T.L.E.

IV

Name:

Maricris C. Escuadro IV- Maxwell

Year & Section: Teacher:

Mrs. Bermudez

Accounting Elements Assets

Assets are defined as a probable future economic benefits obtained or controlled by a particular entity as a result of past transactions or events. Per revised Philippine Accounting Standards (PAS) No. 1, an entity shall classify assets as current when: a. it expects to realize the asset , or intends to sell or consume it , in its normal operating cycle; b. it holds the asset primarily for the purpose of trading; c. it expects to realize the asset within twelve months after the reporting period; or d. the asset is cash or a cash equivalent (as defined in PAS No. 7) unless the asset is restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.

Current Assets
Cash. Cash is any medium of exchange that a bank will accept for deposit at face value. It includes coins, currency, checks, money orders, bank deposit and drafts. Cash Equivalents. Per PAS No. 7, these are short term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. Notes Receivable. A note receivable is a written pledge that the consumer will pay the business a fixed amount of money on a certain date. Accounts Receivable. These are claims against costumers arising from sale of services or goods on credit. This type of receivable offers less security than a promissory note. Inventories. Per PAS No. 2, these are assets which are (a) held for sale in the ordinary course of business; (b) in the process of production for such sale; (c) in the form of materials or supplies to be consumed in the production process or in the rendering of services. Prepaid Expenses. There are expenses paid for by the business in advance. It is an assets because the business avoids having to pay cash in the future for a specific expense. These include insurance and rent. These prepaid items represent future economic benefits assets- until the time this start to contribute to the earning process; these, then, become expenses.

Non-current Assets
Property, Plant and Equipment. Per PAS No. 16, 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. Included are such items as land, building, machinery and equipment, furniture and fixtures, motor vehicles and equipment. Accumulated Depreciation. It is a contra account that contains the sum of the periodic depreciation charges. The balance in these account is deducted from the cost of the related asset-equipment or buildings-to obtain book value. Intangible Assets. Per PAS No. 38, 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.

Liabilities
Liabilities represent financial obligations of an entity to transfer assets or provide services to other entities in the future as a result of past transactions or events. Per revised Philippine Accounting Standards PAS No. 1, an entity shall classify a liability as a current when: a. It expects to settle the liability in its normal operating cycle; b. It holds the liability primarily for the purpose of trading; c. The liability is due to be settled within twelve months after the reporting period; or d. The entity does not have an unconditional right to defer settlement of the liability for at least twelve months after the reporting period.

Current Liabilities
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. Notes Payable. A note payable is like a note receivable but in a reverse sense. In a case of a note payable, the business entity is the marker of the note; that is, the business entity is the party who promises to pay the other party a specified amount of money on a specific future date. 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 its costumers with goods or services, the amounts received are recorded in the unearned revenue account (liability method). When the goods or services provided to the costumer, 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 for the balance sheet date.

Non-current Liabilities
Mortgage Payable. This account records long-term debt of the business entity for which the business entity has pledge certain assets as security to the creditor. In the event that the debt payments are not made, the creditor can foreclose or cause the mortgaged assets to be sold enable the entity to settle the claim. Bonds Payable. Business organization often 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 a contract between the issuer and the lender specifying the terms of repayment and the interest to be charged.

Owners Equity
Net assets or equity is the residual interest in the assets of the entity after deducting all its liabilities. 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 profit earned during the year or decrease by loss. Withdrawals. When the owner of the business entity withdraws cash or other assets, such as recorded in the drawing or withdrawal account rather than directly reducing the owners equity account. Income Summary. It is temporary account used at the end of the accounting period to the close income and expenses. This account shows the profit or loss for the period before closing to the capital account.

Revenue
The amount of money that a company actually receives during a specific period, including discounts and deductions for returned merchandise. It is the "top line" or "gross income" figure from which costs are subtracted to determine net income.

Expenses
Expenses are decreases in economic benefits or service potential during the reporting period in the form of outflows or consumption of assets or incurrence of liabilities that result in decreases in net assets or equity, other than those relating to distributions to owners. Cost of Sales. The cost incurred to purchased or to produced the products sold to costumers during the period; called cost of good sold.

Salaries or Wages Expenses. Includes all payments as a result of an employeremployee relationship such as salaries or wages, 13th month pay, cost of living allowances and other related benefits. Telecommunications, Electricity, Fuel and Water Expenses or Utilities Expenses. Expenses related to use of telecommunication facilities, consumption of electricity, fuel and water. Rent Expenses. Expense for space, equipment or other asset rentals. Supplies Expenses. Expense of using supplies in the conduct of daily business. Insurance Expense. Portion of premiums paid on insurance coverage which has expired. Depreciation Expense. The portion of the cost of a tangible asset allocated or charge as expense during an accounting period. Interest Expense. A expense related to use of borrowed funds.

Income
Income is the consumption and savings opportunity gained by an entity within a specified time frame, which is generally expressed in monetary terms. However, for households and individuals, "income is the sum of all the wages, salaries, profits, interests payments, rents and other forms of earnings received... in a given period of time Service income. Serves as a generic term used to encompass income earned for service rendered. Professional fees. Gross billings of a lawyer, doctor accountant, engineer or any other professionals for service rendered. Retainer fees. Somewhat the same with professional fees, the only difference is that retainer fees are of a fixed price for a certain period.