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ABM Accounting Notes

This document provides an overview of basic accounting concepts and definitions. It discusses the four phases of accounting: recording, classifying, summarizing, and interpreting. It also defines key accounting terms like assets, liabilities, owner's equity, and the basic accounting equation. The types of businesses and business ownership are outlined. Debits and credits are introduced as the basic tools for changing accounts.

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73 views5 pages

ABM Accounting Notes

This document provides an overview of basic accounting concepts and definitions. It discusses the four phases of accounting: recording, classifying, summarizing, and interpreting. It also defines key accounting terms like assets, liabilities, owner's equity, and the basic accounting equation. The types of businesses and business ownership are outlined. Debits and credits are introduced as the basic tools for changing accounts.

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ABM FREE Reviewers

by: ​Lily Godilos


TG: https://t.me/abmfreexx

Lesson I.

ACCOUNTING definitions
1. a language of business employed to communicate financial information based upon
analyzing, recording, classification, summarization, reporting, and interpretation of
financial data.
2. The process of IDENTIFYING, RECORDING, and COMMUNICATING economic
events of an organization to interested users. (​Weygandt, J. et. al​)
3. involves the recording, classifying, summarizing, and interpreting the
transactions/events of a financial character. (​American Institute of CPAs / AICPA​)
4. A system that measures business activities, processes given information into reports,
and communicates those findings to decision-makers.(​Philippine Institute of Certified
Public Accountants / PICPA​)

Father of Accounting
-Luca Pacioli

There are ​four​ basic phases of accounting: recording, classifying, summarizing and
interpreting

1) ​Recording
● - all financial transactions are recorded in a systematical and chronological manner in
the appropriate books or databases.
● ito ang part na nagjojournalizing ka pa lang.
2) ​Classifying
● involves sorting and grouping similar items under the designated name, category or
account.
● posting time!
3) ​Summarizing
● involves summarizing the data after each accounting period, such as a month,
quarter or year.
4) ​Interpreting
● concerned with analyzing financial data, and is a critical tool for decision-making.

A ​business entity​ is an organization that uses economic resources to provide goods or


services to customers in exchange for money or other goods and services.

Objective of most businesses


-to ​earn profit​ by servicing, merchandising or manufacturing.
Three types of profit business:

Servicing
● provides ​intangible​ products(no physical form)
● offers skills, expertise etc
● serbisyo​ ang ibinibenta, like salon. ang binabayan ay ang kakayahan nila maggupit
ng buhok.

Merchandising
● buy and sell businesses
● grocery stores

Manufacturing
● raw products to new products
● bakery. hindi lang harina ang ibebenta nila but ​gawang​ tinapay na.

Types of Ownership

Sole Proprietorship
● owned by an individual
● ikaw lang ang may-ari. ikaw ang makikinabang sa kita but ikaw lang din ang
magbabayad ng mga utang and other expenses.

Partnership
● owned by two or more indiv
● ikaw at isa o mga kaibigan mo ang owner ng business. Lahat kayo maghahati sa kita
and expenses.

Corporation
● recognized as a separate taxpaying entity.
● basta this has something to do with tax.

Cooperative
● a private business organization that is owned and controlled by the people who use
its products, supplies or services.
● parang mga ibang canteen sa school. coop ang tawag kasi teachers ang may hawak
'non.

Assets​-resources owned by the business entity.

>​Current Asset
● -assets that are expected to be converted to cash within a year.
● -Cash, accounts receivable, inventory
● Cash​ -most ​liquid​ of all assets, appear on the 1st line.
● Accounts Receivable​ - as a company recovers A/R, this account decreases and the
cash increases by the same amount.
● Inventory​ - amounts for raw materials, reports of sales of goods, cost of goods sold in
income statement.

>​Noncurrent assets
● -company's long-term investments for which the full value will not be realized within
the accounting year.
● -land, goodwill, patent, or PPE(property, plant and equipment)
● All PPE is ​depreciable.​

Liabilities​-owes or obligations ng business sa ibang business/company.

>​Current liabilities
● -often understood as all liabilities of the business that are to be settled in cash within
the fiscal year or the operating cycle of a given firm.
● -accounts payable, short term debt

>​Noncurrent liabilities
● -financial obligations that are not due within a year
● -long-term debt, bonds payable

Owner's Equity​-owner's rights to the assets of the business.


● owners equity=asset-liability

Balance Sheet​ - also called as "statement of financial position".

Two forms of a balance sheet

Account form
● presents assets on the left and liabilities and owner's equity on the right
● traditional form
Report Form
● presents assets above, liabilities and stockholders' equity below.

Basics: Debits and Credits

T-account​ is the most basic form of representing an account.

Debits and credits are the basic accounting tools for changing accounts.

Debit​ (left side)


● increases the asset and expense accounts, and decreases the liability, equity and
revenue accounts.

Credit​ (right side)


● increases the liability, equity and revenue accounts, and decreases the asset and
expense accounts.
Basic Accounting Equation

ASSETS = LIABILITIES + OWNER'S EQUITY

LIABILITIES = ASSETS - OWNER'S EQUITY

OWNER'S EQUITY = ASSETS - LIABILITIES

kailangan balance

Your talents and abilities will improve over time, but for that, ​you have to start  
-Martin Luther King 
 

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