accountancy terms and definition

SOCI

Statement of comprehensive income

SOCIOE

Statement of changes in owners equity

SOFC

Statement of financial condition

SOCF

Statement of cash flows

4 financial statements

SOCI

SOCIOE

SOFC

SOCF

3 Major types of business

Manufacturing

Merchandising

Service business

4 organizations of business

Sole proprietorship

Partnership

Corporation

Cooperative

3 accounting concepts

Entity concept

Periodicity concept

Stable monetary unit concept

SOCI

SOCIOE

SOCF

Xyz corporation

Statement of ____

For the year ended December 31,2025

SOFC

Xyz corporation

Statement of ____

December 31,2025

Liabilities

are what a person or business owes to others—typically in the form of debts or financial obligations. They are recorded on the balance sheet and can include things like loans, accounts payable, mortgages, or taxes owed. In simple terms:

= What you owe.

Assets

are things you own that have value, like cash, property, or equipment.

Revenue

total income a business earns from its normal activities, like selling products or services, before any expenses are deducted.

Expenses

costs a business has to pay to run its operations, like rent, salaries, and utilities.

Simple definition:

= Money a business spends

5 accounting elements (ALORE)

ASSET

LIABILITY

OWNER'S EQUITY

REVENUE

EXPENSES

3 accounting concepts

1. Entity Concept

2. Periodicity Concept

3. Stable Monetary Unit Concept

1. Entity Concept

- hiwalay ang pag mamay ari, benta, expenses ng entity sa assets, liabilities, owners equity, revenue, and expenses sa personal. kung ano lang yung sa entity, will stay sa entity.

1. Periodicity Concept

- yung business life in entity is tuloy tuloy, hinahati into equal time periods. shortest is 1 month, longest is 1 year. the sale for good is upon delivery, while services once the good is rendered. once it is incured/ nagastos (Accural Accounting) it should be recorded and reported in the
period

Stable Monetary Unit Concept

- kapag sa Philippines the unit should be peso. ang unit is nakadepende sa kung anong country ka gagawa ng statement, for example: PH: PESO/P US: US DOLLARS/$

AWE in AWELER

Assets

Withdrawal

Expenses

LER in AWELER

Liabilities

Equity/capital

Revenues

accounting event

- is an economic occurrence that causes changes in an

enterprise’s assets, liabilities and/or equity. Events may be internal actions, such as the

use of equipment for the production of goods and services. It can also be an external

event such as the purchase of new materials from a supplier.

business transaction

- is the occurrence of an event or a condition that

affects financial position and/or performance and can be reliably recorded

Manual system

– utilize paper-based journals (general and special) and

ledgers (general and subsidiary).

Computer-based transaction systems

– replace paper records with

computer records.

Database system

– embed accounting data within the business even data on

which they are based

Assets

is a present economic resource controlled by the entity as a result of past

events. An economic resource is a right that has the potential to produce economic

benefits.

Liabilities

is a present obligation of the entity to transfer an economic

resource (asset) as a result of past events.

Equity

is the residual interest in the assets of the enterprise after deducting all

its liabilities. In other words, they are claims against the entity that do not meet the

definition of liabilit

Cash

- is any medium of exchange that a bank will accept for deposit at face value. It includes coins, currency, checks, money orders, bank deposits and drafts.

Cash Equivalents

- These are sort-term, highly liquid investments that are readi invertible to known amount of cash and which are subject to an insignificant risk changes in value.

Notes receivable

- These are written pledge that the customer will pay the business a fixed amount of money on a certain date.

Accounts Receivable

- These are claims against customers arising from sale of goods and/or services on credit. This type of receivable offers less security than a promissory note.

Inventories

- These are assets which are (a) held for sale in the ordinary course of business; (b) in the process of production for such sale; or (c) in the form of materials or supplies to be consumed in the production process or in the rendering of services.

Prepaid Expenses

- These are expense paid for by he business in advance. It is an asset because the business avoids having to pay cash in the future for a specific expense. They include insurance and rent. These prepaid items represent future economic benefits - assets - until the time these start to contribute to the earning process; these, then, become expense.

Property, Plant and Equipment

- These are tangible assets that are held by an enterprise for use in the production or supply of goods or services, or for rental to others, or for administrative purposes and which are expected to be used during more than one period.

These include, land, building, machinery and equipment, furniture and fixtures, motor vehicles and equipment.

Accumulated Depreciation

- It s contra account that contains the sum of the periodic depreciation charges. The balance in this account is deducted from the cost of the related asset - equipment or building, to obtain book value (or carrying amount).

Intangible Assets

- These are identifiable, nonmonetary assets, without physical substance held for use in the production or supply of goods or services, for rental to others, or for administrative purposes. These include goodwill, patents, copyrights, licenses, franchises, trademarks, brand names, secret processes, subscription lists and non-competition agreements.

Accounts Payable

- This account represents the reverse relationship of the accounts receivable. By accepting the goods or services, the buyer agrees to pay for them in the near future.

Accrued Liabilities

- Amounts owed to others for unpaid expenses. This account includes salaries payable, utilities payable, interest payable and taxes payable.

Unearned Revenues

- when the business entity receives payment before providing customers with goods or services, the amounts received are recorded in the unearned revenue account (liability method). When the goods or services are provided to the customer, the unearned revenue is reduced and income is recognized.

Current Portion of Long-Term Debt

- These are portions of mortgage notes, bonds and other long-term indebtedness which are to be paid within one year from end of the reporting period (balance sheet date)

Mortgage Payable

- This account records long-term debt of the business entity for which the business entity has pledged certain assets as security to the creditor. In the event the debt payments are not made, the creditor can foreclose or cause the mortgaged asset to be sold to enable the entity to settle the claim.

Bonds Payable

- Business organizations obtain substantial sums of money from lenders to finance the acquisition of equipment and other needed assets. They obtain these funds by issuing bonds. The bond is contract between the issuer and the lender specifying the terms of repayment and the interest to be charged.

Capital

- this account is used to record the original and additional investments of the owner of the business entity. It is increased by the amount of profits earned during the year or is decreased by a loss. Cash or other assets that the owner may withdraw from the business ultimately reduce it. This account title bears the name of the owner.

Withdrawals

- When the owner of a business entity withdraws cash or other assets, such are recorded in the drawing or withdrawal account rather than directly reducing the owner's equity account.

Income Summary

- It is a temporary account used at the end of the accounting period to close income and expenses. This account shows the profit or loss for he period before closing to the capital account.

Revenue

or income is the inflow of money or other assets (including claims to money such as sale made on credit) that results from sales of goods or services or from the use of money or property. The result of revenue is an increase to assets.

Service Income/revenue

- Revenue earned by performing services for a customer or client, for example: accounting services by a CPA firm, laundry services by a laundry shop.

Sales

- Revenues earned as a result of sale of merchandise; for example: sale of building materials by a construction supplies firm.

Expenses

It involves the outflow of money, the use of other assets, or the incurring of a liability.

Expenses include cost of any materials, labor, supplies, and services used in an effort to produce revenue.

Cost of Sales

- The cost incurred to purchase or to produce the products sold to customers during the period, also called cost of goods sold. Salaries or wages expense include all payments as a result of an employer-employee relationship such as salaries or wages, 13th month pay, cost of living allowances and other related benefits.

Telecommunications, Electricity, Fuel and Water Expenses/ utilities expenses

- This relate to use of telecommunications facilities, consumption of electricity, fuel and water.

Supplies Expense

. These are expenses of using supplies (e.g. office supplies) to the conduct of daily business.

Rent Expense

. These are expenses for space, equipment and other asset rentals.

Insurance Expense

. Portion of premiums paid on insurance coverage (e.g. on motor vehicle, health, life, fire, typhoon or flood) which has expired.

Depreciation Expense

. The portion of the cost of a tangible asset (e.g. building or equipment) allocated or charged as expense during an accounting period.

Uncollectible Accounts Expense

. The amount of receivable estimated to be doubtful of collection and charged as expense during an accounting period

Interest Expense

. An expense related to use of borrowed funds.

Rules of DEBIT and CREDIT

AWE LER

Formula

ASSETS = LIABILITIES + EQUITY + INCOME - EXPENSES