Fundamentals of Accounting

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Chapter 1 & 2 Summary
Accounting is a process of identifying, measuring, and communicating economic information to permit informed judgments and decisions by users of the information. It is a service activity and the language of business. Its main function is to provide qualitative information that is intended to be useful in making economic decisions.
The Accounting process is a series of repetitive activities of recording, summarizing and reporting economic transactions from the beginning to the end of the accounting period. It involves Identifying, Measuring and Communicating. The recording phase involves Documentation and Recording (a. Posting to the general journal b. posting to the general ledger). The Summarizing phase involves Preparation of Trial Balance, Preparation of Working Paper, Preparation of post-closing Trial Balance and Preparation of financial statements.
The Summary of Debit and Credit Analysis. The T- Account is used as a tool to analyze the effect of business transaction, maintains the equation Debit = Credit. The rules of Debit and Credit can be summarized as Debit (Increases in: Assets Expenses Losses; Decreases in Liabilities, Capital, Revenue and Profit), Credit (Increases in: Liabilities, Capital, Revenue and Profit).
Adjusting entries are journal entries which bring some accounts to their current and correct value. Basic adjusting entries are Accruals, Prepayments, Pre-collections, Depreciation and amortization, Uncollectible accounts and Ending Inventory.
Accounting errors are misstatements of accounting data due to inaccurate measuring and recording of business transactions. Types of Accounting Errors are namely, Errors due to omission and Errors on amount recorded, account title and accounting treatment. Correcting Entry is a journal entry designed to remove accounting errors made in the general journal in the general journal and general ledger.
Partnership by the definition of the Civil Code of the Philippines is that

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