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FABM2 - Lesson 1
FABM2 - Lesson 1
BUSINESS
AND MANAGEMENT 2
LET’S HAVE A REVIEW
WHAT IS THE MEANING OF ACCOUNTING?
“Accounting is the process of IDENTIFYING, RECORDING, and
COMMUNICATING economic events of an organization to interested
users.”
WHAT ARE THE BRANCHES OF ACCOUNTING?
• Financial Accounting
• Management Accounting
• Government Accounting
• Auditing
• Tax Accounting
• Cost Accounting
• Accounting Education
• Accounting Research
USERS OF ACCOUNTING INFORMATION
INTERNAL
Internal users of accounting information are those individuals
inside a company who plan, organize, and run the business. These
users are directly involved in managing and operating the
business. These include marketing managers, production
supervisors, finance directors, company officers and owners.
EXTERNAL
External users are individuals and organizations outside a company
who want financial information about the company. These users are not
directly involved in managing and operating the business. The two most
common types of external users are potential investors and creditors.
Examples of External Users:
• Potential Investors
• Banks
• Suppliers
• BIR
• DOLE
FORMS OF BUSINESS ORGANIZATIONS
• Partnership
• Corporation
• Cooperatives
THE ACCOUNTING EQUATION
Assets and Expenses are Debited when they Increase, and they
are Credited when they Decrease. While Liabilities, Equity and
Revenue are Debited when they Decrease, and they are Credited
when they Increase.
Review Activity:
Total Assets ?
1.
Total Liabilities P335,000 Total Assets P762,000
Total Equity P375,000 Total Liabilities ?
3.
Total Equity P398,000
1.Accounting Equation
Assets = Liabilities + Equity
2. Assets
are the resources owned and controlled by the firm.
Current Assets
Non-current Assets
Current Assets
• Cash is money on hand, or in banks, and other items considered as medium of exchange
in business transactions.
• Accounts Receivable are amounts due from customers arising from credit sales or credit services.
• Notes Receivable are amounts due from clients supported by promissory notes.
• Inventories are assets held for resale
• Supplies are items purchased by an enterprise which are unused as of the reporting date.
• Prepaid Expenses are expenses paid in advance. They are assets at the time of payment and become
expenses through the passage of time.
• Accrued Income is revenue earned but not yet collected
• Short term investments are the investments made by the company that are intended to be sold
immediately
Non-current Assets
• Property, Plant and Equipment are long-lived assets which have been
acquired for use in operations.
• Long term Investments are the investments made by the company for
long-term purposes
• Intangible Assets are assets without a physical substance. Examples
include franchise and copyright.
3. Liabilities
are obligations of the firm arising from past events
which are to be settled in the future.
Current Liabilities
Non-current Liabilities
Current Liabilities
• Accounts Payable are amounts due, or payable to, suppliers for goods
purchased on account or for services received on account.
• Notes Payable are amounts due to third parties supported by promissory notes.
• Accrued Expenses are expenses that are incurred but not yet paid (salaries
payable, taxes payable)
• Unearned Income is cash collected in advance; the liability is the service to
performed or goods to be delivered in the future.
Non-current Liabilities
• Loans Payable
• Mortgage Payable
liabilities that do not fall due (paid, recognized as revenue) within one year after year-end
date
4. Equity
the owner’s claims in the business. It is the residual interest in the
assets of the enterprise after deducting all its liabilities.
Capital
It is not separate from the owner. The business and the owner are
inseparable
STATEMENT OF FINANCIAL POSITION
REPORT FORM
ACCOUNT FORM
PRACTICE:
1. Learning is Fun Company had currents assets amounting to Php
100,000. Non-current assets for the year totaled Php 76,000. How
much is the company’s total assets?
You can use any business name and the end of the current
year for the heading.