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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.




basic accounting win ballada.rar



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)



The source documents are the original records that provide evidence and details of the transactions that occurred. The source documents include invoices, receipts, checks, bank statements, contracts, vouchers and other documents that support the validity and accuracy of the transactions. The source documents are used to identify and analyze the transactions and to record them in journals.


The journal is a chronological record of transactions that shows the accounts and amounts affected by each transaction. The journal entry consists of the date, the account titles and amounts to be debited and credited, and a brief explanation of the transaction. The journal entry follows the rules of the double-entry system and maintains the accounting equation. The journal is also known as the book of original entry because it is the first place where transactions are recorded. There are different types of journals depending on the nature and frequency of transactions such as general journal, sales journal, purchases journal, cash receipts journal and cash disbursements journal.


The ledger is a collection of accounts that shows the changes in each account due to transactions and the balances of each account at any point in time. The ledger account consists of the account title, the date, the reference, the debit amount and the credit amount for each transaction that affects that account. The ledger account shows the increase or decrease in each account and the balance after each transaction. The ledger is also known as the book of final entry because it is the final place where transactions are recorded before preparing financial statements. There are two types of ledgers depending on the level of detail and aggregation of accounts such as general ledger and subsidiary ledger.


The trial balance is a list of all accounts in the ledger with their balances at a given date. The trial balance is prepared to check the accuracy and completeness of recording transactions in journals and posting them to ledgers. The trial balance shows the debit balances and credit balances of each account and verifies that they are equal. If they are not equal, it means that there is an error in recording or posting transactions that needs to be corrected. The trial balance is also used to prepare adjusting entries and financial statements.


Chapter 4: Adjusting Entries




In this chapter, you will learn about:


  • The need for adjusting entries



  • The types of adjusting entries



  • The effects of adjusting entries on financial statements



  • The worksheet and its preparation



The adjusting entries are journal entries that are made at the end of an accounting period to update the accounts and reflect the correct amounts of revenues, expenses, assets and liabilities in the financial statements. The adjusting entries are needed because some transactions or events are not recorded during the period or are recorded incorrectly or incompletely. The adjusting entries ensure that the revenue recognition principle and the expense recognition principle are followed.


The types of adjusting entries are classified into four categories based on their nature and purpose:


  • Accruals: These are adjusting entries that record revenues or expenses that have been earned or incurred but not yet recorded or received or paid. For example, interest revenue earned but not yet received, salary expense incurred but not yet paid.



  • Deferrals: These are adjusting entries that record revenues or expenses that have been received or paid in advance but not yet earned or incurred. For example, rent revenue received in advance but not yet earned, insurance expense paid in advance but not yet incurred.



  • Depreciation: This is an adjusting entry that records the allocation of the cost of a long-term asset over its useful life as an expense. For example, depreciation expense for a building, equipment or vehicle.



  • Estimates: These are adjusting entries that record the estimated amounts of revenues or expenses that are uncertain or difficult to measure. For example, bad debts expense for uncollectible accounts receivable, warranty expense for defective products.



The effects of adjusting entries on financial statements are to update the balances of the accounts and to match the revenues and expenses of the period. The adjusting entries increase or decrease the revenues, expenses, assets and liabilities in the income statement and the statement of financial position. The adjusting entries also affect the statement of changes in equity and the statement of cash flows indirectly through the net income and the retained earnings.


Chapter 5: Completing the Accounting Cycle




In this chapter, you will learn about:


  • The closing entries and their purposes



  • The post-closing trial balance and its preparation



  • The reversing entries and their advantages



The closing entries are journal entries that are made at the end of an accounting period to transfer the balances of the temporary accounts (revenues, expenses and dividends) to the permanent account (retained earnings). The closing entries are needed to prepare the accounts for the next accounting period and to report the net income or loss and the dividends for the current period in the statement of changes in equity. The closing entries follow a four-step process:


  • Close the revenue accounts to the income summary account. This entry debits all the revenue accounts and credits the income summary account for the total amount of revenues.



  • Close the expense accounts to the income summary account. This entry credits all the expense accounts and debits the income summary account for the total amount of expenses.



  • Close the income summary account to the retained earnings account. This entry transfers the net income or loss for the period from the income summary account to the retained earnings account. If there is a net income, this entry debits the income summary account and credits the retained earnings account. If there is a net loss, this entry credits the income summary account and debits the retained earnings account.



  • Close the dividends account to the retained earnings account. This entry transfers the dividends for the period from the dividends account to the retained earnings account. This entry debits the retained earnings account and credits the dividends account.



The post-closing trial balance is a list of all accounts in the ledger with their balances after closing entries have been posted. The post-closing trial balance is prepared to check that all temporary accounts have been closed and that the total debit balances equal the total credit balances. The post-closing trial balance shows only permanent accounts (assets, liabilities and equity) and their balances at the end of the period.


The reversing entries are optional journal entries that are made at the beginning of an accounting period to reverse some or all of the adjusting entries made at the end of the previous period. The reversing entries are used to simplify the recording of transactions in the current period that are related to transactions in the previous period. The reversing entries are especially useful for accruals and deferrals that


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