1. Assets = Liabilities + Equity Accounts
Current:
Cash
Credit Card Receivables
Accounts Receivable
Marketable Securities
Inventories
Prepaid Expenses
Non Current:
Land & Building
Machinery & Equipment
China, Glass, Silver, Linen
and Uniform
Intangible Assets
Current
Accounts Payable
Accrued Expenses
Notes Payable
Non-Current
Mortgage Payable
Common Stock
Retained Earnings or
Owners’ Capital
Partners’ Capital

2. Account or Account Title – a device of term used in recording the increases and decreases in the financial statement elements.
Accounting Equation – shows the relationship among a business firm’s assets, liabilities and equity.
Double Entry Bookkeeping – a method wherein every transaction of a business enterprise is recorded in terms of increases and decreases in its assets, liabilities, and equity. For every debit, there should be a corresponding credit.

3. Balance Sheet

4. Balance sheet is:
a statement showing ASSETS, LIABILITIES & STOCKHOLDERS’ EQUITY of an entity.
It reports the condition of the entity – how much money and other assets it has, how many obligations it has to pay, and how much capital was used in the operation.
It is presented in 2 formats : REPORT FORM and ACCOUNT FORM

5. Assets – liabilities = Owner’s equity
THE BALANCE SHEET
Assets – are business resources that have probable future economic benefits
Qualifications:
have future economic benefits
be under management’s control
result from past transactions
Liabilities – are probable future sacrifices of economic benefits.
require transfer of assets having future economic benefits.
specify to whom the assets must be transferred
Owner’s Equity – the residual interest of the owner in the assets of the business. Also known as net assets
Assets – liabilities = Owner’s equity

6. Liabilities and Owner’s Equity
ROSAL’S BUSINESS
Balance Sheet
December 31, 2007
Assets
Current Assets :
Cash P5,120 Accounts receivable ,000
Total assets P7,120
=====
Liabilities and Owner’s Equity
Liabilities:
Note payable P1,000
Owner’s equity:
Rosal, capital ,120
Total liabilities and owner’s
Equity P7,120
======
Account form of the Balance Sheet

7. AMETHYST TRADING COMPANY
Balance Sheet
December 31, 2007
Assets
Current assets
Cash P 150,000
Accounts receivable ,000
Merchandise inventory ,000
Total current assets ,000
Non-current assets
Store and delivery equipment ,000
Less: Accumulated depreciation ,000
Total non-current assets ,000
Total assets P 650,000
======
Liabilities
Current liabilities
Accounts payable P 100,000
Wages payable ,000
Total current liabilities ,000
Non-current liabilities
Note payable (due in 2010) ,000
Total liabilities P 300,000
Owners’ Equity
Arni dela Cruz, Capital P 175,000
Mel Santos, Capital ,000
Total owners’ equity ,000
Total liabilities and owners’ equity P 650,000
Report form of the Balance Sheet

8. Income Statement

9. THE INCOME STATEMENT
Revenues – inflows or settlements of liabilities during a particular accounting period.
Characteristics:
It arises from the company’s primary earning activity and not from incidental or investment transactions
It is recurring
Gains – increases to equity (net assets) resulting from peripheral or incidental transactions not associated with the company’s major or central line of business.
Expenses – outflows of assets or incurrences of liabilities during a particular accounting period. It must be incurred in conjunction with the company’s revenue-generating process.
Losses- decrease to equity (net assets) resulting from peripheral or incidental transactions not associated with the company’s major or central line of business.

10. For the Year Ended December 31, 2007
ROSAL’S BUSINESS
Income Statement
For the Year Ended December 31, 2007
Service revenue P2,690
Rent income
Total Revenue P3,680
Less: Expenses
Wages expense 1,630
Utilities expense
Miscellaneous expense
2,060
Net income P1,620
======

11. Statement of Changes In Owners’ Equity

12. STATEMENT OF CHANGES IN EQUITY
Investment by owners
Cash or other assets exchanged for shares
Service performance exchanged for shares
Conversion of liabilities to equity ownership
Distribution to owners
Cash dividend payments or declarations
Transfer of assets to owners
Liquidating distributions
Conversion of equity ownership to liabilities
Capital maintenance adjustment – revaluation or restatement of assets and liabilities

13. For the Year Ended December 31, 2007
ROSAL’S BUSINESS
Statement of Capital
For the Year Ended December 31, 2007
Rosal, Capital, January 1, P5,000
Add: Net Income ,620
P6,620
Less: Drawings (500)
Rosal, Capital, December 31, P6,120
======

14. Statement of Cash Flows

15. STATEMENT OF CASH FLOWS
Operating cash flows – inflows and outflows of cash from:
Acquiring
Selling
Delivery goods for sale
Providing services
Investing cash flows
Acquiring and selling investments, property, plant, and equipment and intangibles
Lending money and collecting on loans
Financing cash flows
Obtaining resources from owners
Paying of dividends
Obtaining and repaying resources from creditors on long-term credit

16. RARS Statement of Cash Flows For the Period January 2-31, 2007
Cash flows from operating activities
Cash received from revenue transactions P 7,000
Cash paid for expenses (3,500)
Cash paid for supplies purchased (2,000)
Net cash provided by operating activities P 1,500
Cash flows from investing activities
Cash paid for tools and equipment (20,000)
Cash received from sale of excess tools ,000
Net cash used by investing activities (18,000)
Cash flows from financing activities
Investment by owner ,000
Net increase in cash for the month ,500
Cash balance January 1,
Cash balance January 31, P33,500
======