FABM REVIEWER final

FABM REVIEWER STEPS IN FACTORS THAT
ACCOUNTING CYCLE AFFECT THE

OWNER'S EQUITY
Bookkeeper starts with: 1. Journalizing -
1. analysis of business Journalize the economic Equity increase = net
transactions and transactions and events. income, additional
economic events. 2. Posting - Post the investments
2. recording in the journal entries in
general journals number 1 to the general Equity decrease = net
3. classifying in the ledgers. loss, withdrawals
general ledgers 3. Trial Balance -
Prepare the trial balance Accounting Equation
Calendar year - the from the general A=L+C
accounting cycle covers ledgers. L=A-C
a period of usually one 4. Adjusting - Adjust the C=A-L
calendar year (January ledger balances. A=C
1 to December 31). 5. Financial statements -
Make an income
Revenue = the sales or
Fiscal year - A period of statement and balance
gross income
twelve months ending sheet from the adjusted
on a date other than trial balance.
6. Closing - Transfer Cost = cost of products
December 31 sold or service rendered
income and expense
accounts to summary
Statement of Financial accounts. Expenses = incurred to
Position (Balance 7. Post-Closing Trial run the entity
Sheet) - reports the Balance - Make a trial
permanent accounts as balance of all assets, 2 Types of Balance
of the end of an liabilities, and owner's Sheet
accounting period. equity.
1. Account form
Assets - what the Net Income - excess of (Horizontal)
business owns. the total credits over the
total debits of the LEFT
Liabilities - what the income statements - Assets
business owes. columns. - Total Assets
- revenue exceeds cost
Owner's equity - what and expenses. RIGHT
the business is worth. - Liabilities
Net Loss - excess of - Owner's equity
Permanent accounts total debits over the total - Total liabilities and
(real accounts) - the credits of the income owner's equity
accounts in the balance statement columns.
sheet - revenue is less than
cost and expenses.
2. Report Form individual owns the investments, Loan,
(Vertical) business. Withdrawal)
2. Partnership -
Assets association of two or Accrual Basis of
Total assets more persons to carry Accounting - not all cash
Liabilities on as co-owners of a receipts are revenues
Owner's equity business for profit. and not all cash
Total liabilities and 3. Corporation - payments are expenses.
Owner's equity separate body
consisting of at least five TWO METHODS OF
individuals and treated ACCOUNTING
by law as a unit.
Post-Closing Trial
Balance - adjusted trial 1. Cash basis of
balance is prepared Statement of Cash accounting - recognizes
from the general ledgers Flows - provides revenue when cash is
at the end of the information about cash received and recognizes
accounting period receipts and cash expenses only when
payments of an entity cash is paid.
during a period. It
Income Statement
classifies the information
(Profit and Loss 2. Accrual basis of
into:
Statement) - presents accounting - recognizes
an entity's result of revenue whether or not
operations for a period 1. Operating activities - cash has been received,
of time. directly related to and recognizes
earning the net income expenses which it is
or suffering the net loss. incurred, whether or not
Single-Step Income
(Current Assets, Current cash has been paid.
Statement (Service
Liabilities, Revenue,
Business)
Expense, Accumulated
Bad Debts - portion of
Depreciation)
Multistep Income accounts receivable
Statement from customers that
2. Investing activities - may not be collected.
(Merchandising
acquisition or disposition
Business)
of plant, equipment, and
Depreciation accounting
investments. (Fixed
FORMS OF BUSINESS - process of allocating
assets, Long-term
ORGANIZATIONS the cost of plant and
Liabilities)
equipment to the years
Organization - having or periods except to
3. Financing activities - benefit from their use.
two or more individuals financing the entity
working together toward through cash receipts
the attainment of goals. Scrap value - estimated
from and cash payments
selling price of the asset
to investors or creditors
1. Sole proprietorship - at the end of its useful
other than to, or from
simplest form. only one life.
suppliers. (Additional
Depreciable cost - cost
less scrap value.
Straight line method -

depreciation determines
the cost of the asset
then scrap value is
subtracted.
Asset Method - asset

account is debited upon
payment
Expense Method -
expense
account is debited;
asset account is
credited
Liability Method - cash is

debited; liability is
credited
Revenue Method -
income account is
credited

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FABM REVIEWER STEPS IN FACTORS THAT

ACCOUNTING CYCLE AFFECT THE

Straight line method -

Asset Method - asset

Liability Method - cash is

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