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Training center
Accounting for-Non Accountant Seminar
By: Atty. Rheiner P. Mora,CPA
August 4, 2016 at Alpa City Suites
Hernan Cortes corner F. Cabahug Street,
Cebu City.
Accounting for
Non
Accountants
ATTY. RHENEIR P. MORA
RESOURCE SPEAKER
MANAGING PARTNER, R. P. MORA & CO.
Bookkeeping
The recording of economic
events. One part of accounting
ACCOUNTING INFORMATION SYSTEM
ACCOUNTING
INFORMATION Financial
Statements
/ Reports
SYSTEM
Accounting
Summary
Financia
l
Stateme
nts
Decision
Making
Financial
Statements
Organization
USERS
Unaudite Managem
Financial d ent
Statemen
ts Stakehold
Audited
ers
Why Accounting?
Accounting is
the tool for
providing
financial
information to
various
stakeholders
Management
Financial
Statement is a
tool to measure
the Efficiency
and
Effectiveness of
management.
Management
Efficien Effectiven
cy ess
Exampl Expense
e
Revenue
s
If actual If actual
exceeds budget exceeds budget
FAVORABLE UNFAVORABLE
Business
Business Stakeholders
Stakeholders
A business stakeholder is a person or entity
having an interest in the economic
performance of the business.
The
TheProcess
Processof
ofProviding
ProvidingInformation
Information
STAKEHOLDERS
Identify Internal: External:
1 stake-
holders.
Owners,
managers,
Customers,
creditors,
employees government
Assess stakeholders
2 informational needs.
The
The Process
Process of
of Providing
Providing
Information
Information
Design the
Record accounting
economic Accounting
4 data about
business
Information
System
3 information
system to meet
stakeholders
activities needs.
and events.
The
The Process
Process of
of
Providing
Providing Information
Information
STAKEHOLDERS
Internal: External:
Owners, Customers,
managers, creditors,
employees government
Prepare
accounting
5 reports for
stakeholders.
Accounting
Information
System
Types of Businesses
Manufacturing
Manufacturing Business
Business
Product
Product
General
General Motors
Motors Cars,
Cars, trucks,
trucks, vans
vans
Intel
Intel Computer
Computer chips
chips
Boeing
Boeing Jet
Jet aircraft
aircraft
Nike
Nike Athletic
Athletic shoes
shoes and
and apparel
apparel
Coca-Cola
Coca-Cola Beverages
Beverages
Sony
Sony Stereos
Stereos and
and television
television
Types of Businesses
Merchandising
Merchandising Business
Business
Product
Product
Wal-Mart
Wal-Mart General
General merchandise
merchandise
Toys R
Toys R Us
Us Toys
Toys
Circuit
Circuit City
City Consumer
Consumer electronics
electronics
Lands
Lands End
End Apparel
Apparel
Amazon.com
Amazon.com Internet
Internet books,
books, music,
music, video
video
retailer
retailer
Types of Businesses
Service
Service Business
Business
Product
Product
Disney
Disney Entertainment
Entertainment
Delta
Delta Air
Air Lines
Lines Transportation
Transportation
Marriott
Marriott Hotels
Hotels Hospitality
Hospitality and
and lodging
lodging
Merrill
Merrill Lynch
Lynch Financial
Financial advice
advice
Sprint
Sprint Telecommunication
Telecommunication
There
There are
are three
three types
types of
of
business
business organizations
organizations
Proprietorship
Partnership
Corporation
A
Aproprietorship
proprietorship Advantages
isis owned
owned by
by one
one Ease in organizing
individual.
individual. Low cost of
organizing
Disadvantage
Joes Limited source of
financial resources
Unlimited liability
Advantages
A
Apartnership
partnership isis More financial
owned
owned by
by two
two or
or resources than a
more
more individuals.
individuals. proprietorship.
Additional
management skills.
Joe and Martys Disadvantage
Unlimited liability.
AAcorporation
corporation isis
organized
organized under
under state
state Advantage
or
or federal
federal statutes
statutes as
as aa The ability to obtain
separate
separate legal
legal entity.
entity. large amounts of
resources by issuing
stocks.
J & M, Inc. Disadvantage
Double taxation.
Business
Business Strategies
Strategies
A business strategy is an integrated set of plans and
actions designed to enable the business to gain an
advantage over its competitors, and in doing so, to
maximize its profits.
Business
Business Strategies
Strategies
Under a low-cost strategy, a business designs and
produces products or services of acceptable quality
at a cost lower than that of its competitors.
Wal-Mart
Southwest Airlines
Business
Business Strategies
Strategies
The
The unit-of-measure
unit-of-measure
concept
concept requires
requires that
that
economic
economic data
data be
be
recorded
recorded in
in dollars.
dollars.
Accounting Methods
The
The resources
resources
owned
owned by
by aa
business
business
The
The Accounting
Accounting Equation
Equation
Assets = Liabilities + Owners Equity
The
The rights
rights of
of the
the
owners
owners
What are Assets?
Assets are resources owned by a business.
They are used in carrying out such activities
as production, consumption and exchange.
(1) it must be owned by the
organization, and
(2) it must have money value.
Ownership and Money Value
OWNERSHIP is the exclusive right to
possess, use, enjoy, and dispose of
property.
MONEY VALUE exists if a buyer is
willing to pay money to a seller for
the
Cash
property.
Automob Rented Checks
Which of these
ile areApartme
assets?
nt
Computer Library Clothing Postage
Book On Stamps
Loan
Excersice
Prepare a list of ten assets that you
personally own.
Prepare a list of ten assets that a business
organization would own
Types of Assets
Short Life (Current) vs. Long Life (Non-Current)
CURRENT ASSETS
Cash and other assists that can be turn into cash. (< 1yr)
INVESTMENTS
Assets not used on the operation of organization but have
value. (> 1yr)
PROPERTY, PLANT, AND EQUIPMENT
Long-term or long-life assets
INTANGIBLE ASSETS
No physical substance, but have value (long term)
Examples of Assets
Cash
Receivables (Money people owe you)
Office Building
Furniture & Fixtures
Office Equipment
Office Supplies
Inventory
Vehicle
Bond Purchases
Copyright
Franchise
Test your knowledge
1. What is the difference between office
supplies and office equipment?
2. A toner cartridge is considered an office
supply, even though it is an integral part
of the computer printer. why?
3. Will we replace a typewriter as frequently
as a typewriter ribbon? Why or why not?
4. What type of asset is a supply? (Short-life
or long-life?)
5. What type of asset is a computer? (Short-
life or long-life?)
Recognizing Ownership
CAPITAL (EQUITY) is the
ownership of the assets of the
business by the proprietor.
Seed money
Machinery Purchased
Supplies
Cash
Furniture
Example
Revenues Expenses
BALANCE SHEET
LIABILITIES:
ASSETS:
Current Liabilities:
Current Assets: Vendors Payables
Cash Loans and other Borrowings (<1
Accounts Receivable year)
Inventory Deferred Income
Prepaid Expenses Total Current Liabilities
Total Current Assets
Non-Current Liabilities:
Non-Current Assets: Loans and other Borrowings (>1
year)
Land
Building
TOTAL LIABILITIES
Leasehold
Improvements
Furniture & Equipment OWNERS EQUITY:
Total Fixed Assets Capital Stock Issued
Accumulated Earnings (Deficit)
TOTAL ASSETS TOTAL EQUITY
ASSETS = LIABILITIES + OWNERS EQUITY
NORMAL The sum of the increases in an
account is usually equal to or greater
BALANCE than the sum of the decreases in the
account. Thus, the normal balance of
an account is either a debit or a credit
depending on whether increases in
the account are recorded as debits or
credits.
DEBIT An accounting entry that
results in either an increase in
assets or a decrease in equity
or liabilities on a company's
balance sheet or in your bank
account.
CREDIT An accounting entry that either
decreases assets or increases
liabilities and equity on the
company's balance sheet.
JOURNAL
A Journal is a book in which transaction are
recorded in the order in which they occur
i.e. in chronological order.
A Journal is also called book of prime entry
because all transactions are entered first
in this book
The process of recording a transaction in
Journal is called a Journalizing
An entry made in Journal is called Journal
Entry
Journal
Book of original entry
Parts
Heading
Date column
Particulars
Folio or Reference
Debit
Credit
48
LEDGER
Ledger is the principle book which contains all
accounts to which transactions recorded in the
book of original entry are transferred
The ledger is also called Book of Final Entry as
it is the ultimate destination of all transactions.
UTILITY OF LEDGER
It provides complete information of all accounts
in one book
It enables to ascertain what are the main items
of revenue
It enables to ascertain what are the main items
of expenses
It enables to ascertain which are the assets and
of what values
FORMAT OF A LEDGER
(Name of the Account) Ledger
Folio No..
Date DEBIT
Particulars Folio Amount Date ParticularsCREDIT
Folio Amount
(Peso) (Peso)
POSTING
Posting is the process of transferring the
transactions recorded in the books of original
entry in the concerned accounts opened in
Ledger.
It may be done daily, weekly, fortnightly or
monthly according to the convenience and
requirements of the business.
Posting helps us to know the net effect of various
BALANCING
Balance of an account is the
difference between the total of
debit and total of credit appearing
in an account.
Balance signifies the net effect of
all transactions posted to that
account during a given period.
Normally, Personal and Real
accounts are balanced; Nominal
Accounts are closed by transferring
What is a business transaction?
Owners
Assets = Liabilities + Equity
Accounts Chris Clark,
Cash + Supplies + Land Payable Capital
Bal. 40,000 10,350 200,000 = 10,350 240,000
f. 6,350 6,350
Bal. 33,650 10,350 200,000 4,000 240,000
g. At
g. At the
the end
end ofof the
the month,
month, the
the cost
cost of
of supplies
supplies
on hand
on hand isis P5,500,
P5,500, soso P4,850
P4,850 ofof supplies
supplies
were used.
were used.
Owners
Assets = Liabilities + Equity
Accounts Clark Kent,
Cash + Supplies + Land Payable Capital
Bal. 33,650 10,350 200,000 = 4,000 240,000
g. 4,850 4,850 Supplies
expense
Bal. 33,650 5,500 200,000 4,000 235,150
h. At
h. At the
the end
end of
of the
the month,
month, Clark
Clark withdrew
withdrew P20,000
P20,000
in cash
in cash from
from the
the business
business for
for personal
personal use.
use.
Owners
Assets = Liabilities + Equity
Accounts Clark Kent,
Cash + Supplies + Land Payable Capital
Bal. 33,650 5,500 200,000 = 4,000 235,150
h. 20,000 20,000 With-
drawal
Bal. 13,650 5,500 200,000 4,000 215,150
Effects
Effects of
of Transactions
Transactions on
on Owners
Owners Equity
Equity
Owners Equity
Decreased Increased
by by
Owners Owners
withdrawals investments
Expenses Revenues
Net
income
Accounting
Accounting reports,
reports, called
called
financial
financial statements,
statements,
provide
provide summarized
summarized
information
information to to the
the owner.
owner.
Financial
Financial Statements
Statements
Income statementA summary of the
revenue and expenses for a specific
period of time.
Statement of owners equityA
summary of the changes in the owners
equity that have occurred during a
specific period of time.
Balance sheetA list of the assets,
liabilities, and owners equity as of a
specific date.
Statement of cash flowsA
Superman Enterprises
Income Statement
For the Month Ended June 30, 2015
Fees earned P7 500 00
Operating expenses:
Wages expense P2 250 00
Rent expense 8 000 00
Supplies expense 4 850 00
Utilities expense 4 500 00
Miscellaneous expense 2 750 00
Total operating expenses 22 350 00
To
Tothe
the statement
statement
Net income (loss) (P14 850 00)
of
of owners
owners equity
equity
Superman Enterprises
Statement of Owners Equity
For the Month Ended June 30, 2015
Chris Clark, capital, June 1, 2015 P 0
Investment on June 1 250 000 00
From
From the
the income
income
Net loss for June ( 14 850 00)
statement
statement 235 150 00
Less withdrawals 20 000 00
Increase in owners equity 215 150 00
Chris Clark, capital, June 30, 2015 To
Tothe
the P215 150 00
balance
balance sheet
sheet
Superman Enterprises
Balance Sheet
From
From the
the
June 30, 2015 statement
statement of
of
Assets Liabilities owners
owners equity
equity
Cash P 13 650 00 Accounts Payable P 4 000 00
Supplies 5 500 00 Owners Equity
Land 200 000 00 Clark Kent, cap. 215 150 00
Total liabilities and
Total assets P219 150 00 owners equity P219 150 00
AVE.
YEAR NET INCOME ROI
INVESTMENT
OWNER BUSINESS
Vendors/Cash Out: MANAGER/ACCOUNTAN
T
Approve Vendors
Invoices Vendors/Cash Out:
Sign Checks Record Vendors Bills to
Pay (accrual basis)
Prepare Checks
Mail Signed Checks
Bank Statements:
Bank Statements:
Prepare Statements
Review Bank (operating, payroll, etc.)
Statements
Reconciliation Disburse Petty Cash
Review Petty Cash Prepare Petty Cash
Reconciliation
INTERNAL CONTROLS SEGREGATION OF DUTIES
OWNER BUSINESS
Employees: MANAGER/ACCOUNT
Sign Employee ANT
Contracts Employees:
Approve Employee Prepare Payroll Sheets
Time Sheets and Payroll Journals
Distribute Payroll Record Payroll
Checks Payments
Investment Investment
Securities: Securities:
Approve Securities Post Securities
Transactions Transactions
Review Securities Prepare Securities
INTERNAL CONTROLS
BUSINESS
SEGREGATIONMANAGER/ACCOUNTANT
OF DUTIES
OWNER Insurance:
Insurance: Prepare Insurance
Reports
Review Insurance Financial
Reports Reports/Budgets:
Financial Post Entries to General
Reports/Budgets: Ledger
Give Inputs and Prepare Annual Budget
Review Annual With Owner Inputs
Budget Prepare Financial
Review Monthly Reports:
Financial Reports (P&L, balance sheets,
cash flow)
Give Inputs and
Prepare Revised Annual
Review P&L
BUSINESS RECORDS LIST OF MAJOR
FILES
BUSINESS RECORD FILE
Vendors Invoices Alphabetically
Customers Files Alphabetically
Bank Statements, Cancelled Checks, Deposit By Month
Slips