Program : BACHELOR OF SCIENCE IN

ACCOUNTING INFORMATION SYSTEM

Course Code : INAC 213

Course Title : Intermediate Accounting 1

Course Credit : 3 units Contact Hours : 54

BULACAN POLYTECHNIC COLLEGE

Bulihan, City of Malolos

Bachelor of Science in Date Developed:

Bulacan Polytechnic June 2020
Accounting Information Page 1 of 11
College Date Revised:
System
July 2020
INAC 213 Document No. Developed by:
Intermediate Accounting 1 Jean Irish Delos Santos Revision # 01
20-InAc 213
 Bachelor of Science in Date Developed:
Bulacan Polytechnic June 2020
Accounting Information Page 2 of 11
College Date Revised:
System
July 2020
INAC 213 Document No. Developed by:
Intermediate Accounting 1 Jean Irish Delos Santos Revision # 01
20-InAc 213
 MODULE CONTENT

COURSE TITLE: Intermediate Accounting 1

MODULE TITLE Review of the Accounting Process

NOMINAL DURATION 3 HRS (NO. of Hours per topic)

SPECIFIC LEARNING OBJECTIVES:

At the end of this module, you MUST be able to demonstrate familiarity of the
Accounting Process

TOPIC: (SUB TOPICS)

1. The nature of accounts
2. Transaction Analysis
3. The Accounting Cycle
4. Transaction Occurrence; Journal Entries, Posting
5. The Trial Balance
6. Adjusting Journal Entries And Posting
7. The Worksheet (Optional)
8. The Financial Statements
9. Closing Entries
10. Post-Closing Trial Balance; Reversing Entries

ASSESSMENT METHOD/S:
Quizzes

REFERENCE/S:
Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield-Intermediate Accounting
(Wiley), 2004 Spiceland, Sepe, & Nelson. 8th ed. 2016 by McGraw-,
Intermediate Accounting, 8th ed. 2016 by McGraw-Hill Irwin. ISBN 978-0-07-
8025839. Baruch England, Intermediate Accounting 1, Second Edition,
McGraw-Hill, 2007, ISBN: 13:978-0-07-146973-9

Bachelor of Science in Date Developed:

Bulacan Polytechnic June 2020
Accounting Information Page 3 of 11
College Date Revised:
System
July 2020
INAC 213 Document No. Developed by:
Intermediate Accounting 1 Jean Irish Delos Santos Revision # 01
20-InAc 213
 1. THE NATURE OF ACCOUNTS

An 'account' is a specific location for recording transactions of a like-kind.

Assets are the resources owned and controlled by the firm.

Liabilities are obligations of the firm arising from past events which are to be
settled in the future.
Equity or Owner’s Equity is the owner’s claims in the business. It is the residual
interest in the assets of the enterprise after deducting all its liabilities.
Income is the increase in economic benefits during the accounting period in the
form of inflows of cash or other assets or decreases of liabilities that result in an
increase in equity. Income includes revenue and gains.
Expenses are decreases in economic benefits during the accounting period in the
form of outflows of assets or incidences of liabilities that result in decreases in
equity.
ASSETS
Current Assets are assets that can be realized (collected, sold, used up) one year
after the year-end date. Examples include Cash, Accounts Receivable,
Merchandise Inventory, Prepaid Expense, etc.
Cash is money on hand, or in banks, and other items considered as a
medium of exchange in business transactions.
Accounts Receivable are amounts due from customers arising from credit
sales or credit services.
Notes Receivable are amounts due from clients supported by promissory
notes.
Inventories are assets held for resale
Supplies are items purchased by an enterprise that is unused as of the
reporting date.
Prepaid Expenses are expenses paid in advance. They are assets at the
time of payment and become expenses through the passage of time.
Accrued Income is revenue earned but not yet collected
Short term investments are the investments made by the company that
are intended to be sold immediately
Non-current Assets are assets that cannot be realized (collected, sold, used up)
one year after the year-end date. Examples include Property, Plant, and
Equipment (equipment, furniture, building, land), long term investments, etc.
Property, Plant, and Equipment are long-lived assets that have been
acquired for use in operations.
Long term Investments are the investments made by the company for
long-term purposes
Intangible Assets are assets without a physical substance. Examples
include franchise and copyright.

Bachelor of Science in Date Developed:

Bulacan Polytechnic June 2020
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College Date Revised:
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July 2020
INAC 213 Document No. Developed by:
Intermediate Accounting 1 Jean Irish Delos Santos Revision # 01
20-InAc 213
LIABILITIES
Current Liabilities Liabilities that fall due (paid, recognized as revenue) within
one year after the year-end date. Examples include Accounts Payable, Utilities
Payable, and Unearned Income.
Accounts Payable are amounts due, or payable to, suppliers for goods
purchased on account or for services received on account.
Notes Payable are amounts due to third parties supported by promissory
notes. Accrued Expenses are expenses that are incurred but not yet paid
(examples: salaries payable, taxes payable)l
Unearned Income is cash collected in advance; the liability is the services
to be performed or goods to be delivered in the future.
Non-current Liabilities are liabilities that do not fall due (paid, recognized as
revenue) within one year after the year-end date. Examples include Notes
Payable, Loans Payable, Mortgage Payable, etc.
Loans Payable
Mortgage Payable

OWNER’S EQUITY
is the residual interest of the owner from the business. It can be derived by
deducting liabilities from assets.
Capital is the value of cash and other assets invested in the business by the
owner of the business.
Drawing is an account debited for assets withdrawn by the owner for personal
use from the business.
INCOME Service revenue for service entities, Sales for merchandising and
manufacturing companies
EXPENSES Salaries Expense, Interest Expense, Utility Expense

II.TRANSACTION ANALYSIS
 The Accounting Equation is A=L+E
 For every transaction, the accounting equation should always be
balanced.
 That assets are resources owned by the business
 That liabilities are obligations by the business
 That Equity is the residual interest of the owner of the business.
 There are four elements that affect equity (Investment, Withdrawal,
Revenue, and Expenses)
 Normal Balance of an account – is the increase side of the account – it
is the usual balance of an account.


Bachelor of Science in Date Developed:

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College Date Revised:
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July 2020
INAC 213 Document No. Developed by:
Intermediate Accounting 1 Jean Irish Delos Santos Revision # 01
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

HOW TO ANALYZE BUSINESS TRANSACTIONS

1. Ascertain it as a business transaction. A transaction ascertained as a
business transaction needs further analysis, otherwise, drop extra time for
it.
2. Find the accounting element affected. See whether the effect is to asset
account or to the equity account. If it is to equity account further identify
whether it is to liability or to the capital account. If it is a capital account
is it withdrawal, revenue, or expense?
3. Determine the arithmetical effect on the accounts. Is it increase or
decrease?
4. Be sure to maintain the equality of the accounting equation
5. Apply the rules of debit and credit.
6. Comprehension
• To Remember:
– Accounts to be debited when INCREASED
– Drawing, Expenses, Assets, Losses
– Accounts to be credited when INCREASED
– Gains, Income, Revenue, Liabilities, SHE/Capital

Bachelor of Science in Date Developed:

Bulacan Polytechnic June 2020
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College Date Revised:
System
July 2020
INAC 213 Document No. Developed by:
Intermediate Accounting 1 Jean Irish Delos Santos Revision # 01
20-InAc 213
III.THE ACCOUNTING CYCLE
1. Analyzing and Classify Data about an Economic Event
Identifying the transactions from the events is the first step in the
accounting process.
Events are analyzed to find the impact on the financial position or to be
more specific the impacts on the accounting equation.
Documents such as a receipt, an invoice, a depreciation schedule, and a
bank statement, etc. Provide evidence that an economic event has actually
occurred.

2. Journalizing the transaction.

Transactions having an impact on the financial position of a business are
recorded in the general journal.
In the general journal, the transactions are recorded as a debit and a credit
in monetary terms with the date and short description of the cause of the
particular economic event.

3. Posting from the Journals to General Ledger.

Transactions recorded in the general journal are then posted to the general
ledger accounts.
The accounts classify accounting data into certain categories and
they are recorded in general journal entries according to that
classification.
Depending on the frequency of the transactions posting to ledger
accounts may be less frequent

4. Preparing the Unadjusted Trial Balance.

To determine the equality of debits and credits as recorded in the general
ledger, an unadjusted is prepared. It is a way to investigate and find the
fault or prove the correctness of the previous steps before proceeding to
the next step.
Unadjusted trial balance makes the next steps of the accounting process
easy and provides the balances of all the accounts that may require an
adjustment in the next step.
The unadjusted balance sheet is for internal use only.

5. Recording Adjusting Entries.

Adjusting Entries ensure that the revenue recognition and matching
principles are followed.
To find the revenues and expenses of an accounting period adjustments
are required.
Adjusting entries are required to be is because a transaction may have
influence revenues or expenses beyond the current accounting period
and to journalize to the events that are not yet recorded.

6. Preparing the Adjusted Trial Balance.

An adjusted trial balance contains all the account titles and balances
of the general ledger which is created after the adjusting entries for
an accounting period have been posted to the accounts.
It is an internal document and is not a financial statement.
It helps to create the income statement and balance sheet and provide
enough information for preparing the cash flow statement.

Bachelor of Science in Date Developed:

Bulacan Polytechnic June 2020
Accounting Information Page 7 of 11
College Date Revised:
System
July 2020
INAC 213 Document No. Developed by:
Intermediate Accounting 1 Jean Irish Delos Santos Revision # 01
20-InAc 213
7. Preparing Financial Statements.
Financial statements are prepared from the balances from the adjusted
trial balance. The financial statements are made at the very last of the
accounting period.
Cash flow statement, income statement, balance sheet, and statement
of retained earnings; are the financial statements that are prepared at
the end of the accounting period.
This is the output of the accounting process, which is used by the
interested parties both within and out of the organization.

8. Recording Closing Entries.

At the end of an accounting period, Closing entries are made to transfer
data in the temporary accounts to the permanent balance sheet or income
statement accounts.
Transferring the balances of the temporary accounts or nominal accounts
(e.g. revenue, expense, and drawing accounts) to the owner’s equity or
retained earnings account is used because these types of accounts only
affect one accounting period.

9. Preparing a Closing Trial Balance.

To make sure that debits equal credits, the final trial balance is prepared.
As the temporary ones have been closed only the permanent accounts
appear on the closing trial balance to make sure that debits equal credits.

10. Recording Reversing Entries.

Posit closing entries is an optional step of the accounting cycle. A reversing
journal entry is recorded on the first day of the new period for avoiding
double counting the amount when the transaction occurs in the next
period.
******

The primary objective of the accounting cycle in an organization is to

process financial information and to prepare financial statements at the
end of the accounting period.
An accounting cycle is a continuous and fixed process that needs to be
followed accordingly. Maintenance of the continuity accounting cycle is
important.

Bachelor of Science in Date Developed:

Bulacan Polytechnic June 2020
Accounting Information Page 8 of 11
College Date Revised:
System
July 2020
INAC 213 Document No. Developed by:
Intermediate Accounting 1 Jean Irish Delos Santos Revision # 01
20-InAc 213
 PRACTICE
I. Journalize the following business transactions for the month of
October 2016.

Sold Merchandise on Account to B Streisand P3,500 Terms 2/10, n/45,

October 1 FOB shipping point
Granted allowance to B, Streisand for merchandise delivered in wrong
2 size and size and color, P500
Purchased merchandise on credit from C. Dione Wholesale, P8,700
3 terms 2/15, n/60, FOB shipping point
4 Received a bill for freight on shipment received October 3 P700
5 Received 50% partial collection from B. Streisand
6 Sold merchandise for cash P3,500
7 Purchased merchandise P5, 000. Terms COD
Sold Merchandise on accounts to Moffats Enterprises, P4,500 terms
2/10, n/30
Purchased merchandise from Boyzone, Inc P5,500 including freight cost
8 of P500. Terms 1/15, n/60, FOB shipping point
Sold merchandise on account to M. Jackson P4,800 Terms 2/10, n/30
Purchased merchandised from S. Dione wholesale P7,700 Terms 2/15,
9 n/30, FOB shipping point
10 Received a bill for freight on the shipment received on October 9 P800
Received full collection from B.Streisand for sale on October 1
11 Returned P500 worth of merchandise with defects to Boyzone, Inc
The accounting department found an overcharge of P500 for October 9
12 purchases
17 Paid in full D. Dione wholesale for purchase on October 3
18 Received collection in full from M. Jackson
Received 50% collection from Moffats Enterprise as per arrangement, a
19 discount was allowed on this partial collection
23 Paid in full Boyzone, Inc
24 Paid Freight charges for October Purchases
paid C. Dione in full for the purchase of October 9
Purchase office supplies from spice general merchandise P2, 000. Terms:
27 25% down, balance 2/5. n/15
31 Collected in full Moffats Enterprise

Bachelor of Science in Date Developed:

Bulacan Polytechnic June 2020
Accounting Information Page 9 of 11
College Date Revised:
System
July 2020
INAC 213 Document No. Developed by:
Intermediate Accounting 1 Jean Irish Delos Santos Revision # 01
20-InAc 213
 II. Exports Trading has the following unadjusted account balances
from the general ledger as of December 31, 2016

Cash P
Accounts Receivable 48,000.00
Allowance for Doubtful accounts 3,000.00
Merchandise Inventory 97,500.00
Prepaid Insurance 12,000.00
Rental Deposits 48,000.00
Office Equipment 30,000.00
Accumulated Depreciation 3,000.00
Store Equipment 35,000.00
Accumulated Depreciation 3,500.00
Accounts Payable 8,000.00
Notes Payable 10,000.00
Wesley, Drawing 3,500.00
Wesley, Capital 350,000.00
Sales 190,000.00
Cost of Sales 70,000.00
Office Supplies Expense 1,500.00
Store Supplies Expense 2,500.00
Taxes and Licenses 8,000.00
Utility Expense (70%
administrative) 5,000.00
Rent Expense 44,000.00
Sales Salaries 30,000.00
Office Salaries 20,000.00
Interest Income 1,000.00
Interest Expense 500.00
Freight Out 1,500.00
Advertising Expense 3,000.00
Salesmen's Commissions 6,000.00
Miscellaneous Selling Expenses 1,500.00
Miscellaneous General Expenses 1,000.00

Data for Adjustment:

1. The insurance is a one-year policy to commence July of the current year.
2. Office equipment and store equipment are both depreciated for 5 years
using the straight line method of depreciation without salvage value.
3. The note due to creditors bears interest of 12%. No interest payment has
been paid since its date of issuance October 1
4. Accruals include: Utilities P1,000, Sales salaries P3,000, Office Salaries
P4,000
5. Allowance for doubtful accounts should be 10% of the accounts
receivable outstanding
6. The business uses a perpetual inventory system

Bachelor of Science in Date Developed:

Bulacan Polytechnic June 2020
Accounting Information Page 10 of 11
College Date Revised:
System
July 2020
INAC 213 Document No. Developed by:
Intermediate Accounting 1 Jean Irish Delos Santos Revision # 01
20-InAc 213
Required: Prepare the following
1. 10 – column worksheet
2. Balance Sheet
3. Income Statement

See Answers Here:

https://drive.google.com/file/d/10TKLW8B6ByuQryWd7PAnbTn0EFbjBk
HY/view?usp=sharing

Bachelor of Science in Date Developed:

Bulacan Polytechnic June 2020
Accounting Information Page 11 of 11
College Date Revised:
System
July 2020
INAC 213 Document No. Developed by:
Intermediate Accounting 1 Jean Irish Delos Santos Revision # 01
20-InAc 213