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Naum Lukin

Win Ballada's Basic Accounting: A Comprehensive and Updated Resource for Students and Professionals


Outline of the article: # Basic Accounting by Win Ballada: A Comprehensive Guide ## Introduction - What is basic accounting and why is it important? - Who is Win Ballada and what are his credentials? - What are the features and benefits of his book Basic Financial Accounting and Reporting (Made Easy)? ## Chapter 1: Accounting and Its Environment - The definitions, evolution and branches of accounting - The types and forms of business organizations - The purpose and phases of accounting - The fundamental concepts and principles of accounting - The accountancy profession and its standards in the Philippines ## Chapter 2: Accounting Equation and the Double-Entry System - The elements of financial statements - The accounting equation and its applications - The double-entry system and its rules - The types and effects of transactions - The normal balance of accounts ## Chapter 3: Recording Business Transactions - The accounting cycle and its steps - The source documents and their uses - The journal and its types - The ledger and its types - The trial balance and its preparation ## Chapter 4: Adjusting Entries - The need for adjusting entries - The types of adjusting entries - The effects of adjusting entries on financial statements - The worksheet and its preparation ## Chapter 5: Completing the Accounting Cycle - The closing entries and their purposes - The post-closing trial balance and its preparation - The reversing entries and their advantages ## Chapter 6: Financial Statements - The purpose and users of financial statements - The components and formats of financial statements - The income statement and its preparation - The statement of changes in equity and its preparation - The statement of financial position and its preparation ## Chapter 7: Cash and Cash Equivalents - The definition and classification of cash and cash equivalents - The internal control over cash receipts and disbursements - The bank reconciliation statement and its preparation - The petty cash fund and its operation Basic Accounting by Win Ballada: A Comprehensive Guide




Introduction




Basic accounting is the process of recording, summarizing and reporting the financial transactions of a business. It is essential for any business owner, manager or investor to understand the financial performance and position of a business. Basic accounting helps to make informed decisions, comply with tax laws and regulations, and communicate with external parties such as creditors, investors and customers.




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One of the best sources to learn basic accounting is the book Basic Financial Accounting and Reporting (Made Easy) by Win Ballada. Win Ballada is a certified public accountant, a certified business educator and a master of business administration. He is also a topnotcher in the CPA board exam and a prolific author of accounting books since 1996. He has written more than 20 books on various topics such as financial accounting, management accounting, taxation, auditing and business law.


His book Basic Financial Accounting and Reporting (Made Easy) is a comprehensive guide that covers the fundamental concepts and principles of accounting, the accounting cycle and its steps, the preparation and presentation of financial statements, and the accounting for specific items such as cash, receivables, inventories, property, plant and equipment, liabilities and equity. The book is compliant with the 2018 conceptual framework and the revised corporation code of the Philippines. It also features conceptual, clear discussions, updated examples and exercises, reliable solutions and answers, and relevant Philippine standards and practices.


In this article, we will provide a summary of each chapter of the book and highlight the key points and tips that you need to know. Whether you are a student, a professional or a business owner, this article will help you to learn or review the basics of accounting in an easy and effective way.


Chapter 1: Accounting and Its Environment




In this chapter, you will learn about:


  • The definitions, evolution and branches of accounting



  • The types and forms of business organizations



  • The purpose and phases of accounting



  • The fundamental concepts and principles of accounting



  • The accountancy profession and its standards in the Philippines



Accounting is defined as the language of business. It is a system that measures, processes and communicates financial information about an economic entity. An economic entity is any organization or unit that engages in economic activities such as producing goods or services, buying or selling assets, borrowing or lending money, or paying taxes.


Accounting has evolved over time from primitive methods such as using bullae, clay tablets or quipu to modern methods such as using computers, databases or software. Accounting has also developed different branches to serve different purposes such as auditing, bookkeeping, cost accounting, financial accounting, financial management, management accounting or taxation.


Business organizations can be classified into different types based on their activities such as service, merchandising or manufacturing. They can also be classified into different forms based on their ownership such as sole proprietorship, partnership or corporation. Each form has its own advantages and disadvantages in terms of legal liability, taxation, control and continuity.


The purpose of accounting is to provide useful information to various users for decision making. The users can be internal such as owners, managers or employees or external such as creditors, investors or customers. The phases of accounting are identifying transactions, recording transactions in journals, posting transactions to ledgers, preparing trial balances, adjusting entries, preparing financial statements and closing entries.


The fundamental concepts and principles of accounting are the basic assumptions and rules that guide the accounting process. Some of the most important concepts are entity concept (the business is separate from its owners), periodicity concept (the life of the business is divided into periods), stable monetary unit concept (the value of money does not change over time) and going concern concept (the business will continue to operate indefinitely). Some of the most important principles are objectivity principle (the accounting information should be based on facts), historical cost principle (the assets should be recorded at their original cost), revenue recognition principle (the revenue should be recorded when earned) and expense recognition principle (the expenses should be recorded when incurred).


The accountancy profession in the Philippines is regulated by the Accountancy Act of 2004 which defines the scope of practice, qualifications and responsibilities of certified public accountants (CPAs). The CPAs must pass a licensure examination administered by the Professional Regulatory Board of Accountancy (PRBOA) and comply with the code of ethics and standards of the Philippine Institute of Certified Public Accountants (PICPA). The accounting standards in the Philippines are issued by the Financial Reporting Standards Council (FRSC) which adopts the International Financial Reporting Standards (IFRS).


Chapter 2: Accounting Equation and the Double-Entry System




In this chapter, you will learn about:


  • The elements of financial statements



  • The accounting equation and its applications



  • The double-entry system and its rules



  • The types and effects of transactions



  • The normal balance of accounts



The elements of financial statements are the components that make up the financial reports of a business. The financial statements include the income statement, the statement of changes in equity, the statement of financial position and the statement of cash flows. The elements of financial statements are assets, liabilities, equity, income and expenses.


Assets are the resources owned or controlled by the business that can provide future economic benefits. Liabilities are the obligations of the business to transfer assets or provide services to other entities in the future. Equity is the residual interest of the owners in the assets of the business after deducting the liabilities. Income is the increase in economic benefits during a period in the form of inflows or enhancements of assets or decreases of liabilities that result in increases in equity, other than those relating to contributions from owners. Expenses are the decrease in economic benefits during a period in the form of outflows or depletions of assets or increases of liabilities that result in decreases in equity, other than those relating to distributions to owners.


The accounting equation is a mathematical expression that shows the relationship between the elements of financial statements. The accounting equation is: Assets = Liabilities + Equity. This means that the total assets of a business must always equal the total claims on those assets, which are either liabilities or equity. The accounting equation can also be expressed as: Equity = Assets - Liabilities. This means that the net worth or owner's equity of a business is equal to the excess of assets over liabilities.


The accounting equation can be used to analyze and record the effects of transactions on the financial position of a business. A transaction is an exchange or transfer of economic value between two or more entities that can be measured and recorded in monetary terms. Transactions can be classified into three types based on their effects on the accounting equation: source transactions, exchange transactions and use transactions.


A source transaction is one that increases both an asset and a claim (liability or equity) on that asset. For example, when a business borrows money from a bank, it increases both cash (an asset) and bank loan (a liability). A source transaction does not change the total assets or total claims, but it changes their composition.


An exchange transaction is one that decreases one asset and increases another asset, or decreases one claim and increases another claim, or decreases an asset and decreases a claim on that asset. For example, when a business buys inventory on credit, it decreases cash (an asset) and increases inventory (another asset), or when a business pays dividends to its owners, it decreases retained earnings (an equity) and decreases cash (an asset). An exchange transaction does not change the total assets or total claims, but it changes their composition.


A use transaction is one that decreases both an asset and a claim on that asset. For example, when a business pays rent for its office space, it decreases both cash (an asset) and retained earnings (an equity). A use transaction does not change the total assets or total claims, but it changes their composition.


The double-entry system is a method of recording transactions that ensures that every transaction affects two accounts in such a way that the accounting equation is always maintained. The double-entry system uses debits and credits to record changes in accounts. A debit is an entry that increases an asset or decreases a liability or equity. A credit is an entry that decreases an asset or increases a liability or equity. For every transaction, there must be at least one debit and one credit, and the total amount of debits must equal the total amount of credits.


Chapter 3: Recording Business Transactions




In this chapter, you will learn about:


  • The accounting cycle and its steps



  • The source documents and their uses



  • The journal and its types



  • The ledger and its types



  • The trial balance and its preparation



The accounting cycle is a series of steps that are performed to record, summarize and report the financial transactions of a business. The accounting cycle consists of the following steps:


  • Identify and analyze transactions



  • Record transactions in journals



  • Post transactions to ledgers



  • Prepare a trial balance



  • Adjust entries



  • Prepare financial statements



  • Close entries



  • Prepare a post-closing trial balance



  • Reverse entries (optional)