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    Analyzing Transactions To Start Business

    Uploaded by

    Shaila Marcelo
    The document discusses key aspects of financial accounting for businesses: - Financial structure includes assets, liabilities, and equity. Assets are resources owned, liabilities are obligations, and equity is the owners' residual claim. - The accounting equation is assets = liabilities + equity. - Accounts are used to track changes to the elements and include accounts for assets, liabilities, and equity. - Business transactions must maintain the accounting equation and involve an equal exchange of values. - Principles like cost concept, monetary measurement, and going concern guide accounting practices.

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    © All Rights Reserved
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    Analyzing Transactions To Start Business

    Uploaded by

    Shaila Marcelo
    369 views12 pages
    The document discusses key aspects of financial accounting for businesses: - Financial structure includes assets, liabilities, and equity. Assets are resources owned, liabilities are obligations, and equity is the owners' residual claim. - The accounting equation is assets = liabilities + equity. - Accounts are used to track changes to the elements and include accounts for assets, liabilities, and equity. - Business transactions must maintain the accounting equation and involve an equal exchange of values. - Principles like cost concept, monetary measurement, and going concern guide accounting practices.

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    Chapter 3.pptx

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    The document discusses key aspects of financial accounting for businesses: - Financial structure includes assets, liabilities, and equity. Assets are resources owned, liabilities are obligations, and equity is the owners' residual claim. - The accounting equation is assets = liabilities + equity. - Accounts are used to track changes to the elements and include accounts for assets, liabilities, and equity. - Business transactions must maintain the accounting equation and involve an equal exchange of values. - Principles like cost concept, monetary measurement, and going concern guide accounting practices.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    369 views12 pages

    Analyzing Transactions To Start Business

    Uploaded by

    Shaila Marcelo
    The document discusses key aspects of financial accounting for businesses: - Financial structure includes assets, liabilities, and equity. Assets are resources owned, liabilities are obligations, and equity is the owners' residual claim. - The accounting equation is assets = liabilities + equity. - Accounts are used to track changes to the elements and include accounts for assets, liabilities, and equity. - Business transactions must maintain the accounting equation and involve an equal exchange of values. - Principles like cost concept, monetary measurement, and going concern guide accounting practices.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    of 12

    Chapter 3

    ANALYZING TRANSACTIONS
    TO START BUSINESS
    Financial Structure of a Business

    Financial Structure is based on the three elements –


    Asset, Liabilities and Equity

    Assets – resources owned by the business, they are


    used in the operations of the company
    Liabilities – obligations of the company
    Equity – residual interest of the owners
    Accounting Equation

    Assets = Liabilities + Equity


    Accounts

    Used to record changes in the accounting elements

    Assets
     Cash, Accounts Receivable, Inventory, Supplies, Land,
    Equipment etc.
    Liabilities
     Accounts Payable, Interest Payable, Salaries Payable, Notes
    Payable, Loan Payable etc.
    Equity
     Owner’s Equity, Owner’s Drawing
    Normal Balance

    Assets – Debit (increase DR; decrease CR)

    Liabilities – Credit (increase CR; decrease DR)

    Equity – Credit (increase CR; decrease DR)


    Business Transactions

     Exchange in values between two parties expressed in


    monetary terms
     Equal Value

     For every value received there is value parted


     Increase or decrease the elements but the identity should
    always be maintained
    Accounting Principles

    Business Entity Concept


    Cost Concept or Exchange Price
    Objectivity Principle
    Monetary Measurement Principle
    Going Concern
    Accrual Assumption
    Reporting Period
    Illustration 1

    March 1 May Gomez opened a tour and travel service by


    contributing cash of P50,000. She has three cars worth
    P1,200,000 but contributed only two cars worth
    P750,000.
    3 Gomez borrowed P100,000 cash from PNB for use in her
    business
    7 Bought tables and chairs from Blim’s and paid cash
    15 Various equipment were purchased on account from
    National Winners for P55,000
    18 Gomez made cash withdrawal of P5,000 for personal use
    20 The account due to National Winners was paid in cash
    Statement of Financial Position

    Happy Tour & Travel


    Statement of Financial Position
    March 20, 2018

    ASSETS LIABILITIES AND OWNER'S EQUITY


    Cash P45,000 Loans Payable P100,000
    Cars 750,000 Gomez, Capital 795,000
    Equipment 55,000
    Furniture and Fixtures 45,000
    Total P895,000 P895,000
    Illustration 2
    Copyclear and Bindery Center situated at Taft Avenue, Manila was set
    up January 2, 2018. The owner, Susan Alegre, contributed cash of
    P20,000, and equipment of P48,000. The following are the additional
    transactions for January:
    Jan 5 Bought furniture and fixtures worth P6,000 on account
    7 Bought a photocopier machine for P20,000. Terms: 50% down, balance on
    account
    8 Hired a helper on commission basis, based on 10% of sales, to operate the
    machine
    10 An emergency prompted Ms. Alegre to withdraw P1,500 cash for personal
    use
    15 Bought supplies costing P3,000 and paid cash
    20 The account of January 5 is due. Ms. Alegre paid this from her personal
    cash
    30 The account of January 7 is due. Issued a 60-day promissory note for this
    COPYCLEAR AND BINDERY CENTER
    Statement of Financial Position
    January 30, 2018

    ASSETS LIABILITIES AND OWNER'S EQUITY


    Cash P5,500 Notes Payable P10,000
    Supplies 3,000 Alegre, Capital 72,500
    Equipment 68,000
    Furniture and Fixtures 6,000
    Total P82,500 P82,500
    Qualitative Attributes

    Understandability
    Relevance
    Reliability
    Comparability

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