-off date.

Contains ASSETS, LIABILITIES AND OWNNER’S EQUITY

Maybe Account format or Report format