MODULE
2AND MANAGEMENT 1 REFRESHER
FUNDAMENTALS OF ACCOUNTANCY,
BUSINESS,
Abanag, Catherine Evangelista
Andraje, Daisy Mae Espinosa
Sabanal, Ericson
Nacinopa, Pat
Gutana, Railey
Ramirez, Benedick Orongan
Manlaysay, Carlos Miguel
Fajardo, Yumi Jacyrie
Tapang, Angelo B.
RULES OF DEBIT AND CREDIT
What are the Debit and Credit Rules?
Debits and credits are the opposing sides of an accounting journal entry. They
are used to
change the ending balances in the general ledger accounts when accrual basis
accounting is
used. The rules governing the use of debits and credits in a journal entry are
noted below.
ABANAG
Rule 1: Debits Increase Expenses, Assets, and Dividends
All accounts that normally contain a debit balance will increase in amount when a debit
(left
column) is added to them, and reduced when a credit (right column) is added to them.
The types
of accounts to which this rule applies are expenses, assets, and dividends.
SABANAL
Rule 2: Credits Increase Liabilities, Revenues, and Equity
All accounts that normally contain a credit balance will increase in amount when a credit
(right column) is added to them, and reduced when a debit (left column) is added to them.
The types of accounts to which this rule applies are liabilities, revenues, and equity.
ANDRAJE
Rule 3: Contra Accounts Offset Paired Accounts
Contra accounts reduce the balances of the accounts with which they are
paired. This means that (for example) a contra account paired with an asset
account behaves as though it were a
liability account.
BACUETE
Rule 4: Entries Must Balance
The total amount of debits must equal the total amount of credits in a transaction.
Otherwise, a transaction is said to be unbalanced, and the financial statements from which a
transaction is constructed will be inherently incorrect. An accounting software package will
flag any journal entries that are unbalanced, so that they cannot be entered into the system
until they have been corrected.
FAJARDO
GUTANA
THE ACCOUNTING EQUATION
Assets = Liabilities + Equity
⚫ Assets are things of value owned by a business. There are different categories
of business assets including long-term assets, capital assets, investments and tangible
assets. They were acquired by borrowing money from lenders, receiving cash from owners
and shareholders or offering goods or services. Current business assets include cash and
accounts receivable, while long-term assets include notes receivable. Items such as plants,
property and equipment are considered capital assets. Securities owned by a company like
stocks and bonds are called investments. Intangible assets found on the company balance
sheet include trademarks, goodwill, patents and copyrights. The accounting equation states
that the amount of assets must be equal to liabilities plus shareholder or owner equity.
MANALAYSA
⚫ Liabilities are obligations owed to other companies and people are considered
liabilities and can be categorized as current and long-term liabilities. Due within the year,
current liabilities on a balance sheet include accounts payable, wages or payroll payable
and taxes
payable. Long-term liabilities are usually owed to lending institutions and include notes
payable and possibly unearned revenue. Unearned revenue from the money you have yet
to receive for services or products that you have not yet delivered is considered a
liability.
NACINOPA
⚫ Shareholders' Equity is the revenue a company shareholder can claim after debts have
been paid is Shareholder Equity. Shareholder Equity is equal to a business’s total assets
minus its total liabilities. It can be found on a balance sheet and is one of the most
important metrics for analysts to assess the financial health of a company. Shareholder
Equity represents the net or book value of a business.
RAMIREZ
TAPAN
THANK YOU
