SIMPLE ACCOUNTING

AND BOOKKEEPING
 What is
ACCOUNTING?
ACCOUNTING is ..….
the process of identifying,
measuring, and communicating
economic information to permit
informed judgments and decisions by
users of the information
A Statement of Basic
Accounting Theory
American Accounting
Association, 1966
 Essential Characteristics
of Accounting…
Economic Entity Accounting

Measure
Com-
financial municate Decision
Financial Measure
activities Maker
Activity of an a
summary
economic
entity
 ACCOUNTING CYCLE of a
Small Business
R INTERPRETING 4 RECORDING PHASE
A THE DATA Journalize 1
T Financial Analysis transactions & Post
I BOOKKEEPING
to Ledger
O ANALYSIS

3
SUMMARIZING 2
DATA
Prepare financial CLASSIFYING DATA
reports Analyze transactions and
group together data which
are similar in nature

STATEMENTS
 What is
BOOKKEEPING?
(RECORDING – CLASSIFYING PHASE)
Bookkeeping is ..….
A systematic compiling and
recording of financial
transactions.
What is Needed by the
Business?
 A simple book (General
Journal) to record the
financial transactions
of the business in
chronological order

 List all the money

received and money
paid by the business
 RECORDING PROCESS
1. Analyze all the financial transactions for the day
Date P
o
VALUE
20__ Particulars
s Parted with
t Received Credit
e (Debit)
d
 RECORDING PROCESS
2. Record the transactions in chronological order (General
Journal)
AMOUNT (P)
PARTED
DATE TRANSACTIONS PARTICULARS RECEIVED WITH
20__ (DEBIT) (CREDIT)
10/29 Invested P3,000 Cash 3,000
Capital 3,000
11/5 Bought coffee, Supplies/Inventories 1,000
canned goods, milk
Cash 1,000
11/6 Sold 3 canned goods Cash 75
@ P25 each
Sales 75
(3 canned goods)
11/7 Bought rice for sale Supplies/Inventories 700
(28 kilos @ P25) (Rice 28 kilos @ P25)
Cash 700
RECORDING PROCESS
EXERCISE
POSTING PROCESS
3. Record each transactions in their respective book of accounts
(General/Subsidiary Ledger) to know the outstanding balance:

CASH ON HAND
Date Particulars Amount (P)
20__
POSTING PROCESS
3. Record each transactions in their respective book of accounts
(General/Subsidiary Ledger) to know the outstanding balance:

CASH ON HAND
Date Particulars Amount (P)
20__ Received Paid Balance
10/29 Capital, Beginning P3,000 P3,000
balance
11/5 Supplies/ Inventories P1,000 2,000

Sales P75 P2,075

11/6 (3 canned goods @
P25 each)
Supplies/Inventories 700 P1,375
11/7 (28 kilos @ P25)
Posting Process…
SUPPLIES/INVENTORIES
Date Particulars Amount (P)
20__ Received W/drawn Balance

E
Posting Process…
SUPPLIES/INVENTORIES
Date Particulars Amount (P)
20__ Received W/drawn Balance
11/5 Purchases P1,000 P1,000
(5 pack coffee, (5 pack
coffee,
10 canned goods, 10 canned
3 milk) goods,
3 milk)
11/6 Sales P75 P925
(3 canned goods (3 canned (5 pack
goods) coffee,
@ P25 each)
7 canned
goods,
3 milk)
11/7 Purchases P700 P1,625
Rice (5 packs
coffee, 7
(28 kilos @ P25) canned
goods,3 milk,
28 kilos rice) E
POSTING PROCESS
EXERCISE
 THE
FINANCIAL
STATEMENTS
(CLASSIFYING – SUMMARIZING PHASE)
3 MAJOR FINANCIAL
STATEMENTS
1. CASH FLOW
STATEMENT

2. BALANCE
SHEET

3. INCOME
STATEMENT
E
 CASHFLOW
STATEMENT
shows a company's flow of
cash
Cashflow Statement
Should be prepared & monitored monthly
Type What is it ? Example Where is it
recorded?
Cash Cash coming 1. Money Cash Receipts
Inflow into the received Book/
business from sales Cash Book
2. Interest
earned in
bank
account
Cash Cash going 1. Payment of Cash
Outflow out of the salaries Disbursements
business 2. Payment of Book/
raw Cash Book
materials
 Format for Cashflow Statement
KASUCO Workers Cooperative
CHECK – Cash flow Statement
Closing For the Month ended ____________
cash
balance Opening Cash Balance (at the beginning of the month)
with the Add: Cash Inflow
balance of Cash Sales
cash in the Collections
bank Interest
account Proceeds of Loan
and cash TOTAL CASH INFLOW
on hand for
Cross- Less: Cash Outflow
check. Salaries
Materials and Supplies
Loan Repayments
Equipment Repair
TOTAL CASH OUTFLOW

NET CASH FLOW (TOTAL CASH INFLOW – CASH OUTFLOW)

= Closing Cash Balance at the end of the month E

How to Use & Monitor the
Cashflow Statement
1. Is there a Net Cash inflow or Outflow?

2. What is the Closing Cash Balance?

• Is there enough cash to pay operating
expenses for next few months?

• Is there enough cash to make loan &

interest repayments required?

• Is there too much idle cash in the bank

account - could this cash be invested in a
project that will have higher returns?
Why do you need a cash budget?
1. To know whether your cashflow
statement each month is good
or bad

2. Set a guideline for expenditure

3. Ensure enough cash is available

in the business to continue
operations
BALANCE SHEET
STATEMENT
snapshot of a company's financial
condition at a specific moment in time
Balance Sheet Components
Component Description Example

Assets What you Cash

OWN Accounts Receivable
Inventory
Property & Equipment

Liabilities What you Accounts Payable

Salaries Payable
OWE
Interest Payable
Taxes Payable
Capital = What you own Beginning Capital
minus what you owe
or Paid-up Capital
Assets = Liabilities Net Income/Loss
+ Members’ Equity
Withdrawals
Format for Balance Sheet
KASUCO Workers Cooperative
Balance Sheet
as of ________ Month end

Assets:
Cash
Accounts Receivable
Less: Allowance for Doubtful Debts
Inventories
Interest Receivable
Supplies and Materials
Land
Building
Less: Accumulated Depreciation
Furniture and Equipment
Less: Accumulated Depreciation

TOTAL ASSETS

REFER NEXT PAGE TO CONTINUE BALANCE SHEET FORMAT

Format for Balance Sheet…
KASUCO Workers Cooperative
Balance Sheet
As of ________ Month end

(continued from previous page)

Liabilities:
Accounts Payable
Salaries Payable
Interest Payable
Taxes Payable

TOTAL LIABILITIES

Capital:
Beginning Capital
Paid-up Capital
Net Income/Loss
Withdrawals
TOTAL CAPITAL

CHECK – TOTAL ASSEST = LIABILITIES + CAPITAL

E
How do you Use & Monitor the
Balance Sheet?
1. Are Assets > Liabilities

2. Compare to previous month or year

why has accounts receivable gone
up? Is there difficulty collecting
cash ?

3. Are there enough inventories to

supply the demand? Is there an
over-stock or under-stock?
INCOME STATEMENT

Shows the operating results of a

company for a given period of time
INCOME STATEMENT
Key Points to Understand in Income
Statement:

• Very different to Statement of

Cashflows so Ignore Cashflows

• Result is net profit or loss

• Format is as follows ……
Format for Income Statement
KASUCO Workers Cooperative
Income Statement
For the Month ended ____________

Sales
Less: Cost of Goods Sold
Gross Profit
Less: Operating Expenses
Salary Expense
Supplies Expense
Delivery Expense
Rent Expense
Light, Water and Telephone
Miscellaneous Expense
Interest Expense

= Net Income from Operations

Add: Other Income
Rent Income
Interest Income
Less: Other Expense
Interest Expense
Total Net Income (Loss) for the Month

E
How do you Use & Monitor the
Income Statement?
1. Net Profit or Loss by type of business
operation ? Compare income vs. expenses

2. Compare to previous month or year and ask

why there are movements:
E.g. Why has sales decreased from prior
year?
Why has maintenance expense increased?

3. How can you increase the net profit?

Options for increasing Net Profit
To increase net profit there are 2
options:

1. Increase Sales – how?

 Quantity/Volume Sold
Or  Selling Price

2. Decrease Expenses – how ?

Reduce overhead expenses
Reduce maintenance/repair costs
Happy Managing
and bookkeeping!!!