Accounts &

Transaction Analysis
 Learning objectives

1. Identify the various account titles used in account for

business transactions.
2. Identify the normal balance of an account
3. Interpret and analyze business transactions
4. Explain rules of debit and credit
5. Prepare accounting journal entries in proper format

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 1.
ACCOUNTS
NATURE AND DEFINITION

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 Real vs Nominal Accounts
REAL Accounts NOMINAL Accounts
-also can be stated asthe -also can be stated as the
balance sheet accounts, income statement accounts
which comprises the basic or also called temporary
accounting equation, i.e. accounts which is presented
assets, libilities and equity. under the SCI of the business
then closed to the equity
account. Which comprises of
revenu and expenses
accounts
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 ASSETS
✘ asset is a resource with economic value that an individual,
corporation, or country owns or controls with the
expectation that it will provide a future benefit.
✘ An asset can be thought of as something that, in the
future, can generate cash flow, reduce expenses, or
improve sales, regardless of whether it's manufacturing
equipment or a patent.
✘ Assets are reported on a company's balance sheet and are
bought or created to increase a firm's value or benefit the
firm's operations
✘ Can be classified as CURRENT 5 and NON-CURRENT ASSETS
 Current vs Non-Current Assets
CURRENT ASSET NON-CURRENT ASSETS
Is an asset that is expected to be Is an asset that is notexpected to be
realized within 12 mos. After the realized within 12 mos. After the
reporting period. reporting period. Meaning more than
LIST: 12 mos. Or more
1. CASH AND CASH EQUIVALENTS LIST:
2. TRADE AND OTHER RECEIVABLES 1. PROPERTY PLANT AND
EQUIPMENT
3. INVENTORIES
2. INTANGIBLE ASSETS
4. PREPAYMENTS
3. LONG TERM INVESTMENTS
5. SHORT TERM INVESTMENTS

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 LIABILITIES
✘ A liability is something a person or company owes, usually
a sum of money.
✘ Liabilities are settled over time through the transfer of
economic benefits including money, goods, or services.
Recorded on the right side of the balance sheet, liabilities
include loans, accounts payable, mortgages, deferred
revenues, bonds, warranties, and accrued expenses
✘ Can be classified as CURRENT and NON-CURRENT
LIABILITIES

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 Current vs Non-Current Liabilities
CURRENT LIABILITIES NON-CURRENT LIABILITIES
Is an obligation of the enitty that is Is an obligation of the enitty that is
expected to be settled within 12 expected to be settled more than 12
mos. After the reporting period. mos. After the reporting period.
LIST: LIST:
1. TRADE AND OTHER PAYABLES 1. BONDS AND MORTGAGE PAYABLE
2. ACCRUED EXPENSES 2. DEFERRED TAXES
3. UNEARNED INCOME 3. EMPLOYEE BENEFITS
4. CURRENT PORTION OF LONG 4. LEASES FOR MORE THAN 12 MOS.
TERM DEBT 5. NON-CURRENT PORTION OF LONG
TERM DEBT
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 EQUITY
✘ Equity, typically referred to as shareholders' equity (or
owner’s equity for privately held companies), represents
the amount of money that would be returned to a
company’s shareholders if all of the assets were liquidated
and all of the company's debt was paid off.
✘ Equity can be found on a company's balance sheet and is
one of the most common pieces of data employed by
analysts to assess the financial health of a company
✘ INCLUDES CAPITAL ACCOUNT, WITHDRAWAL, ADDT’L
INVESTMENT AND INCOME SUMMARY ACCOUNT.
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 REVENUE/INCOME ACCOUNTS
✘ Revenues are "increases in economic benefits during the
accounting period in the form of increases in assets or
decreases in liabilities that result in increases in equity,
other than those relating to contributions from equity
participants".
✘ Includes SERVICE REVENUE, INTEREST INCOME, SALES,
OTHER INCOME ACCOUNTS.

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 EXPENSE ACCOUNTS
✘ Expenses are “outflow in economic benefits during the
accounting period in the form of decrease in assets or
increase in liabilities that result in decrease in equity, other
than those relating to contributions from equity
participants".
✘ Essentially, accounts expenses represent the cost of doing
business; they are the sum of all the activities that result
in a profit.
✘ INCLUDES, SUPPLIES, UTILITIES, SALARIES, RENT,
ADVERTISING, MISCELLANEOUS EXPENSES
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 Basic Accounting Equation

ASSETS LIABILITI
EQUITY
ES

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NORMAL BALANCES
-When you say normal
balances, it means, it is where
the account are usually should
be presented or when the
account increase in terms of
their debit/credit balances. So
when a transaction caused the
account to decrease you
should record that on the
oppposite of its normal balance
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Journalizing
Let’s record our transaction in the
original book of entry

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 HOW TO JOURNALIZE?
INTERPRET (!)
TRANSALATE THE
TRANSACTION ON A
IDENTIFY (?) RECORD
LANGUAGAE WHERE YOU
FIRST ANALYZE THE COULD UNDERSTAND AND RECORD YOUR
TRANSACTION AS TO CHECK WHAT ACCOUNTS TRANSACTION BASED ON
WHETHER IT IS ARE AFFECTED ON THAT YOUR ANALYSIS, AND GIVE
RECORDABLE OR NOT. TRANSACTION. A DESCRIPTION OF THAT
TRANSACTION.

TIP: CHECK WHETHER THE TIP: YOU CAN TRANSALATE

TRANSACTION QUALIFIES IT INOT TAGALOG SO THAT TIP: MASTER DIFFERENT
BASED ON THE MAIN YOU CAN UNDERSTAND IT KINDS OF TRANSACTION
COMPONENTS OF PROPERLY AND PRACTICE
ACCOUNTING DEFINITION RECORDING.
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 2.

Let’s have an exercise

 Let’s solve first some problems related to basic accounting
equation

PROBLEMS
1.) Assuming the business has a total assets of 5,000,000,
its liabilities is 1/3 of its total equity and the equity is 75%
of the total assets. HOW MUCH IS THE TOTAL LIABILITIES
OF THE BUSINESS
2.) Assuming a business has total net assets of
25,000,000 and its total liabilities is lesser than its total
equity by 4 times. HOW MUCH IS THE TOTAL ASSETS OF
THE BUSINESS
3.) Assuming a business has an asset of thrice the amount
of the total liability balance, and its total liabilities is twice
less than its equity balance. With 17 a total liabilities of
Let’s JOURNALIZE TRANSACTIONS!

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THANKS!
-ANY
QUESTION
S?

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