PINAGKAWITAN INTEGRATED NATIONAL HIGH SCHOOL

4th Quarter-Worktext, Week 6 (4 days)

PERFORM KEY BOOKKEEPING TASK

WHAT IS BOOKKEEPING?

Bookkeeping is the process of recording and organizing a business’s financial transactions, and a
bookkeeper is a person responsible for that process. Bookkeeping also helps you identify areas of profit
expansion—areas you might not have noticed without clear financial reports you can interpret easily. In
general, a bookkeeper records transaction, sends invoices, makes payments, manages accounts, and
prepares financial statements. Bookkeeping and accounting are similar, but bookkeeping lays the basis for
the accounting process—accounting focuses more on analyzing the data that bookkeeping merely collects.

1. Understand business accounts. In the world of bookkeeping, an account doesn’t refer to an individual
bank account. Instead, an account is a record of all financial transactions of a certain type, like sales or
payroll.

There are five basic types of accounts:

• Assets, which are the cash and resources owned by the business (e.g., accounts receivable, inventory)
• Liabilities, which are the obligations and debts owed by the business (e.g., accounts payable, loans)
• Revenues or income, which is the money earned by the business, usually through sales
• Expenses or expenditures, which is the cash that flows out from the business to pay for some item or
service (e.g., salaries, utilities)
• Equity, which is the value remaining after liabilities are subtracted from assets, representing the owner’s
held interest in the business (e.g., stock, retained earnings).

Bookkeeping begins with setting up each necessary account so you can record transactions in the
appropriate categories. You likely will not have the same exact accounts as the business next door, but
many accounts are common. The table below shows some frequently used small- business accounts and
their types.

ACCOUNT DESCRIPTION ACCOUNT TYPE

Accounts Payable Liability
Accounts Receivable Asset
Cash Asset
Dividends Equity
Equipment Asset
Insurance Expense Expense
Interest Expense Expense
Interest Income Revenue
Interest Payable Liability
Inventory Asset
Owner’s capital Equity
Real Estate Asset
Rent Expense Expense

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Rental Income Revenue

Retained Earnings Equity

Salaries and Wages Expense

Sales Income Revenue
Supplies Asset
Supplies Expense Expense
Unearned Service Revenue Liability
Utilities Expense Expense

2.Set up your business accounts. Knowing the accounts, you need to track for your business is one
thing; setting them up is another. Back in the day, charts of accounts were recorded in a physical book
called the general ledger (GL). But now, most businesses use computer software to record accounts. It
might be a virtual record rather than a hard copy, but the overall file is still called the general ledger.

There are three main methods for creating a GL:

 Spreadsheet software (e.g., Excel)

 Desktop accounting bookkeeping software (e.g., QuickBooks Desktop)
 Cloud-based bookkeeping software (e.g., QuickBooks Online, Wave)

3. Decide on a bookkeeping method. If you plan to do your own books in house instead of outsourcing to
an accounting or bookkeeping firm, you need to make one crucial choice before you start setting everything
up: Are you going to use single-entry bookkeeping or double-entry bookkeeping?

With single-entry bookkeeping, you enter each transaction only once. If a customer pays you a sum, you
enter that sum in your asset column only.

In the double-entry bookkeeping system, you’ll record two entries for each transaction: a debit (Dr) and a
credit (Cr). Debits and credits are recorded as journal entries in the ledger. The debit is usually recorded
first (on the left), followed by the credit (on the right).

4. Record every financial transaction. You’ve created your set of financial accounts and picked a
bookkeeping system—now it’s time to record what’s actually happening with your money. It’s crucial that
each debit and credit transaction is recorded correctly and in the right account. Otherwise, your account
balances won’t match, and you won’t be able to close your books.

Account Type Debit recorded for Credit recorded for

Asset Increase Decrease
Liability Decrease Increase
Revenue Decrease Increase
Expense Increase Decrease
Equity Decrease Increase

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To record a transaction, first determine the accounts that will be debited and credited. For example,
imagine that you’ve just purchased a new point-of-sale system for your retail business. You paid for the
system, which cost P250,000, in cash. The transaction will affect two accounts: cash (an asset account)
and equipment (also an asset). Because you’re decreasing your cash and increasing your equipment, you
would record a P250,000 debit (on the left) for the equipment account and a P250,000 credit for the cash
account (on the right). Note that journal entries don’t include specific details about the item, vendor, or
biller; you just track debits and credits by account.

5. Balance the books. The last step in basic bookkeeping is to balance and close the books. When you
tally up account debits and credits—often at the end of the quarter or year—the totals should match.

Assets = Liabilities + Equity

6. Prepare financial reports. Now that you’ve balanced your books, you need to take a closer look at what
those books mean. Summarizing the flow of money in each account creates a picture of your company’s
financial health. You can then use that picture to make decisions about your business’s future.

Here are some of the most common financial reports created in bookkeeping:

 Balance sheet. This document summarizes your business’s assets, liabilities, and equity at a single
period of time. Your total assets should equal the sum of all liabilities and equity accounts.
The balance sheet provides a look at the current health of your business and whether it has the ability
to
expand or needs to reserve cash.
 Profit and loss (P&L) statement. Also called an income statement, this report breaks down
business revenues, costs, and expenses over a period of time (e.g., quarter). The P&L helps you
compare your sales and expenses and make forecasts.
 Cash flow statement. The statement of cash flow is similar to the P&L, but it doesn’t include any
non-cash items such as depreciation. Cash flow statements help show where your business is
earning and spending money and its immediate viability and ability to pay its bills. Bookkeeping
software helps you prepare these financial reports, many in real-time. This can be a lifeline for small-
business owners who need to make quick financial decisions based on the immediate health of their
business.

7.Stick to a schedule. At least once a week, record all financial transactions, including incoming invoices,
bill payments, sales, and purchases. And make it a priority to close your books regularly too.

8.Store records securely. Proper record-keeping for small businesses makes the process easier and
keeps you compliant with the law. You never want to waste time chasing down last month’s missing
invoice, and you certainly don’t want to find yourself in trouble with legal requirements.

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PINHS 4 Quarter Entrepreneurship 11 PINHS
 PINAGKAWITAN INTEGRATED NATIONAL HIGH SCHOOL
Name: _________________________ Subject Teacher: _____________________
Grade and Section: _______________ Contact No.: _____________________
4TH Quarter Week 6 Learning Task Score:
Written Work

Direction: Match column A with column B. Write the term referred to on your paper.
A B
1. Proper record-keeping for small businesses makes the
process easier and keeps you compliant with the law. A. Understand business accounts

2.At least once a week, record all financial transactions,

including incoming invoices, bill payments, sales, and B. Set up your business accounts
purchases.
3. Summarizing the flow of money in each account creates
C. Decide on a bookkeeping method
a picture of your company’s financial health.

4. Tally up account debits and credits—often at the end of

the quarter or year—the totals should match. D. Record every financial transaction

5. An account is a record of all financial transactions of a

certain type, like sales or payroll. E. Balance the books

6. You need to track for your business is one thing; setting

F. Prepare financial reports
them up is another.
7. Instead of outsourcing to an accounting or bookkeeping
firm, you need to make one crucial choice before you start G. Stick to a schedule
setting everything up.
8. Proper record-keeping for small businesses makes the
H. Store records securely
process easier and keeps you compliant with the law.

Performance task

RECORD KEEPING. In which journal would you record each of the following transactions? Indicate your
selection with a tick ().

Cash Cash Purchases Sales

Scenario Payments Receipts Journal Journal
Journal Journal
1 You received a cheque for goods you sold    
2 You collected the car from your garage mechanic after it had been
serviced that day and you wrote a cheque to cover the invoice.    

3 You called in at the printer and collected the printing you ordered.
The printer gave you an invoice and put the amount on your    
account.
4 The bank paid you interest on the money you had in your bank
account.    
5 You supplied sports equipment to ten members of your sports club
on the condition that they will pay you in one month’s time.    
6 The monthly telephone bill arrives in the mail and must be entered
into the accounting system of the company.    
7 You paid rent with a cheque    
8 You received a cheque from a customer who paid his account    
9 You took delivery of stock which you purchased on account from
your supplier    
10 You received a telephone call from your customer ordering goods
to be sent on his account.    

PINHS 3rd Quarter Entrepreneurship 11 PINHS Page 4