legal accounting 1.ppt

7/18/2019 legal accounting 1.ppt

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LEGAL ACCOUNTING



THE BASICACCOUNTINGENVIRONMENT

Legal accounting



What is a business

!" An o#gani$ation o# ente#%#ising entit& engage' inco((e#cial) in'ust#ial o# %#o*essional acti+ities" Abusiness can be a *o#,%#o-t entit&) such as a%ublicl&,t#a'e' co#%o#ation) o# a non,%#o-to#gani$ation engage' in business acti+ities) such as

an ag#icultu#al coo%e#ati+e"

." An& co((e#cial) in'ust#ial o# %#o*essionalacti+it& un'e#ta/en b& an in'i+i'ual o# a g#ou%"

0" A #e*e#ence to a s%eci-c a#ea o# t&%e o*econo(ic acti+it&"

Source: http://www.investopedia.com/terms/b/ business.asp

http://www.investopedia.com/terms/b/business.asp






What a#e the forms o* abusiness organization

Sole %#o%#ieto#shi% 1a#tne#shi%

Co#%o#ation



Dene a sole

proprietorship. Sole %#o%#ieto#shi% is a business

o#gani$e' b& one %e#son"

A'+antages2 S(all ca%ital nee'e'3 eas& han'ling o*

o%e#ations3 unli(ite' liabilit& o* %#o%#ieto#

4a'+antage *#o( c#e'ito#5s %e#s%ecti+e6 7isa'+antage2

7i8cult& in e9%ansion



Dene a partnership.

Cite A#ticle !:;: o* the Ci+il Co'e"

Art. 1767. By the contract of partnership two ormore persons bind themselves to contributemoney, property, or industry to a common fund,with the intention of dividing the prots among

themselves. Two or more persons may also form a

partnership for the eercise of a profession.



Dene a corporation.

Cite Sec" . o* the Co#%o#ation Co'e"

!ec. ". Corporation defned. , Aco#%o#ation is an a#ti-cial being c#eate'b& o%e#ation o* la<) ha+ing the #ight o*succession an' the %o<e#s) att#ibutes

an' %#o%e#ties e9%#essl& autho#i$e' b&la< o# inci'ent to its e9istence"



What a#e the types o* businessoperations

Se#+ice Me#chan'ising

Manu*actu#ing



E9%lain the t&%es o* businesso%e#ations"

Se#+ice2 %#o+ision o* se#+ices *o# a *ee 4clinic) %a#lo#6

Me#chan'ising2 bu& an' sell o* goo's=(e#chan'ise 4g#oce#&)

'#ugsto#e6

Manu*actu#ing2

bu&s #a< (ate#ials *o# con+e#sion to an'sale o* -nishe' %#o'ucts 4labo#ato#ies=*acto#ies <ith sales 'e%a#t(ents6



Relate business toaccounting.

>ue#ies2

Is accounting #ele+ant to a business

Woul' la<&e#s) es%eciall& those%#acticing in the co#%o#ate a#ena)bene-t *#o( ha+ing an accounting

bac/g#oun'



What is accounting

Acco#'ing to A(e#ican AccountingAssociation2

Accounting is the process o* identifying,measuring and communicating econo(ic in*o#(ation to %e#(it in*o#(e'

?u'g(ents an' 'ecisions b& use#s o*

in*o#(ation"



What is accounting

Acco#'ing to the A(e#ican Institute o*Ce#ti-e' 1ublic Accountants2

Accounting is the art of RE!RD"#$%&'SS"()"#$% S*++'R","#$ in a signi-cant(anne# an' in te#(s o* (one&)t#ansactions an' e+ents <hich a#e in %a#t at

least o* -nancial cha#acte# an'"#-ERRE-"#$ the #esults the#eo*"



What is the natu#e o*accounting

It is a SERVICE acti+it&"

It is the language o*

business"



What a#e the *unctions o*accounting

To %#o+i'e @uantitati+e in*o#(ation)%#i(a#il& -nancial in natu#e) about

econo(ic acti+ities) that is inten'e' to beuse*ul in (a/ing econo(ic 'ecisions

To #eco#' t#ansactions

To #e%o#t econo(ic #ealit& o* the business 4au'it *unction6 to test the #easonableness

o* the asse#tions (a'e #elati+e to the-nancial state(ents



What a#e the t&%es o*accounting an' the

co##es%on'ing #e%o#ts Manage#ial Accounting (anage#ial #e%o#ts

inancial Accounting -nancial#e%o#ts=gene#al %u#%ose -nancial #e%o#ts

Ta9 Accounting ta9 #etu#ns

Go+e#n(ent Accounting s%ecial #e%o#ts as#e@ui#e' b& la<

Cost Accounting #e%o#ts that (a& *o#(%a#t o* (anage#ial an'=o# gene#al %u#%ose-nancial #e%o#ts



Note2

The %#ocess o* accounting in+ol+escommunicating the #esults o* the econo(ic

t#ansactions anal&$e') #eco#'e' an' su((a#i$e'"

But ho< a#e such #esults co((unicate'

,Th#ough INANCIAL RE1ORTING

The#e*o#e) <hat is the en' %#o'uct o* theaccounting %#ocess

,INANCIAL STATEMENTS



What a#e the 'ie#ent -nancialstate(ents as %#o+i'e' *o# in

1AS ! State(ent o* -nancial %osition 4balancesheet6

State(ent o* co(%#ehensi+e inco(e

4inco(e state(ent6

State(ent o* cash Do<s

State(ent o* changes in o<ne#5s e@uit&

Notes to -nancial state(ents



E9%lain2 State(ent o* inancial1osition

It is a *o#(al -nancial state(ent that#e%o#ts the -nancial con'ition o* an

ente#%#ise as of a particular date"

It %#o+i'es in*o#(ation about the assets)liabilities an' o<ne#5s cont#ibution as o*a %a#ticula# 'ate"

It is use*ul in e+aluating li@ui'it&)sol+enc& an' -nancial De9ibilit& o* theente#%#ise"



Sa(%le2 state(ent o* -nancial %osition



E9%lain2 State(ent o*Co(%#ehensi+e Inco(e

It %#o+i'es in*o#(ation about -nancial%e#*o#(ance 4%#o-t o# loss6 o* the

business during a given period"

It is use*ul in %#e'icting the ca%acit& o*the ente#%#ise to gene#ate cash *#o( itso%e#ation"



E9%lain2 State(ent o* Cashlo<s It sho<s in*o#(ation that %#o+i'e use#s a

basis to assess the abilit& o* the entit& to

gene#ate cash an' cash e@ui+alents an'

the nee's o* the entit& to utili$e thosecash Do<s"

It is 'esigne' to %#o+i'e in*o#(ation

about the change in an ente#%#ise5s cashan' cash e@ui+alents"



E9%lain2 State(ent o* Changesin E@uit&

This -nancial #e%o#t sho<s the(o+e(ents in the +a#ious ele(ents o*

the sha#ehol'e#s5 e@uit&"



E9%lain2 Notes to inancialState(ents

Notes a#e a''itional in*o#(ation%#o+i'e' in a co(%an&s -nancial

state(ents" These #e%o#t the 'etails

that a#e le*t out o* the (ain #e%o#ting'ocu(ents) such as the balance sheetan' inco(e state(ent"



Who a#e the use#s o* these -nancialstate(ents

E9te#nal Use#s2 In+esto#s

Len'e#s

Su%%lie#s

E(%lo&ees

Custo(e#s

Go+e#n(ent



Who a#e the use#s o* these -nancialstate(ents

Inte#nal Use#s Manage(ent



UN7AMENTALS OACCOUNTING

Legal accounting



UN7AMENTALS O

ACCOUNTING2 THECONCE1TUAL

RAMEWORFLegal accounting



Note2

Ou# 'iscussion on legal accounting <oul' be *ocuse'on

INANCIAL ACCOUNTING"

Hence) the te#(s an' %#ocesses e9%laine' a#e (ainl&*o#2,general purpose -nancial state(ents

that could be used by various users with dierentconcerns

that are the usual sub0ect of an e1ternal audit by

ertied ublic 'ccountantsOthe# accounting cou#ses <oul' co+e# to%ics on2

,s%ecial #e%o#ts #e@ui#e' b& 'ie#ent #egulato#& bo'ies

,(anage#ial #e%o#ts %#e%a#e' *o# (anage(ent use



What a#e the ob?ecti+es o* gene#al%u#%ose -nancial #e%o#ting

The -nancial state(ents %#o+i'ein*o#(ation that enables the use#s to(a/e econo(ic 'ecisions"

The -nancial state(ents %#o+i'ein*o#(ation on the #e%o#ting ente#%#ise5s-nancial %osition) %e#*o#(ance an'changes in -nancial %osition"



E9%lain the #e%o#ting entit& conce%t"

The business ente#%#ise is a se%a#ate ?u#i'ical entit& *#o( its o<ne#s) (anage#s)e(%lo&ees"



o# -nancial state(ents to be use*ul)<hat @ualitati+e cha#acte#istics (ustthe& %ossess

#undamental $ualities% The& (ust be #ele+ant"

ee'bac/ +alue

1#e'icti+e +alue The& (ust be o* *aith*ul #e%#esentation"

Neut#alit& #ee'o( *#o( e##o# Co(%leteness

&nhancing $ualities% Co(%a#abilit& an' Ve#i-abilit& 4 Ti(eliness

Un'e#stan'abilit&6



What a#e the ele(ents o* -nancialstate(ents

Assets

Liabilities

E@uit&

Inco(e

E9%ense



What a#e assets

Assets #esou#ces cont#olle' b& theente#%#ise as a #esult o* %ast e+ents an'*#o( <hich *utu#e econo(ic bene-ts a#e

e9%ecte' to Do< to the ente#%#ise



What a#e the t<o (ain classes o* assets

Cu##ent Assets

Noncu##ent Assets



7istinguish2 cu##ent *#o( noncu##entassets"

Cu##ent Assets e9%ecte' to be #eali$e') o# is inten'e' *o# sale o#

consu(%tion in the entit&5s no#(al o%e#ating c&cle4<hich is usuall& one &ea#6

hel' %#i(a#il& *o# t#a'e e9%ecte' to be #eali$e' <ithin !. (onths a*te#

'ate o* -nancial %osition

4cash) in+ento#ies) accounts #ecei+able) sho#t,te#(in+est(ents6

Noncu##ent Assets All othe# assets 4%#o%e#t&) %lant an' e@ui%(ent3 long,

te#( in+est(ents6



What a#e liabilities

Liabilities %#esent obligations o* an entit&a#ising *#o( %ast t#ansactions o# e+ents)the settle(ent o* <hich is e9%ecte' to

#esult in an outDo< *#o( the entit& o*#esou#ces e(bo'&ing econo(ic bene-ts "



What a#e the t<o (ain classi-cations o*liabilities

Cu##ent Liabilities

Noncu##ent Liabilities



7istinguish2 cu##ent *#o( noncu##entliabilities"

Cu##ent Liabilities e9%ecte' to be settle' in

the entit&5s no#(al o%e#ating c&cle

hel' %#i(a#il& *o# t#a'ing

'ue to be settle' <ithin !. (os" a*te# 'ate o*-nancial %osition 4accounts %a&able) ta9es %a&able) sho#t,te#(

%a&ables6

Noncu##ent Liabilities All othe# liabilities 4bon's %a&able) 'e*e##e'

ta9 liabilit&6



What is e@uit&

NET ASSETS

E@uit& is the #esi'ual inte#est in the assetso* the entit& a*te# 'e'ucting all its

liabilities"



What is inco(e

Inco(e is the inc#ease in econo(icbene-ts 'u#ing the accounting %e#io' inthe *o#( o* inDo<s o# enhance(ents o*

assets o# 'ec#eases o* liabilities that #esultin inc#eases in e@uit&) othe# than those#elating to cont#ibutions *#o( e@uit&%a#tici%ants"



The te#( inco(eJ enco(%assesK

both #e+enue an' gains"

Re+enue a#ises in the cou#se o* the o#'ina#& acti+ities

o* an entit& an' is #e*e##e' to b& a +a#iet& o*'ie#ent na(es inclu'ing sales) *ees) inte#est)'i+i'en's) #o&alties an' #ent

Gains #e%#esent othe# ite(s that (eet the 'e-nitiono* inco(e an' (a&) o# (a& not) a#ise in the

cou#se o* the o#'ina#& acti+ities o* an entit&""



What is e9%ense

E9%enses a#e 'ec#eases in econo(icbene-ts 'u#ing the accounting %e#io' inthe *o#( o* outDo<s o# 'e%letions o*

assets o# incu##ences o* liabilities that#esult in 'ec#eases in e@uit&) othe# thanthose #elating to 'ist#ibutions to e@uit&%a#tici%ants""



The te#( e9%enseJ enco(%assesK

Losses as <ell as those e9%enses that a#ise inthe cou#se o* the o#'ina#& acti+ities o* the entit&"E9%enses that a#ise in the cou#se o* the o#'ina#&acti+ities o* the entit& inclu'e2 cost o* sales)<ages an' 'e%#eciation" The& usuall& ta/e the*o#( o* an outDo< o# 'e%letion o* assets such ascash an' cash e@ui+alents) in+ento#&) %#o%e#t&)%lant an' e@ui%(ent"

Losses #e%#esent othe# ite(s that (eet the'e-nition o* e9%enses an' (a&) o# (a& not) a#isein the cou#se o* the o#'ina#& acti+ities o* theentit&""

> Wh t l t l t *



>2 What ele(ents a#e ele(ents o*STATEMENTS O INANCIAL 1OSITIONWhat a#e ele(ents o* INCOMESTATEMENTSA2 Balance Sheet Ele(ents Assets) Liabilities) O<ne#5sE@uit&

These a#e REAL=1ERMANENT accounts"

ou 'o NOT CLOSE these at the en' o* the accounting

%e#io'" The t#ansactions a#e accu(ulate'J in theseaccounts"

Inco(e State(ent Ele(ents Re+enue) Gains) E9%enses

These a#e NOMINAL=TEM1ORAR accounts" At the en' o* the

accounting %e#io') &ou CLOSE these accounts) such thatthe& ha+e ERO balances at the o%ening o* the ne9taccounting &ea#" 2losing entries will be discussed later on.3

4: 5hat is the rationale behind closing of accounts6



UN7AMENTALS O

ACCOUNTING2 TRA7ITIONAL

CONCE1TS AN7Legal accounting



What is the going conce#n assu(%tion

It is e9%ecte' that the business <illcontinue to e9ist in'e-nitel&) thus-nancial state(ents shoul' be %#e%a#e'

on going conce#n basis unless(anage(ent inten's to close thebusiness"



What is the %e#io'icit& conce%t

The in'e-nite li*e o* an entit& is sub'i+i'e'into ti(e %e#io's o* e@ual length.

Since state(ent use#s nee' -nancialin*o(#ation on a #egula# basis) then the li*eo* an entit& has to be 'i+i'e' into s%eci-cti(e inte#+als calle' the accounting %e#io'" This <ill enable the ente#%#ise to %#e%a#e periodic -nancial state(ents"



What is the acc#ual assu(%tion

Assets) liabilities) #e+enues an' e9%enses a#e#ecogni$e' base' on the %e#io' the& #elate o#base' on the occu##ence o* thet#ansaction=e+ent) #athe# than base' on the

cash #ecei+e' o# %ai'"

&ample% A sol' a shi#t on anua#& !) but #ecei+e' the

%a&(ent on eb#ua#& !" Un'e# acc#ual basis) A shoul' al#ea'& #ecogni$e a

#e+enue 4inco(e6 on anua#& !) 'es%ite non#ecei%to* cash on such 'ate"



What is the (oneta#& unit conce%t

All business t#ansactions a#e (easu#e'an' #eco#'e' using onl& one unit o*(easu#e(ent" In accounting) onl& 'ata

(easu#able in te#(s o* (one& a#e#ecogni$e' an' #eco#'e' in the boo/s o*the entit&"



REERENCES

1a#tne#shi% an' Co#%o#ation Accounting b& Valencia

Accounting *o# 1a#tne#shi% an' Co#%o#ation b& Tolentino,Ba&sa

.!st Centu#& Accounting 1#ocess b& C#u$,Manuel

legal accounting 1.ppt

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