ELEMENTS OF FINANCIAL STATEMENTS AND ACCOUNT TITLES USED
ASSETS- are defined as “resources controlled by the enterprise as a result of past transactions
and events and from which future economic benefits are expected to flow in the enterprise”.
ASSETS ARE CLASSIFIED INTO TWO
CURRENT ASSETS
Refer to all assets that are expected to be realized, sold or consumed
within the enterprise’s normal operating cycle. Operating cycle is the
interval of time from the date of acquisition of merchandise inventory,
sell the inventory to customers and the ultimate collection of cash from
the sale. When the normal operating cycle of the business is not clearly
identifiable, it is assumed to be twelve months.
CASH- the account title to describe money, either paper or in coins and money
substitute like check, postal money orders, bank draft and treasury warrants.
When cash is within the premise of the business, the account title is cash on
hand and cash in bank if deposited in the bank.
PETTY CASH FUND- the account title for money placed and set aside for petty or
small expense.
CASH EQUIVALENTS- short-term, highly liquid instruments that are readily
convertible into cash and they present insignificant risk of change in interest
rate.
NOTE RECEIVABLE- this is a promissory note that is received by the business
from the customer arising from rendering of services, sale of merchandise, etc.
this can either be an interest bearing or non-interest bearing.
ACCOUNT RECEIVABLE- the account title for a amounts collectible arising from
services rendered to a customer or client on credit or sale of goods to customers
on accounts. This constitutes an oral or verbal promise to pay by a customer or
client.
ESTIMATED UNCOLLECTIBLE ACCOUNTS- this is an asset offset or contra-asset
account. It provides for possible losses from uncollected accounts. Although this
is not actually an asset, it is classified as such because it is shown as a deduction
from the accounts receivable which is a current asset account.
ACCUED INCOME- the amount of income earned but not yet collected.
ADVANCES TO EMPLOYEES- the account title for amounts collectable from
employees for allowing them to make cash advance which are deductibleagainst
their salaries or wages.
INVENTORIES- these are assets which are:
1. Held for sale in the ordinary course of business.
2. In the process of production for such sale.
3. The form of materials or supplies to be consumed in the
production process or in the rendering of services.
ASSETS- are defined as “resources controlled by the enterprise as a result of past transactions
and events and from which future economic benefits are expected to flow in the enterprise”.
ASSETS ARE CLASSIFIED INTO TWO
CURRENT ASSETS
Refer to all assets that are expected to be realized, sold or consumed
within the enterprise’s normal operating cycle. Operating cycle is the
interval of time from the date of acquisition of merchandise inventory,
sell the inventory to customers and the ultimate collection of cash from
the sale. When the normal operating cycle of the business is not clearly
identifiable, it is assumed to be twelve months.
CASH- the account title to describe money, either paper or in coins and money
substitute like check, postal money orders, bank draft and treasury warrants.
When cash is within the premise of the business, the account title is cash on
hand and cash in bank if deposited in the bank.
PETTY CASH FUND- the account title for money placed and set aside for petty or
small expense.
CASH EQUIVALENTS- short-term, highly liquid instruments that are readily
convertible into cash and they present insignificant risk of change in interest
rate.
NOTE RECEIVABLE- this is a promissory note that is received by the business
from the customer arising from rendering of services, sale of merchandise, etc.
this can either be an interest bearing or non-interest bearing.
ACCOUNT RECEIVABLE- the account title for a amounts collectible arising from
services rendered to a customer or client on credit or sale of goods to customers
on accounts. This constitutes an oral or verbal promise to pay by a customer or
client.
ESTIMATED UNCOLLECTIBLE ACCOUNTS- this is an asset offset or contra-asset
account. It provides for possible losses from uncollected accounts. Although this
is not actually an asset, it is classified as such because it is shown as a deduction
from the accounts receivable which is a current asset account.
ACCUED INCOME- the amount of income earned but not yet collected.
ADVANCES TO EMPLOYEES- the account title for amounts collectable from
employees for allowing them to make cash advance which are deductibleagainst
their salaries or wages.
INVENTORIES- these are assets which are:
1. Held for sale in the ordinary course of business.
2. In the process of production for such sale.
3. The form of materials or supplies to be consumed in the
production process or in the rendering of services.
