Introduction

Accounting system is an organized set of manual and computerized accounting methods,

procedures and controls established to gather, record, classify, analyze, summarize, interpret, and

present accurate and timely financial data for management decisions. An accounting system

allows a business to keep track of all types of financial transactions, including expenses, income,

liabilities, assets, etc. and can generate comprehensive statistical reports that provide management

or other interested parties to aid in the decision-making process.

Accounting Cycle:

1. Recording in the journals

Business transaction are recorded using double entry bookkeeping system. Each journal

entry will consist of amounts that are debits and credits, the transaction date and the

explanation of the transaction. Transaction are recorded in chronological order and as they

occur.
2. Posting to the ledger

After journalizing transactions, the data will be transferred to another account called the

ledger.

3. Unadjusted trial balance

The trial balance itemizes the debit and credit totals for each account. Its purpose is to test

the equality of all debits and credits. It is also a control tool to help find errors in recording

or posting.

4. Adjusting entries

Adjusting entries are prepared to update the accounts before they are summarized in the

financial statements.

5. Financial Statements

The financial statements are the end product0 of an accounting system: Statement of

Comprehensive Income, Statement of Financial Position, Statement of Cash Flow,

Statement of Changes in Equity, and Notes to Financial Statements.

6. Closing entries

Temporary balances are reduced to zero in order to prepare the accounts for the following

year’s transactions.

7. Post-closing trial balance

After the closing entries, the only accounts that remain will be the permanent entries or real

accounts: assets, liabilities, and owner’s equity.

The accounting system is composed of:

I. Business Papers and Forms

The recording phase starts with the understanding of the documentation, specifically all

financial records and paper works, showing what business activities had occurred. A business

document, also known as source document is the original record containing the details to

substantiate a transaction. It provides a means of verifying the accounting records and thus has an

essential part of the information and control system.

II. Journals and Ledgers

The business will maintain various journals to meet specific needs of the business. A

journal entry is made for each transaction showing the accounts and amounts. There are two kinds

of a journal, a special journal and a general journal. A special journal is used to record frequently

recurring transactions such as sales, cash receipts, purchases on account, and cash disbursement

while general journal is used to record all transactions for which in a special journal is not

maintained. On the other hand, a ledger is a collection of accounts maintained by the business. The

information provided on the financial statements and the controls to be employed in carrying of

the functions to detailed information is supported by different account ledgers maintained

separately. General ledgers contain all accounts appearing on the financial statements. Subsidiary

ledgers encompass detailed support for a certain general ledger.

III. Business Machines

These are devices and/or equipment used to maintain the recording, processing and storage

of important business transactions and forms. These develop the internal control system of the

organization. The business should always consider the cost of acquiring, maintaining and the

effectiveness and efficiency of such machine.

 IV. Chart of Accounts
Chart of accounts is a listing of the accounts available in the accounting system in which

to record entries. It consists of balance sheet accounts (assets, liabilities, capital) and income

statement accounts (revenues, expenses, gains, losses). It is used to organize the finances of the

proposed agency and to segregate expenditures, revenues, assets, and liabilities in an orderly

manner to give the proponents a better comprehension of the financial health the entity,

The accounts are divided into the following categories: Assets, Liabilities, Capital, Income,

and Expenses. The accounts have their corresponding codes.

ASSETS

 Current Assets

Cash on Hand 101

Inventory 102

 Noncurrent Assets
103
Cooking Tools and Equipment

LIABILITIES
Accounts Payable 201
Salaries Payable 202
Tax Payable 203

PARTNERS’ CAPITAL ACCOUNT

 Capital and Withdrawal Accounts

Agustin, Capital 301

Tuazon, Capital 302
 Bugtong, Capital 303
Bulaec, Capital 304
Umali, Capital 305
Agustin, Drawing 306
Tuazon, Drawing 307
Bugtong, Drawing 308
Bulaec, Drawing 309
Umali, Drawing 310

INCOME AND EXPENSE ACCOUNT

Sales Receipts 401

EXPENSES

Depreciation Expense 501

Repair and Maintenance 502
Utilities Expense 503
Rent Expense 504
Supplies Expense 505
Salaries and Wages 506
Percentage Tax Expense 507

DEFINITION OF CHART OF ACCOUNTS

ASSETS (101-103)

Assets are defined as resources owned and controlled by the company because past transactions

and events and from which future economic benefits are expected to flow in the entity.

Current assets include assets which are held for the purpose of trading, they are expected to be

realized within twelve months after the reporting period, and they are intended to be sold and

consumed within the normal operating cycle of the business.

Cash: This account includes currency or any cash items on hand, cash in bank, and petty cash

fund in which are unrestricted and immediately available for use in the current operation. Cash

on hand take account of undeposited and other cash items to be deposited. And petty cash fund

To be debited for:

 Receipt from customers

 Capital contributions of the
Partners
 Deposits
 Credit memos

To be credited for:
 Payment of expenses
 Payment of debts and other
liabilities
 Purchases of assets
 Withdrawals
 Debit memos
 Other cash outlays

Inventory: This account refers to cost of raw materials on hand at the end of the accounting or
reporting period.

To be debited for:

 Purchase of materials

To be credited for:

 Requisition or used of raw materials

Noncurrent assets are residual and includes all other assets not classified as current assets. Items

classifies as noncurrent assets are usually used for the more than one year or within normal

operating cycle.

Cooking Tools and Equipment: These represent the tangible assets that are held for use by the

business in providing the service. The costs comprise of the purchase price, freight, handling,

storage and other costs related to the acquisition, insurance, installation cost, cost of resting and

trial run and other costs needed in preparing the equipment for its intended use.

LIABILITIES (201)

Accounts Payable: These represents the entity’s Obligation to pay off short-term debt to its
Creditor.

Debited for: paying the Bill

Credited for: company owe a bill

Salaries Payable: These Represents the salaries owed to employees

Debited for: paying the salary

Credited for: Recognizing the salaries expense

Tax Payable: These represent the payables to the government in the form of business and transfer
taxes, income taxes, business permits, etc.

Debited for: Closing the account.

Credited for: Recognizing the tax payable.

CAPITAL (301-310)

Partner’s Capital Account

Capital is the residual interest in the assets of the business after deducting all its liabilities. It is

the contribution of the partners to the business. This account represents the ownership of the

partners in the business. This account is used for summarizing transactions affecting such year.

Debited for: Decrease in the partner’s capital. Share in the partnership net loss. Closing of

partner’s drawing account at the end of the accounting period.

Credited for: Original Investment of the partners. Increase in the partner’s capital. Share

in partnership net income.

Withdrawing Account

This account is used to record cash or other assets taken by the partners for personal use.

Debited for: Withdrawals made by the partners, and for personal liabilities of the partner to the

partnership. Receivable or fund of the partnership collected and retained by the partner.

Credited for: Closing of the account.

REVENUE (401)

Revenue or income is the increase in the economic benefits during the accounting period in the

form of inflows or development of assets or decreases in liabilities that result in increase in equity,
other than those relating to contributions from equity participants. It refers to the increases in

owner’s equity resulting from selling goods, rendering services or performing business activities.

Sales Receipts

Represents the gross increase in assets measures in conformity with the Generally

Accounting Principles that form profit directed activities of an enterprise that can change

the partner’s equity. The general activities from which revenue is derived from selling of

goods to the customers.

EXPENSES (501-506)

Depreciation Expenses: This account is used to record the portion of costs of the equipment

expensed during the accounting period.

Debited for: Depreciation recognized for the period.

Credited for: Closing of the account.

Repair and Maintenance expense: This is used to record the cost of repairs and maintenance

incurred to keep the asset operating at its present condition.

Debited for: Cost of repairing certain assets

Credited for: Closing the account

Utilities Expense: This is used to record the cost consumed in a reporting period.
Debited for: Cost paid

Credited for: Closing the account

Rent Expense: This is used to record the payment of rent in a reporting period

Debited for: Cost Paid

Credited for: Closing the Account

Supplies Expense: This account reports the cost of supplies such as bullpens, erasers, stationaries,

and other supplies consumed by the entity.

Debited for: Used supplies for the period.

Credited for: Closing the account.

Salaries Expense: This account represents the amount of salaries paid to the employees as

compensation for the services they have rendered.

Debited for: Salaries earned by the employee.

Credited for: Closing the account.

Taxes and Licenses: This account refers to business taxes, licenses, and other fees due to the

government.

Debited for: Taxes and licenses paid.

Credited for: Closing the account.

 V. Internal Control

Internal control is defined as a process in assuring and achievement of an organization's

objectives in operational effectiveness and efficiency, reliable financial reporting, and compliance

with laws, regulations and policies. A broad concept, internal control involves everything that

controls risks to an organization.

It is a means by which an organization's resources are directed, monitored, and measured.

It plays an important role in detecting and preventing fraud and protecting the organization's

resources, both physical (e.g., machinery and property) and intangible (e.g., reputation or

intellectual property such as trademarks).

At the organizational level, internal control objectives relate to the reliability of financial

reporting, timely feedback on the achievement of operational or strategic goals, and compliance

with laws and regulations. At the specific transaction level, internal control refers to the actions

taken to achieve a specific objective.

VI. Financial Reports

The financial reports that are prepared in accordance with the Generally Accepted Accounting

Principles (GAAP) and techniques are reported to others that are useful in making economic

decisions. These include the Statement of Financial Position, Income

Statement, Statement of Cash Flow, and the Statement of Changes in Partners’ Equity. These

reports are accompanied by supporting schedules and supplementary notes that show important

details and other information that cannot be conveniently included in the body of the financial

statements.
V. FINANCIAL AND MANAGEMENT REPORTS
The management reporting system for Burgarian has been designed to generate reports that
will provide management and the supervising agency with useful and timely information for more
effective planning, coordination and control of operations. The management reporting system
covers the entire range of the existing operations of the company, thus providing both financial
and operating data necessary for effective planning and control.

The management reporting system should be evaluated periodically to assess its continued
effectiveness as a channel for the effective planning, monitoring and control of operations.

The reports used in the management reporting system are the following:

Statement of Financial Performance

The Statement of Financial Performance, also known as the Income statement, shows the

level of activity of the business. This is used to study cyclical sales patterns, such as when sales

peak each year. Managers also establish their advertising and inventory budgets with these reports.

Burgarian Projected Income Statement

For the Year Ending December 31, 2017-2021
(in Philippine Peso)

Total Net Sales xx

Less: Cost of Goods Sold xx

Gross Profit xx
Less: Operating Expenses xx

Net Income before Tax xx

Less: Other Percentage Tax xx

xx
Net Income after Tax
Statement of Changes in Owner’s Equity
The statement of owner’s equity is a financial statement that reports the changes in the
equity section of the balance sheet during an accounting period. In other words, it reports the events
that increased or decreased stockholder’s equity over the course of the accounting period.

Burgarian
PROJECTED CHANGES IN OWNER’S EQUITY
As of December 31, 20XX
(in Philippine Peso)
Agustin, Capital xx
Add: Share in Net Income xx
Total xx
Less: Agustin, Drawing xx
Agustin, Capital End xx

xx
Tuazon, Capital
xx
Add: Share in Net Income
Total xx

Less: Tuazon, Drawing xx

xx
Tuazon, Capital End

Bugtong, Capital xx

Add: Share in Net Income xx

Total xx

Less: Bugtong, Drawing xx

Bugtong, Capital End xx

Bulaec, Capital xx
Add: Share in Net Income xx

Total xx

Less: Bulaec, Drawing xx

xx
 Bulaec, Capital End

Umali, Capital xx
Add: Share in Net Income Total xx

Less: Umali, Drawing xx

xx
Umali, Capital End
xx
Total Owner's Equity

Statement of Financial Position

The Statement of Financial Position shows the financial condition of the business as of the

year end compared with the previous year. It shows the assets that the partnership owned. In

contrast, the liabilities which are the cumulative indebtedness of the business incurred. And the

Partners’ Capital, embodies the value which the partners owned after selling their assets. This

helps the management in preparation or revision of its financial plan.

Burgarian

Financial Statement
As of December 31, 20XX
(in Philippine Peso)
ASSETS
Current Assets
Cash xx
Inventory xx

Total Current Assets xx

Non-Current Assets
Cooking Tools and Equipment xx
xx
Total Assets
 LIABILITIES AND EQUITY
Liabilities
Tax Payable xx

Total Liabilities xx

Partner's Equity
Agustin, Capital xx
Tuazon, Capital xx
Bugtong, Capital xx
Bulaec, Capital xx
Umali, Capital xx

Total Partner's Equity xx

Total Liabilities and Partners' Equity xx

Statement of Cash Flow

The Statement of Cash Flow reflects the company's sources and uses of its funds over a
specified time period. Thus, the partners will know where their money go.

Burgarian
Statement of Cash Flows
For the Year Ended December 31,20XX
(in Philippine Peso)

Cash Flow from Operating Activities

Total Cash Receipts xx
Less:
Payment for Purchase of Materials xx
Payment for Indirect Materials xx
Payment for Salaries xx
Payment for Supplies xx
Payment for Repairs and Maintenance xx
Payment for Taxes and Licenses xx
Payment for Utilities xx
Payment for Rent Expense xx
Payment for Income Tax xx
Payment for Other Percentage Tax xx
xx
Net Cash from Operating Activities

Cash Flow from Investing Activities

Payment for Tools and Equipment xx
xx
Net Cash from Investing Activities

Cash Flow from Financing Activities

Cash Contribution of Partners xx
Withdrawals xx
xx
Net Cash Flow from Financing Activities
 Increase (decrease) in Cash xx
Cash, beginning xx
xx
Cash, ending

VII. Business Cycles

1. Revenue Cycle Forms

The revenue cycle starts from the arrival of the client. They would choose the service that they
would want to avail of and then fill up all necessary details related to the service. The cashier
would then input the chosen service in the system. They would automatically compute the
total bill of the customer. And after, payment of the services availed would take place and the
system would furnish receipt. Payment is mandatorily made, and the official receipt would
come in.

(a) Official Receipt

It is document evidence showing the payment received from the buyer.
BURGARIAN

Operated By: BURGARIAN ENTERPRISE

Address: Block 2 Lot 6, Ciudad Grande, Phase 1
Bakakeng Sur, Baguio City
NON-VAT TIN#: 333-444-555
Date Issued: 06/13/2018
Guest Count: 1
=======================================
07/15/2018 13:34 BGR SI#01859756
=======================================
---------------------------DINE IN---------------------------
1 Burger 45.00

--- ------------------
1 Item (s) 45.00

TOTAL DUE 45.00

CASH 100.00
CHANGE DUE 55.00
(b) Deposit slip
This is used as an evidence of any deposits made by the company to its respective
bank.

(c) Daily Cash Receipts Journal

This form summarizes cash receipts across various accounts for a given day. It will
help the company monitored from how many cash is coming. It is used together with
the Cash Disbursement Journal, which tracks cash going out of the business.
(d) Daily Cash Summary/Report
This form summarizes cash receipts and disbursement in a day.
2. Purchasing and Inventory Cycle Forms

The purchase cycle starts from the preparation of a purchase order in three copies by the manager.

All copies shall be forwarded to the accountant for approval by checking the supplies. And after,

one copy of the purchase order will be given to the vendor or supplier, another to the manager,

and the last copy will be given to the accountant. Afterwards, the manager will compare the three

documents namely, purchase order, receiving report, and invoice. The manager will now

summarize all the documents gathered. The summary together with the supporting documents

will be given to the accountant.

(a) Requisition Slip

It is used internally to formally order supplies, equipment and tools. This is used when

materials or supplies are needed or when reach the reorder point.

(b) Purchase Order

This is issued to suppliers stating the specifications, and quantities for the different

items being purchased and the desired delivery date.

(c) Purchase Journal

This book is used to record all the purchases on account.

(d) Receiving Report

It is a record showing all purchases as they are delivered, in order that better control

may be secured over the purchasing function. It is done by the receiving staff that is

authorized by the management.

 PURCHASE CYCLE

Manager Accountant Manager

Prepare Purchase Order

Purchase Invoice
purchase Orders
orders Receiving
Report

Check
Supplies
Purchase
Compare
Orders

Purchase
Accountant Orders
Summary Invoice

File Purchase
Manager Order

Accountant Receiving
Vendor Report

3. Payroll Cycle Forms

The manager is responsible in keeping track of the time-ins and time-outs of every employee.

The accountant is responsible in computing and ascertaining the total number of hours

rendered by the employee. Based on the records from the manager, the accountant prepares

the employees’ earning records and sets two of the employees’ payroll registry. One will be

given to the manager and then the manager will prepare two copies of the payroll summary.

Finally, one copy will keep for filing while the other together with the registry will be given

back to the accountant.

(a) Time Sheet

It is a form certifying that the hours were worked as recorded and that the

employee is entitled to any supplemental payment. This form helps to keep

monitored of each employee’s hours on a daily basis and this serves as a

primary basis in making changes to direct labor cost of the jobs worked on.

(b) Daily Time Record

This shows the time an employee reports for work and goes out and is used in

payroll preparation.
(c) Payroll Register

It is a record with many columns that contains and summarizes payroll

information (amount of salaries and wages earned by employees less

deductions). Information includes employee’s name, regular hours, sick

hours, overtime hours, income tax withheld, medical insurance deductions,

union dues, gross pay, and net pay. The payroll register may be used as a

supplementary record or as a special journal.

(d) Employees Earning Record

This shows the periodic and accumulated earnings of each employee aside

from the payroll deductions made.

(e) List of Payroll Deductions

This itemizes the deductions from each employee’s earnings to derive net pay.

(f) Personnel Information Sheet

This is the individual source of knowledge of each store’s employees.

(g) Application Forms

This contains the applicant’s personal circumstances when evaluating their

employment worthiness.
(h) Pay Slip

It is a statement of net pay issued to an employee containing his or her total

earnings less deductions.

(i) Pay Envelope

This is where the payment for each worker is inserted.

4. Sales Cycle

As the company receives an order from customer, sales order arise immediately and then inventory

must have to update. Then the entity issues three copies of official receipt, one copy will be given

to the customer, the other is to the accountant, and the other will be for company’s own copy
(a) Daily Sales summary report

This is used to show the summary of sales of the day.

(b) Sales Invoice.

This is given to the customers to serve as a record of goods sold to them.

Copies are retained by the store as a record of sales. It specifies how much is

due from or how much has been paid by the customer.

5. Common Forms

(a) General Journal

It is a book used to record daily transactions for a variety of accounts.

(b) General Ledger

It is the business’ accounting record. This formal ledger contains all the

financial accounts and statements of the business.

(c) Subsidiary Ledger

It is a supporting ledger of related accounts that in total equals the control

account appearing in the general ledger.