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Lecture - ACC117

This document discusses key accounting concepts such as analyzing transactions, journalizing, classifying assets and liabilities, and preparing financial statements. It explains that accounting involves analyzing business events to determine if they are recordable, and if so, journalizing them. Transactions are then classified as affecting assets, liabilities, or equities. The document also covers cash and cash equivalents, the statement of cash flows, accounting changes and errors, and interim financial reporting.

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Andrea Pamela Ong
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731 views

Lecture - ACC117

This document discusses key accounting concepts such as analyzing transactions, journalizing, classifying assets and liabilities, and preparing financial statements. It explains that accounting involves analyzing business events to determine if they are recordable, and if so, journalizing them. Transactions are then classified as affecting assets, liabilities, or equities. The document also covers cash and cash equivalents, the statement of cash flows, accounting changes and errors, and interim financial reporting.

Uploaded by

Andrea Pamela Ong
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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January 23,2021

Accounting – analyzing, journalizing, classifying, summarizing and communicating set of reports.

What do we analyze?

- Business Transactions or EVENTS


- Whether they are recordable or not recordable
- RECORDABLE if IT AFFECTS ASSETS, LIABILITIES AND EQUITIES
- NOT RECORDABLE if IT DOES NOT AFFECTS ASSETS, LIABILITIES AND EQUITIES

When do we journalize?

- If the event is recordable.

How do we classify transactions?

- ASSETS – resources of the company.


 Current Assets – these are resources than can be used, collected or realized within
operating cycle or 12 months.

Cash and Cash equivalent

Cash

- Cash on hand
- Cash in bank
- Cash Fund
 Payroll Fund
 Petty Cash Fund
 Tax Fund
 Interest Fund
 Dividend Fund
 Travel Fund

 Non-Current Assets - these are resources than can be used, collected or realized beyond
operating cycle or 12 months.
 Sinking Fund
 PPE

- Liabilities – payables, debts or obligations of the company


- Current Liabilities - payable, debt or obligation of the company to be settled within operating cycle
or 12 months.
- Non-Current Liabilities - payable, debt or obligation of the company to be settled beyond operating
cycle or 12 months.
- Equities
FORMS OF ORGANIZATION
Sole – only one owner in the company – OWNER’S EQUITY
Partnership – two or more persons bind themselves to contribute P.I. Mo. (Property, Industry and
Money) with the intention to divide profits and losses among themselves. - CAPITAL
Corporation
Incorporator – founders of corporation
Corporator – stockholders of the corporation but not founders
“ALL Incorporators are Corporators BUT not all Corporators are Incorporators.”
SHE – Shareholders’ Equity

- Income –
- What is the difference between Income and Revenue?
- Expenses

Provision
- An item that is PROBABLE and MEASUREABLE.

Contingent asset or Liability


- PROBABLE or MEASUREABLE

February 06,2021

Statement of Cash Flows

- Records of Cash inflows and cash outflows.

3 Classifications of Activities

1. Operating Activities – deals with the changes in the current assets and liabilities.
Approaches in computing the Cash flows under Operating Activities:
 Direct Method - Comprehensive
 Indirect Method – Simple to apply
2. Investing Activities - deals with the changes in the non-current assets.
 Direct Method (increase in NCA – deduct/decrease in NCA – Add)
3. Financing Activities - deals with the changes in the non-current liabilities and issuance of
stocks/shares.
 Direct Method (increase in NCL – add/decrease in NCL – deduct)

Why do we convert from Accrual to Cash basis?


- To comply with the requirements such as formulation of Statement of Cash Flows

Who can use Cash basis of accounting?


- Small entities
- Single entry
Prior Period Errors

Misstatements
- Incorrect recordings

ERROR
- Misstatements but UNINTENTIONAL – human error – fatigue,

FRAUD
- Misstatements but INTENTIONAL

Effects of Misstatements

1. Counterbalancing
- if misstatement is not detected, it automatically corrects itself
2. Non-Counterbalancing
- - if misstatement is not detected, it does not automatically correct itself

February 27,2021

Accounting Changes

1. Change in Accounting Policy


- Changes in the policies, rules and pronouncements.
- PAS 39 was replaced by PFRS 9.
- FIFO to Weighted Average
- Costs are determinable

Ex. Cost of inventory on January 1,2021 is P2 per unit, at the end of the year, the said inventory
was not sold, in this case, will there be changes in its cost? - Change in Accounting methods
{FIFO (periodic and perpetual), Weighted Average (periodic or perpetual)}

2. Change in Accounting Estimate


- Costs are not determinable

Ex. On January 1,2019, X Company bought a machine for P120,000 with a useful life of 4 years.
On January 1,2021, upon estimation, the remaining useful life is 1 year.

Ex. On January 1,2021, total inventory amounted to P10,000, due to obsolescence, it went down
to P4,000 at the end of the year.

Loss due to obsolescence - 6,000


Merchandise Inventory – 6,000
Interim Financial Statement
- PAS 34
- If FS is formulated below 12 months

2 Views
Integral view
- Expenses are allocated through the interim period
Independent view
- Expenses are not allocated through the interim period

**Normally, financial reporting is ANNUALLY.


**According to SEC, a company can be compelled to file its FS every 6 months/semi-annually.

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