Simple Bookkeeping

8/6/2019 Simple Bookkeeping

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SIMPLE BOOKKEEPINGSIMPLE BOOKKEEPING

BookkeepingBookkeeping

maintaining the records of themaintaining the records of thefinancial activities of a businessfinancial activities of a business

or an individualor an individual

to record and summarize financialto record and summarize financialtransactions into a usable formtransactions into a usable formthat provides financial informationthat provides financial informationabout a business or an individual.about a business or an individual.

ObjectiveObjective


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Types Of Bookkeeping SystemsTypes Of Bookkeeping Systems

Single EntrySingle Entry

record a daily and a monthly summary ofrecord a daily and a monthly summary ofbusiness income and expensebusiness income and expense

"informal" record keeping system"informal" record keeping system

does not provide a business with all thedoes not provide a business with all thefinancial information needed tofinancial information needed toadequately report the financial affairsadequately report the financial affairs

of a businessof a business

not a complete accounting system and focusesnot a complete accounting system and focusesonly on the business' profit and loss statementonly on the business' profit and loss statement

and not on its balance sheetand not on its balance sheet


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Double Entry SystemDouble Entry System

Double Entry SystemDouble Entry System

has builthas built--in checks and balancesin checks and balances

more accurate than singlemore accurate than single--entryentrysystem and selfsystem and self--balancingbalancing

complete accounting systemcomplete accounting system

focuses on the incomefocuses on the incomestatement and balance sheet.statement and balance sheet.


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Basis of AccountingBasis of Accounting Cash BasisCash Basis

recognizes revenues (earnings) inrecognizes revenues (earnings) inthe period the cash is received andthe period the cash is received and

expenses in the period when theexpenses in the period when thecash payments are madecash payments are made

Accrual BasisAccrual Basis

records income in the period earnedrecords income in the period earnedand all expenses in the periodand all expenses in the periodincurredincurred


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The Bookkeeping LanguageThe Bookkeeping Language Major Type of AccountsMajor Type of Accounts AssetsAssets

AssetsAssets properties used in the operation orproperties used in the operation or

investment activities of a business.investment activities of a business.

All the good stuff a business hasAll the good stuff a business has(anything with value)(anything with value) AssetsAssets

TangibleTangible --you can physical see and touch such asyou can physical see and touch such as

vehicles, equipment and buildingsvehicles, equipment and buildings

IntangibleIntangible --like pieces of paper (sales invoices)like pieces of paper (sales invoices)representing loans to your customers where theyrepresenting loans to your customers where theypromise to pay you later for your services or productpromise to pay you later for your services or product


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The Bookkeeping LanguageThe Bookkeeping Language

Examples of Asset AccountsExamples of Asset Accounts

CashCash

Accounts ReceivablesAccounts Receivables InventoriesInventories

PrepaymentsPrepayments

Furniture and FixturesFurniture and Fixtures

Motor VehiclesMotor Vehicles

BuildingsBuildings


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LiabilitiesLiabilities

Claims by creditors to theClaims by creditors to the

property (assets) of a businessproperty (assets) of a businessuntil they are paiduntil they are paid

Usually one of a business's biggestUsually one of a business's biggest

liabilities (hopefully they are not pastliabilities (hopefully they are not pastdue) is to suppliers where a businessdue) is to suppliers where a businesshas bought goods and services andhas bought goods and services andcharged them.charged them.


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Examples of Liabilities AccountsExamples of Liabilities Accounts

Accounts PayablesAccounts Payables

Notes PayablesNotes Payables LoansLoans

Due to Officers and EmployeesDue to Officers and Employees

Guaranty Deposits PayableGuaranty Deposits Payable


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Owner's Equity/Owner's CapitalOwner's Equity/Owner's Capital

The owner's rights to theThe owner's rights to the

property (assets) of the business;property (assets) of the business;also called proprietorship and netalso called proprietorship and networth.worth.

What the business owes the owner.What the business owes the owner.The good stuff left for the ownerThe good stuff left for the ownerassuming all liabilities (amountsassuming all liabilities (amountsowed) have been paid.owed) have been paid.


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Owner's InvestmentsOwner's Investments

Additional amounts, either cash orAdditional amounts, either cash or

other property, that the ownerother property, that the ownerputs in his business.puts in his business.

Owner's DrawingsOwner's Drawings

Amounts the owner withdraws fromAmounts the owner withdraws fromhis business for living and personalhis business for living and personalexpenses.expenses.


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The Bookkeeping LanguageThe Bookkeeping Language Revenue /IncomeRevenue /Income

Amounts a business earns by sellingAmounts a business earns by sellingservices and products. Amounts billedservices and products. Amounts billed

to customers for services and/orto customers for services and/orproductsproducts

Expense /CostExpense /Cost

The costs of doing business.The costs of doing business.The stuff we used and had toThe stuff we used and had topay for or charge to run ourpay for or charge to run ourbusiness.business.


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Examples of RevenuesExamples of Revenues

SalesSales

Interest IncomeInterest Income

Miscellaneous IncomeMiscellaneous Income


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Examples ofExpensesExamples ofExpenses

Salaries and WagesSalaries and Wages

Office Supplies ExpensesOffice Supplies Expenses Light and WaterLight and Water

Gasoline and Oil ExpensesGasoline and Oil Expenses

RentExpensesRentExpenses

Insurance ExpensesInsurance Expenses

Advertising ExpensesAdvertising Expenses


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ACCOUNTING EQUATIONACCOUNTING EQUATION..

ASSETS=LIABILITIES + OWNER'S EQUITYASSETS=LIABILITIES + OWNER'S EQUITY

ASSETS = LIABILITIES + BEGINNINGASSETS = LIABILITIES + BEGINNING

OW

NER'S

EQUITY + ADDITIONAL O

WNERO

WNER'S

EQUITY + ADDITIONAL O

WNERINVESTMENTS + REVENUEINVESTMENTS + REVENUE -- EXPENSESEXPENSES --

DRAWSDRAWS

SIMPLE EQUATIONSIMPLE EQUATION

EXPANDED EQUATIONEXPANDED EQUATION


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Debits and CreditsDebits and CreditsF

or EveryD

ebit ThereIs A

Credit

For Every

Debit There

Is A

Credit

DEBITDEBIT

CREDITCREDIT

an entry (amount) entered on the left sidean entry (amount) entered on the left side(column) of a journal or general ledger(column) of a journal or general ledger

account that increases an asset, draw or anaccount that increases an asset, draw or anexpense or an entry that decreases a liability,expense or an entry that decreases a liability,owner's equity (capital) or revenue.owner's equity (capital) or revenue.

an entry (amount) entered on the right sidean entry (amount) entered on the right side(column) of a journal or general ledger(column) of a journal or general ledgeraccount that increases a liability, owner'saccount that increases a liability, owner'sequity (capital) or revenue, or an entry thatequity (capital) or revenue, or an entry thatdecreases an asset, draw, or an expensedecreases an asset, draw, or an expense


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Debit and Credit EquationDebit and Credit Equation

Assets + Draws + Expenses = Liabilities + Owner's Equity + RevenueAssets + Draws + Expenses = Liabilities + Owner's Equity + Revenue

Normal Debit Balance Accounts = Normal Credit Balance AccountsNormal Debit Balance Accounts = Normal Credit Balance Accounts

DEBITS = CREDITSDEBITS = CREDITS


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All You Need To Know AboutAll You Need To Know About

Debits and CreditsDebits and CreditsSummarized In One SentenceSummarized In One Sentence::

Enter an amount in theEnter an amount in the Normal BalanceNormal BalanceSideSide of an Account toof an Account to Increase theIncrease theBalanceBalance of an Account and in theof an Account and in theOpposite SideOpposite Side of an Account toof an Account to

Decrease the BalanceDecrease the Balance of an Account.of an Account.


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Debit and Credit EquationDebit and Credit Equation

NORMAL DEBIT BALANCE NORMAL CREDIT BALANCE

ASSETS LIABILITIES

Cash Accounts Payables

Receivables Dueto Employees

Propertyand Equipments REVENUE

EXPENSES Sales

Supplies Expenses Other Income

Salaries EQUITY/CAPITAL

DEBIT = CREDITDEBIT = CREDITFor Every Debit There Is A CreditFor Every Debit There Is A Credit


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Major Types of Accounting &Major Types of Accounting &

Bookkeeping Records andBookkeeping Records and

DocumentsDocuments

General LedgerGeneral Ledger--A book containing theA book containing theaccounts and balances for all of a business'saccounts and balances for all of a business's

assets, liabilities, equity, revenue, and expenseassets, liabilities, equity, revenue, and expenseaccounts.accounts.

Chart Of AccountsChart Of Accounts--AA coded listing of all thecoded listing of all theaccounts in the general ledger.accounts in the general ledger.

JournalsJournals--A preliminary record where businessA preliminary record where businesstransactions are first entered into the accountingtransactions are first entered into the accountingsystem. The journal is commonly referred to assystem. The journal is commonly referred to asthe book of original entry.the book of original entry.


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Major Types of Accounting &Major Types of Accounting &

Bookkeeping Records andBookkeeping Records andDocumentsDocuments

Trial BalanceTrial Balance--A worksheet listing of all theA worksheet listing of all the

accounts appearing in the general ledger withaccounts appearing in the general ledger withthe dollar amount of the debit or credit balancethe dollar amount of the debit or credit balanceof each. Used to make sure the books are "inof each. Used to make sure the books are "inbalance"balance" --total debits and credits are equal.total debits and credits are equal.

Specialized JournalsSpecialized Journals--Journals used to initiallyJournals used to initially

record special types of transactions such asrecord special types of transactions such assales, cash disbursements, and cash receipts insales, cash disbursements, and cash receipts intheir own journal.their own journal.


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Financial StatementsFinancial Statements

Balance SheetBalance Sheet--The financial statement which showsThe financial statement which showsthe amount and nature of business assets, liabilities, andthe amount and nature of business assets, liabilities, andowner's equity as of a specific point in time. It is alsoowner's equity as of a specific point in time. It is alsoknown as a Statement Of Financial Position or aknown as a Statement Of Financial Position or aStatement Of Financial ConditionStatement Of Financial Condition

Income StatementIncome Statement--The financial statementThe financial statementthat summarizes revenues and expenses for athat summarizes revenues and expenses for a

specific period of time, usually a month or aspecific period of time, usually a month or ayear. This statement is also called a Profit andyear. This statement is also called a Profit andLoss Statement or an Operating Statement.Loss Statement or an Operating Statement.


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Financial StatementsFinancial Statements

Capital StatementCapital Statement--The financial reportThe financial reportthat summarizes all the changes inthat summarizes all the changes inowner's equity that occurred during aowner's equity that occurred during aspecific period.specific period.

Statement of Changes in FinancialStatement of Changes in FinancialPositionPosition--The financial statement thatThe financial statement that

reports the sources and uses of cash orreports the sources and uses of cash orworking capital for a specific period ofworking capital for a specific period oftime, normally a year.time, normally a year.


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RECORDING TRANSACTIONSRECORDING TRANSACTIONS

For Every Action There Is An Opposite ReactionFor Every Action There Is An Opposite Reaction

TransactionTransaction--Any event or condition thatAny event or condition thatmust be recorded in the books of amust be recorded in the books of abusiness because of its effect on thebusiness because of its effect on thefinancial condition of the business, such asfinancial condition of the business, such as

buying and selling. A business deal orbuying and selling. A business deal oragreement.agreement.


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Sample TransactionSample Transaction

A OFFICE STORE

TRANSACTIONS FOR THE MONTH OF JANUARY

1. On 1/1 A invest cash of P10,000.00

2. On 1/2 A bought in cash 10 reams of coupon bond amounting to 1,000.00(100/REAM)

3. On 1/3 A bought on credit 10 boxes of ballpens amounting to 500 (50/box)

4. On 1/4 A Sold to B 1 ream of coupon bond at 150.00 pesos

5. On 1/5 A paid 300 for the ballpens he bought on credit

6. On 1/6 A Sold to E 2 reams of Coupon bond at 300. 00 pesos

7. On 1/7 A paid salaries of C, an employee at an amount of 100 pesos


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ENTRIESENTRIESENTRY:

1. A invest cash of P10,000.00

DR CR

Cash 10,000.00

Capital 10,000.00

10,000.00 10,000.00

2. A. bought worth 10 reams of coupon bond amounting to 1,000.00 (100/REAM)

DR CR

Office Supplies Inventory 1,000.00Cash 1,000.00

1,000.00 1,000.00

3. A bought on credit 2 boxes of ballpens amounting to 100 (50/box)

DR CR

Office Supplies Inventory 500.00

Accounts Payables 500.00

500.00 500.00

4. A Sold to B 1 ream of coupon bond at 150.00 pesos on credit

DR CR

AccountsReceivable 150.00

SalesRevenue 50.00


150.00 150.00


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ENTRIESENTRIES

5. On 1/5 A paid 300 for the ballpens he bought on credit

DR CR

Accounts Payable 300.00

Cash 300.00

300.00 300.00

6. A Sold to E 2 reams of Coupon bond at 300. 00 pesos

DR CR

Cash 300.00

SalesRevenue 100.00


300.00 300.00

7. A paid salaries of C, an employee at an amount of 100 pesosDR CR

Salaries 100.00

Cash 100.00

100.00 100.00


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DATE PARTICULARS

REF.

NO. PR

DEBIT CREDIT

SUNDRIES DEBIT CREDITCASH CAPITAL

SALES

REVENUE

Office

SuppliesInventories

1-JanInvestment 1 10,000.00 10,000.00

6-Jan

Saleof3reamsCoupon

Bond 6 300.00 100.00 200.00

TOTAL 10,300.00 10,000.00 100.00 200.00

RECAPITULATION:

Cash 10,300.00

Capital 10,000.00

Sales revenue 100.00

Office Supplies

Inventories 200.00

TOTAL 10,300.00 10,300.00

A. OFFICE STOREA. OFFICE STORE

CASH RECEIPTS JOURNALCASH RECEIPTS JOURNAL


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CASH DISBURSEMENTS JOURNALCASH DISBURSEMENTS JOURNAL

DATE PARTICULARS

REF.

NO. PR

CREDIT DEBIT

SUNDRIES DEBIT CREDITCASH

Office

Supplies

Inventory

Accounts

Payables Salaries

2-Jan Purchased10 reamsCB 2 1,000.00 1,000.00

5-Jan

Paidballpensboughton

credit 5 300.00 300.00

7-Jan PaidC's Salaries 7 100.00 100.00

TOTAL 1,400.00 1,000.00 300.00 100.00

RECAPITULATION:

Cash 1,400.00

Office Supplies

Inventories 1,000.00


Salaries 100.00

TOTAL 1,400.00 1,400.00


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GENERAL JOURNALGENERAL JOURNALDATE PARTICULARS

REF.

NO. PR DEBIT CREDIT

3-JanOffice Supplies Inventory 3 1,000.00

Accounts Payables 1,000.00

Purchaseoncredit

4-JanAccountsReceivable 4 150.00

SalesRevenue 50.00


Saleoncredit

TOTAL 1,150.00 1,150.00

RECAPITULATION:

Office Supplies Inventory 1,000.00 100.00AccountsReceivable 150.00

SalesRevenue 50.00

Accounts Payables 1,000.00

TOTAL 2,300.00 2,300.00


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TRIAL BALANCETRIAL BALANCEJanuaryJanuary

Account Name DEBIT CREDIT

Cash 8,900.00

AccountsReceivable 150.00

Office Supplies Inventory 1,200.00

Accouts Payable 200.00

Capital 10,000.00

SalesRevenue 150.00

Salaries 100.00

10,850.00 10,850.00

-


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BALANCE SHEETBALANCE SHEETFor the Month of JanuaryFor the Month of January

ASSETS

Cash 8,900.00

AccountsReceivable 150.00Office Supplies Inventory 1,700.00

TOTAL ASSETS 10,750.00

LIABILITIES ANDCAPITAL

LIABILITIES


Total Liabilities 700.00

CAPITAL

ACapital 10,000.00

Add: Net Income 50.00

TotalCapital 10,050.00

TOTAL LIABILITIES AND CAPITAL 10,750.00


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INCOME STATEMENTINCOME STATEMENTFor the Month of JanuaryFor the Month of January

REVENUE

SalesRevenue 150.00

TotalRevenue 150.00

LESS: EXPENSES

Salaries 100.00

Total Expenses 100.00

NET INCOME 50.00


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