Recording all your personal transactions in a book every day will enable you to easily track specific ones on any previous date.
Bookkeeping
- refers to the recording of business transactions in the books of the business.
- involves the chronological writing or recording of business transactions and events in the books of accounts for the first time.
Journal
- the book of original entry. It is where all business transactions are chronologically recorded for the first time.
Account Titles
- provides the description of the type and nature of the business transactions.
5 Categories of Account Titles/Accounting Elements
1. Asset Account Titles
a. Cash - it describes money, either in paper or in coins.
b. Accounts receivables - it describes collectibles from customers who made sales transactions on credit.
c. Notes receivables - it describes collectibles that are supported with promissory note.
d. Supplies on hand - it describes unused office or store supplies.
e. Unused factory supplies - it describes unutilized manufacturing supplies.
f. Inventory - it describes unsold goods that are intended for sale.
g. Equipment - it describes tools and equipment like calculators, computers, or any equipment directly related to the production of
goods.
h. Furniture & fixtures - it describes assets like chairs, tables, and display cases.
2. Liability Account Titles
a. Accounts payable - it describes the financial obligations arising from goods purchased or services received.
b. Notes payable - it describes the financial obligations supported with notes.
c. Utilities payable - it describes the unpaid obligations on light and water consumptions.
d. Salaries payable - it describes the unpaid salaries of the workers.
3. Capital Account Titles
a. Capital - it describes the original and additional investment of the owner.
b. Drawing - it describes the temporary withdrawal of capital by the owner.
4. Income Account Titles
a. Service income - it describes general services rendered.
b. Rental income - it describes the income arising from lease or rent of property.
c. Sales - it describes the sale of goods or products to the customers.
5. Expense Account Titles
a. Salaries and wages - it describes the expenses on payments or salaries.
b. Store supplies expense - it describes the expenses on store supplies.
c. Taxes and licenses - it describes the expenses on taxes, permits, fees, and licenses.
d. Utilities expense - it describes the expenses on light and water.
e. Travelling expense - it describes the expenses on transportation or fare of personnel.
Business Documents
The business transactions that are recorded in the two-column general journal are based on business documents, which basically support the existence of transactions.
The most common types of business documents that support transactions and events are as follows:
1. Purchase order - it is an official business document issued by the buyer to the seller of goods.
2. Invoice - it is a commercial business document issued by the seller to the buyer.
3. Official receipt - it is a commercial document that indicates payment or receipt of cash.
4. Delivery receipt - it is a document that serves as an evidence that the goods or service are received.
5. Receiving report - it is a document used within the business upon receipt of the goods shipped by the courier or forwarder.
6. Check - it is a document that orders a payment of money from the current account maintained in the bank.
7. Voucher - it is an internal business document that authorizes the incurrence or payment of obligations.
Simple Bookkeeping
Remember the following fundamental concepts in bookkeeping:
1. Support all transactions with business documents.
2. Record the transactions using the two-column journal.
3. Use the proper account title.
4. Observe the guidelines when using the two column journal.
Illustrations on Simple Bookkeeping
Bookkeeping
- refers to the recording of business transactions in the books of the business.
- involves the chronological writing or recording of business transactions and events in the books of accounts for the first time.
Journal
- the book of original entry. It is where all business transactions are chronologically recorded for the first time.
Account Titles
- provides the description of the type and nature of the business transactions.
5 Categories of Account Titles/Accounting Elements
1. Asset Account Titles
a. Cash - it describes money, either in paper or in coins.
b. Accounts receivables - it describes collectibles from customers who made sales transactions on credit.
c. Notes receivables - it describes collectibles that are supported with promissory note.
d. Supplies on hand - it describes unused office or store supplies.
e. Unused factory supplies - it describes unutilized manufacturing supplies.
f. Inventory - it describes unsold goods that are intended for sale.
g. Equipment - it describes tools and equipment like calculators, computers, or any equipment directly related to the production of
goods.
h. Furniture & fixtures - it describes assets like chairs, tables, and display cases.
2. Liability Account Titles
a. Accounts payable - it describes the financial obligations arising from goods purchased or services received.
b. Notes payable - it describes the financial obligations supported with notes.
c. Utilities payable - it describes the unpaid obligations on light and water consumptions.
d. Salaries payable - it describes the unpaid salaries of the workers.
3. Capital Account Titles
a. Capital - it describes the original and additional investment of the owner.
b. Drawing - it describes the temporary withdrawal of capital by the owner.
4. Income Account Titles
a. Service income - it describes general services rendered.
b. Rental income - it describes the income arising from lease or rent of property.
c. Sales - it describes the sale of goods or products to the customers.
5. Expense Account Titles
a. Salaries and wages - it describes the expenses on payments or salaries.
b. Store supplies expense - it describes the expenses on store supplies.
c. Taxes and licenses - it describes the expenses on taxes, permits, fees, and licenses.
d. Utilities expense - it describes the expenses on light and water.
e. Travelling expense - it describes the expenses on transportation or fare of personnel.
Business Documents
The business transactions that are recorded in the two-column general journal are based on business documents, which basically support the existence of transactions.
The most common types of business documents that support transactions and events are as follows:
1. Purchase order - it is an official business document issued by the buyer to the seller of goods.
2. Invoice - it is a commercial business document issued by the seller to the buyer.
3. Official receipt - it is a commercial document that indicates payment or receipt of cash.
4. Delivery receipt - it is a document that serves as an evidence that the goods or service are received.
5. Receiving report - it is a document used within the business upon receipt of the goods shipped by the courier or forwarder.
6. Check - it is a document that orders a payment of money from the current account maintained in the bank.
7. Voucher - it is an internal business document that authorizes the incurrence or payment of obligations.
Simple Bookkeeping
Remember the following fundamental concepts in bookkeeping:
1. Support all transactions with business documents.
2. Record the transactions using the two-column journal.
3. Use the proper account title.
4. Observe the guidelines when using the two column journal.
Illustrations on Simple Bookkeeping
December 1 |
Jenny Toledo opened her small laundry shop with a legal trade name approved by DTI as Modern Laundry Center. The business has been registered as a non-VAT taxpayer. Jenny rented a space for the business at Rizal Street, Ormoc City, Leyte. The rental fee is 3,000 per month. She made the following initial investment: Cash 20,000 Three units of washing machine 45,000 Five units of electric iron 3,000 |
The entry in the journal will appear as follows:
2016 Particulars Debit Credit
Dec 1 Cash 20,000-
Laundry equipment 48,000-
Jenny Toledo, Capital 68,000-
To record initial investment
It can be observed that the value received has been debited and value parted with has been credited. In other words, the debit in all instances shall be equal to the credit. Hence, the basic accounting equation that applies all types of transactions will be represented as follows:
Value received (debit) = Value parted with (credit)
The values of the washing machines and electric irons are usually evidenced by the official receipts issued by the seller.
The journal entry appears to have two debit values, while credit has only one value. This type of journal entry is called compounded entry. In case there is only one debit and one credit, the entry is called a simple journal entry.
In writing the credit, the account title is indented. For the debit value, the account title is written almost touching the line separating the date and the Particulars columns
.
2016 Particulars Debit Credit
Dec 1 Cash 20,000-
Laundry equipment 48,000-
Jenny Toledo, Capital 68,000-
To record initial investment
It can be observed that the value received has been debited and value parted with has been credited. In other words, the debit in all instances shall be equal to the credit. Hence, the basic accounting equation that applies all types of transactions will be represented as follows:
Value received (debit) = Value parted with (credit)
The values of the washing machines and electric irons are usually evidenced by the official receipts issued by the seller.
The journal entry appears to have two debit values, while credit has only one value. This type of journal entry is called compounded entry. In case there is only one debit and one credit, the entry is called a simple journal entry.
In writing the credit, the account title is indented. For the debit value, the account title is written almost touching the line separating the date and the Particulars columns
.
Income statement
- a structured financial statement that presents the income, expenses and net income or net loss realized during a certain period.
2 Major Parts of the Income Statement
1. Heading - contains information on the name of the business, the name of the financial statement, and the date.
2. Body - is composed of the revenue, expenses, and net income or net loss of the business during a given period.
- a structured financial statement that presents the income, expenses and net income or net loss realized during a certain period.
2 Major Parts of the Income Statement
1. Heading - contains information on the name of the business, the name of the financial statement, and the date.
2. Body - is composed of the revenue, expenses, and net income or net loss of the business during a given period.
Modern Laundry Center
Income Statement
For the Period Ended December 31, 2016
Income Statement
For the Period Ended December 31, 2016
Laundry Services income |
- |
175,300 |
Less: Cost of laundry service |
- |
- |
Direct labor - salaries of workers |
16,000 |
- |
Laundry supplies |
11,800 |
- |
Utilities expense |
3,500 |
31,300 |
Gross profit |
- |
144,000 |
Less: Operating expenses |
- |
- |
Rent expenses |
3,000 |
- |
Taxes & licenses |
5,000 |
8,000 |
Net income |
- |
136,000 |