For Students

Bukidnon Association of Catholic School (BUACS), Inc.

Diocese of Malaybalay

Loyola High School

Don Carlos, Bukidnon
Senior High School Department

FUNDAMENTALS OF ACCOUNTING, BUSINESS AND MANAGEMENT 2

First Quarter
School Year 2020-2021
Learning Activity Sheet No. 1
Week: 1
Day : 1 to 4

Topic : Review of the Accounting Process

A. Topic Background Information/Concepts Notes
Review of the Accounting Process:
 Accounting Process- is also known as the accounting cycle, refers to the procedures or series of steps
taken within a year or during the accounting period to generate financial reports for the company.
 The accounting process is composed of eleven steps group into two phases, namely the recording
phase and the summarizing phase.

 RECORDING PHASE:
- Gathering and analyzing data or documents.
- Journalizing the transactions
- Posting to the ledger
 SUMMARIZING PHASE:
- Preparation of unadjusted trial balance
- Preparation of work sheet for adjustment
- Preparation for adjusted trial balance
- Preparation of the financial statements
- Journalizing and posting the adjusting entries
- Journalizing and posting the closing entries
- Preparation of the post-closing trial balance
- Journalizing and posting the reversing entries
Note: Transactions are recorded initially in a journal called books of the original entry precisely because
transactions are originally recorded in them before being posted to the ledger. Recording transactions in the
journal must be done in chronological order, which means that the arrangement of records such as bills,
receipts, and invoices are in the order of their dates.The rules of debit and credit should also be followed in
recording transactions.
 The rules of debit and credit entail the following
- The normal balances of assets and expenses are debit and the normal balances
of liabilities and equity are credit. Normal balance is the debit or credit
balances that would be expected in the specific account in the general ledger.
- Debit the asset and expenses to increase them.
- Credit the liabilities, capital, and revenue to increase them
- Credit the assets and expenses to decrease them.
- Debit the liabilities, capital, and revenue to decrease them.
 The accounting equation stated that “ all assets are equal to liabilities plus capital”

A= L+C
Take the following information reflecting the relationships among the elements of the normal balance of an
account.

Ex.1 Payment of accounts payable

Debit Credit
Liabilities (Accounts Payable) xxx
Asset (Cash) xxx
Ex. 2 Receipt of Cash Sales

Asset (Cash) xxx

Revenue (Sales) xxx
Ex. 3 Payment of Salaries

Expenses (Salary Expense xxx

Asset (Cash) xxx

In tracking the capital account of the business, the following should be observed:

Ex. 1 Initial Capital

Asset (Cash) xxx

Capital xxx
Ex. 2 Additional Investment

Asset (Cash) xxx

Capital xxx
Ex. 3 Withdrawal from Capital

Capital xxx
Asset (Cash) xxx
Ex. 4 Net Income
Revenue and Expenses Summary xxx
Capital xxx
Ex. 5 Net loss
Capital xxx
Revenue and expenses Summary xxx

 Preparing Journal Entries to Record Basic Business Transactions

- An account that is debited for increases and is credited for decreases in on the
left side of the equation. An account that is credited for increases and is
debited for decreases in on the right side of the equation.
- Another approach in analyzing transactions is obtaining the value received
(debit) and value partied with (credit)
 Posting to the Ledger
- The process of transferring recorded transactions from the journal to the
ledger is called posting. The ledger shows in one place all the changes
(increase or decreases) for a particular account.
SUMMARIZING PHASE
 Preparation of Unadjusted Trail Balance
- When all the ending balances of the accounts in the general ledger are
summarized the result is what we called trial balance.
- In the preparation of a trial balance the following rules must be observed;
a. There should be a report heading the consists of the name of the business,
title of the report (ex. Trial Balance) and the date of the report;
b. Account title should be arrange in the following order- Asset, Liabilities,
Owner’s Equity, Income, and Expenses;
c. The peso sign is placed only in the first debit amount, first credit amount,
and in the total amount.
d. The total figure at the end of the balance must be double ruled (double
underlined)

 Preparation of Worksheet for Adjustments

- Worksheet preparation is gathering and putting together all data that need to
be adjusted to come up with the correct ending balance before financial
reports are communicated to the stakeholders.
- Adjustment of accounts is normally done before closing the book in order to
make all account balances accurate.
 -The accounts that are normally adjusted at the end of the accounting period
are the following:
a. Preferred expenses and unearned income (Deferrals)
b. Accrued expenses and accrued income ( Accruals)
c. Depreciation
d. Uncollectible accounts of bad debts
e. Inventory
- Effects of Omitting Adjustments – omitting adjusting entries that are not made
at the end of the certain accounting period entails misstating the figures for net
income or total assets, liabilities, and capital of the business. Sometimes the
misstatement extends to the next accounting period.
- Unadjusted financial reports result in understatement or overstatement of any
or all the components in the report.
 Preparation of Adjusted Trial Balance
- Am adjusted trial balance is prepared after adjusting entries are made and
posted to the ledger. This is the second trial balance prepared in the
accounting cycle. The adjusted trial balance is the source of correct amount
that will be used to construct the financial statements, specially the SCI, SCE
and the SFP.
 Preparation of Financial Statements
- The financial statements are described as the end products of the accounting
process. Once the worksheet is completed, financial statements are then
prepared. The amounts indicated in the adjusted trial balance are the basis to
construct the financial statements.
- The Philippine Accounting Standard (PAS) requires completer set of financial
statements that includes the statement of financial position (SFP), The
statement of comprehensive income (SCI), the statement of changes in equity
(SCE), and the statement of cash flows (SCF).
- The financial statements provide information about the financial position,
financial performance, and cash flows of an entity that is useful to wide range
of users in making economic decisions.
- Procedures in preparing financial statements:
Statement of Comprehensive Income

Statement of Changes in Equity

Statement of Financial Position

Statement of Cash Flows

Note: It is best to start with the SCI. Upon determining the result of the operation, the profit and loss is
forwared to the SCE or previously known as the capital statement, which is the next to be prepared. From the
start until the end of the accounting period, the movements of capitalization are shown in the SCE. After
preparing the SCI and the SCE, the next report to be made is the SFPor previously known as the balance sheet.
The capital balance to be reflected in the SFP should be the en ding balance found in the SCE. The last to
prepare in the SCF. The SCF is the financial statement that summarizes the inflow and outflows of cash and
cash equivalents of the company. It contains three sections- cash from operation, cash from investing, and cash
from financing.
 Journalizing and Posting the Adjusting Entries
- All adjustments made in the worksheet should be formally recorded to the
journals and posted to each appropriate account in the ledger.
 Journalizing and Posting the Closing Entries
- After all the adjustments have been journalized and posted, the balances of the
temporary accounts otherwise known as nominal accounts, are closed to “
Income Summary account”
- It is necessary to bring all the temporary accounts balances to zero so that in
the following accounting period, the new sets of nominal accounts will be
opened and used for recording transactions:
- STEPS IN CLOSING ENTRIES
a. Debit all the credit accounts ( Revenue or Income) found in the SCI
column of the worksheet to “Income Summary Account”
 b. Credit all the debit accounts ( Expenses) found in the SCI column of the
worksheet to “ Income Summary account”
c. Transfer the balance of the Income Summary account to Capital. A credit
balance in the Income Summary account represents profit or net income,
while a debit balance in this account represents loss or net loss.
d. Credit the Drawing account and debit the Capital Account.
 Preparation of the Post-closing Trial Balance
- Since all nominal accounts have been closed and reduced to zero balance, the
remaining accounts- Assets, Liabilites, Capital, otherwise known as real
accounts- will be forwarded to the next accounting period. A post-closing trial
balance will be prepared in order to check the equality of the debit and credit
side after journalizing and posting the closing entries.
 Journalizing and Posting the Reversing Entries
- The preparation of reversing entries is optional. It is done to be consistentin
recording income and expense accounts.

B. Learning Competency with Code:

 ABM_FABM12- Ia-b-1
 ABM_FABM12- Ia-b-4
 ABM_FABM12- Ic-d-5
C. Learning objectives:

The students will be able to:

1. Define the accounting process
2. Identify the series of steps in preparing financial statements;
3. Categorize the recording phase and the summarizing phase of the accounting proces
D. Detailed Instructions/Directions:

1. Read and understand the background information of the topic.

2. Activity#1: A. Indicate the normal balance of each account by writing Debit or Credit in the second
column.
B. Indicate whether the normal balance of the given account is a debit or a credit and
whether the increase or decrease in such account should be a debit or a credit. Check the
appropriate box.
C. Complete the table to show the correct accounting equation.
3. Activity #2: 1. Show the effects on the accounting equation of the following transactions. Write (+) for
increase, and (-) for decrease, and NC for No Change.
2. Indicate the effect on the accounting elements of each transaction described in the
source document. Write (+) for increase or (-) for decrease.
3. Indicate in the appropriate columns the value of the increase or decrease for each
accounting element resulting from the given transactions.
E. Core Values/Values Integration

 Unity and collaboration, Service-oriented and other centeredness

F. References

 Camerino, D.S.,Fundamentals of Accountancy, Business and Management 2: Review of the Accounting

Process.pp,3-35.Diwa Learning System Inc.,2020

Prepared by: Checked by:

MRS. LALA KRISTINA A. PACAMALAN,LPT MR. ROMEA A. BALASTA, LPT
Subject Teacher Vice Principal for Senior High School

Approved by:

MS. LOURDES BERNADETTE B. EBDALIN,LPT

Principal

Note: To be submitted to your subject teacher

 Bukidnon Association of Catholic School (BUACS), Inc.
Diocese of Malaybalay

LOYOLA HIGH SCHOOL

Don Carlos, Bukidnon
Senior High School Department

FUNDAMENTALS OF ACCOUNTANCY, BUSINESS AND MANAGEMENT 2

First Quarter
Week: 1
Day: 1 to 4
School Year 2020-2021

NAME: ___________________________________________ SCORE : __________________________

GRADE & SECTION: _______________________________ DATE : __________________________

Activity # 1
A. Indicate the normal balance of each account by writing Debit or Credit in the second column.

Account Name Debit or Credit

1. Deferred Income

2. Owner's Drawing

3. Unused Offi ce Supplies

4. Accumulated Depreciation- Equipment

5. Allowance for Doubtful Accounts

6. Land

7. Accounts Payable

8. Notes Payable

9. Cash

10. Accounts Recievable

B. Indicate whether the normal balance of the given account is a debit or a credit and whether the increase
or decrease in such account should be a debit or a credit. Check the appropriate box.
Normal Balance Effect in the Account

Particulars Debit Credit Debit Credit

1. Equipment was sold for P 350,000.00

2. Notes Recievable was collected in full

3. Loans Payable in bank was paid in full

4. Offi ce furnishings was acquired for

P 35, 000.00

5. Insurance in premium for one year was

paid in November
 C. Complete the table to show the correct accounting equation.

Luis Enterprise Kiara Business Jhelsea Products

Elements In Peso

Beginning Capital 100,000.00 400,000.00

Add(Deduct)

Net Income (Loss) (100,000.00) (100,000.00)

Additional Investment 80,000.00 120,000.00

Withdrawal 100,000.00 200,000.00 100,000.00

Ending Capital 350,000.00 400,000.00

Assets 500,000.00 700,000.00

Liabilities 500,000.00

Capital 350,000.00 180,000.00 400,000.00

500,000.00 680,000.00 700,000.00

Revenue 600,000.00

Less Expenses 700,000.00 600,000.00 500,000.00

Income (Loss) 100,000.00 8,000.00

Activity # 2

1. Show the effects on the accounting equation of the following transactions. Write (+) for increase, and (-)
for decrease, and NC for No Change.

Particular Asset Liability Capital

1. Owner invested cash
2. Purchased air conditioning unit in cash
3. Purchased computer on account
4. Borrowed money from banks
5. Owner withdrew cash for personal use
6. Paid the account in purchasing computer
7. Paid partially the loan from bank
8. Additional cash investment of owner
9. Acquired building on account
10. Paid in full the loan from bank
2. Indicate the effect on the accounting elements of each transaction described in the source document.
Write (+) for increase or (-) for decrease.
 Particular Asset Liability Owner's Capital Revenue Expenses
1. Cash disbursement made due to business
registration
2. Charge purchase invoice received for
supplies purchased
3. Statement of account from electric company
for the energy consumed payable next month
4. Promissory note issued to replace the existing
accounts payable
5. Various official reciepts and invoices incurred
for operating expenses

3. Indicate in the appropriate columns the value of the increase or decrease for each accounting element
resulting from the given transactions.

Asset Liability Owner's Capital

Particular Debit (Peso) Credit (Peso) Debit (Peso) Credit (Peso) Debit (Peso) Credit (Peso)
1. The owner invested P 50,000.00 cash to start
the business.
2. Purchased office supplies on account payable
the following week P 2,000.00
3. Collected P 10, 000.00 cash services rendered
to customer
4. Purchased office equipment worth P 75,000.00
(Terms: P 15,000.00 as downpayment promissory
note issued for the balance)
5. Rendered services totaling P 20,000.00 collectible
the following week
6. Paid account in number 2
7. Paid in advance the insurance for the year
amounting to P 3,500.00
8. Owner invested additional cash amounting to
P 20,000.00