Cost Accounting and Cost Management
Accounting is. . .
1.)
2.)
3.)
4.)
5.)
Basic Accounting Cycle
ABSantos, CPA, RCA
A service activity.
It’s function is to provide quantitative information,
Primarily financial in nature
About economic entity
That is intended to be useful in making economic decisions.
Accounting is also defined as. . .
An “ART” of:
1.) RECORDING
a.
Journalizing – Books of Original Entry
Journals
• General Journals
• Cash Receipt Journals
• Sales Journals
• Cash Disbursements Journal
• Purchase Journal
2.) CLASSIFYING
b.
Posting – Books of Final Entry
General Ledger
• Subsidiary Ledgers
3.) SUMMARIZING
c.
Preparation of the Unadjusted Trial Balance – Contains both Real /
Permanent and Nominal / Temporary Accounts
Preparation of the Adjusting Journal Entries
Preparation of the Adjusted Trial Balance – Contains both Real /
Permanent and Nominal / Temporary Accounts
Preparation of the Financial Statements
d.
e.
f.



`
Statement of Financial Position or Balance Sheet
- (Real / Permanent Accounts)
• Statement of Changes in Capital /
Stockholder’s Equity / Retained Earnings
• Cash Flow Statement
Statement of Income or Income Statement
- (Nominal / Temporary Accounts)
Notes to Financial Statements
g. Preparation of Closing Entries – Clearing Entries
- Close All Income and Expenses to Income Summary Account
- Credit / Debit Balances will be closed directly to Capital or Retained
Earnings Account which signifies the Net Income / Loss respectively.
h. Preparation of the Post Closing Trial Balance - Ends the Accounting Cycle.
- Contains the Permanent Accounts balances only.
i. Preparation of the Reversing Entries
- Accrued Income / Expenses
- Prepaid Expenses (Expense Method)
- Deferred or Unearned Income (Income Method)
4.) INTERPRETING
-
1|Page
Financial Statement Analysis
Cost Accounting and Cost Management
Basic Accounting Cycle
ABSantos, CPA, RCA
FUNDAMENTALS OF ACCOUNTING
Listed below are the February 1, 2007 account balances of the Alexander D’ Great Company: (110)
Cash Php33,000; (120) Accounts Receivable Php192,000; (130) Merchandise Inventory Php413,000; (140)
Supplies Php51,000; (150) Prepaid Insurance Php48,000; (160) Land Php460,000; (170) Building
Php1,750,000; (175) Accumulated Depreciation-Building Php350,000; (180) Equipment Php2,310,000; (185)
Accumulated Depreciation-Equipment Php630,000; (210) Accounts Payable Php108,000; (230) Mortgage
Payable Php2,600,000; (310) Gibson, Capital Php1,569,000.
Other accounts in addition to the accounts with remaining balances are: (220) Salaries Payable; (320)
Gibson, Withdrawal; (330) Income Summary; (410) Sales; (420) Sales Return and Allowances; (430) Sales
Discounts; (510) Purchases; (520) Purchase Returns and Allowances; (530) Purchase Discounts; (540)
Transportation-In; (610) Salaries Expenses; (620) Supplies Expense; (630) Insurance Expense; (640)
Depreciation Expense-Building; (650) Depreciation Expense-Equipment; (660) Transportation-Out; (670)
Advertising Expense; (680) Interest Expense; (690) Miscellaneous Expense.
During the month of February, the following transaction occurred:
Feb.
1
2
4
5
7
7
8
9
10
12
14
15
16
18
19
20
22
23
24
24
25
26
28
28
Collected P113,000 from customers on account
Paid P64,000 of accounts due less discounts of 3%
Purchased merchandise, P170,000. Terms: FOB Shipping point; 3/10, n/30
Sold merchandise on account to Gonzales Company, P270,000. Terms: FOB shipping point;
2/10, n/30.
Paid for advertising for the month of February, P6000
Sold merchandise for cash, P250,000
Paid the amount due from the February 4 transaction
Paid Iloilo Freight P4,000 for delivering merchandise last February 4
Received returns from the Gonzales Company, P70,000
Received payment from the Gonzales Company less returns and discounts
Paid P26,000 interest on the Mortgage Payable
Paid salaries, P51,000
Sold merchandise on account to Ronzales Company, P392,000. Terms: FOB Destination,
2/10, n/30
Paid P4,000 freight charges on the sale of February 2016
Acquired supplies for cash, P21,000
Purchased P125,000 of merchandise from Lozada Company on account. Terms: FOB
Destination; 3/10, n/30
Paid P7,000 miscellaneous expenses
Received payment from Ronzales Company less discounts
Purchased P373,000 of merchandise on account from Agustin Company. Terms: FOB
Shipping Point; 3/10, n/30
Paid La Paz Express P9,000 freight for delivering merchandise acquired from Agustin.
Sold merchandise to Ronzales Company on account, P420,000. Terms: FOB shipping point,
2/10, n/30
Received returns from Ronzales Company, P71,000
Gibson withdrew P400,000 from the business
Returned merchandise purchased from Agustin on February 24, P25,000
Required:
1. Post the February account balances to the ledger accounts
2|Page