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Bookkeeping

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Jane Mica Cavalida
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176 views23 pages

Bookkeeping

Uploaded by

Jane Mica Cavalida
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPTX, PDF, TXT or read online on Scribd
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BOOKKEEPING

LESSON 10
Activity 1: Identify what is being describe in the power
point by matching it to the word/s written on the board
1. An effective tool in making your dream business come true. It
reiterates different plans or strategies in Operation and
Administration, Marketing, Production and Logistics, Finance, etc.
2.It put into details on what business model you are going to employ
and how are you going to start the business. Among others, it’s also
reiterated the layers pf management, type of skills and employee
attitude your business need and the steps on how to get the
government license.
3.Contains valuable strategies as to what product you are going to produce or
sell, what industry you want to enter, group of target customers, or your target
market and the business model or strategies you are going to employ.

4.It revealed the production processes and the quality control system of the
goods produced for sale. While the logistics provides a channel of distribution of
the goods from production lines down to the wholesaler’s/retailers or directly to
consumers.

5.It talks about monetary requirements before you open the business. While
financial forecast informs the business owners of the expected outcome of the
business in monetary terms.

6.The process of recording business transactions in a systematic and


chronological manner.
What is Bookkeeping?
 Bookkeeping is the process of recording business
transactions in a systematic and chronological manner.
It is systematic because it follows procedures and
principles.
 On the otherhand, it is chronological because the
transactions are recorded in order of the date of
occurrence.
 Bookkeeping is the starting point of the accounting process.
 A sound bookkeeping system is the foundation for gathering
the information necessary to answer questions related to
profitability, solvency and liquidity of the business.
What is a Bookkeeper?
 Each business has a bookkeeper who is incharge to record, maintain and
update business records from all sorts of financial transactions using
account title that can be found in the charts of accounts already set up by
the Accountant.
 The bookkeeping function dictates the bookkeeper to keep track of all
financial transactions of the business. Only transactions that has monetary
value will be recorded.
 The bookkeeper uses the Book of Accounts to record the business
transactions which is to be consolidated later to help construct financial
statement such as the Trial Balance, Income Statement and Balance Sheet.
What is a Book of Account?
 Thebook of accounts are composed of the Journal and
Ledger.
 Itdepends on the type of business, some businesses used
special journals when they are engaged merchandising type
of business to records business transactions.
There are two types of books used in recording business
transactions. BOOK OF ORIGINAL ENTRY
1. journalsBOOK OF FINAL ENTRY
2. ledgers.
What is a General Journal?
 Thegeneral journal is the most basic journal which
provides columns for date, account titles and
explanations, folio or references and a separate
column for debit and credit entries.
What is a General Ledger?
 The general ledger is a grouping of all accounts directly
traceable to chart of accounts. These accounts will be reflected
in the financial statements as a summary of all financial
activities that have taken place as recorded in the general
journal and subsidiary ledgers.
What is a Subsidiary Ledger?
 Thesubsidiary ledger is a group of accounts directly
associated from the general ledger. This record is created to
maintain individual accounts for customers and vendors
whose cash is not being used as a medium of exchange
when purchasing or selling merchandise.
The Rules of Debit and Credit
 Inthe process of journalization, following the rules of
Debit and Credit are essential part to ensure accurate
recording and sound decision making.
 Debit is abbreviated as DR while CR for Credit.

 Itis a requirement that the bookkeeper is able to


master the normal balance of each account title
before performing the tasks of bookkeeper.
 When to Debit?
 When cash or non-cash items are received, the said cash
or non-cash items must be recorded in the debit column.
 This
means that the debit balance increased. It is called
Value Received.

 When to Credit?
 When cash or non-cash items are given, the said cash or
non-cash items must be recorded in the credit column.
 Thismeans that the credit balance is increased. It is
called Value Parted With.
The following steps will be undertaken in
determining account balances for every account
title such as cash, account receivable, etc.:
1. Add all the debit side to generate total debit
2. Add all the credit side to generate total credit.
3. Subtract total debit to the total credit.
4. Determine the balance of each account.
Depicted in figure 5 below is a matrix of normal debit
and credit balances of Five Major Accounts:
 The normal balance of an account refers to the side (debit or
credit) on which increases to the account are recorded. Each
type of account has a normal balance based on its
classification within the accounting equation:
 1. Assets: Normal balance is debit.
Assets increase with debits (e.g., cash, inventory),
so their normal balance is on the debit side.
 2. Liabilities: Normal balance is credit.
Liabilities increase with credits (e.g., accounts
payable), so their normal balance is on the credit side.
3. Equity: Normal balance is credit.
Owner's equity increases with credits (e.g.,
retained earnings, capital), making its normal balance
credit.
4. Revenues: Normal balance is credit.
Revenue accounts (e.g., sales, service revenue)
increase with credits, so they have a normal credit
balance.
5. Expenses: Normal balance is debit.
Expenses (e.g., rent, utilities) increase with
debits, making their normal balance debit.
Why Normal Balances Matter
The normal balance helps bookkeepers
know how to record increases and
decreases in accounts.
For example, an increase in an asset
account is recorded as a debit because
assets have a debit normal balance, while a
decrease in an asset would be recorded as
a credit.
Problem 1: Identifying Normal
Balances
 For each of the following accounts, determine whether the normal
balance is a debit or a credit:
1. Service Revenue
Answer: Credit
2. Cash
Answer: Debit
3. Accounts Payable
Answer: Credit
4. Utilities Expense
Answer: debit
5. Equipment
Answer: Debit
 6. Retained Earnings
Answer: Credit
 7. Salaries Expense
Answer: Debit
 8. Accounts Receivable
Answer: Debit
 9. Common Stock
Answer: Credit
 10. Prepaid Rent
Answer: Debit
Problem 2: Determining Transaction
Impacts
Indicate whether each of the following transactions would
result in a debit or credit to the given account. Explain briefly.
1. Cash: The business receives cash from a client for
services rendered.
2. Accounts Payable: The business pays off a portion of its
debt to a supplier.
3. Supplies Expense: The business purchases office supplies
on account.
4. Service Revenue: The business earns revenue from
services provided.
5. Equipment: The business sells a piece of equipment for
cash.
Problem 3: Determining Account Effects
Indicate whether each of the following transactions would
increase or decrease the normal balance of the account:
1. An expense is recorded for office supplies purchased.
2. A customer pays off their balance on Accounts
Receivable.
3. A new loan is taken out, increasing Notes Payable.
4. Revenue is earned and recorded.
5. Dividends are declared and paid in cash.

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