Notesale: Turn your study into money

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Fundamentals of ABM1 | Types of Business According to Activities &
Accounting Concepts and Principles
Philippine Normal University (PNU)
Understanding of the types of business according to activities
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Examples: barber shops and beauty parlors, repair shops, banks, accounting and law
firms
• Merchandising Business
This type of business buys at wholesale and later sells the products at retail
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This type of business is also known as "buy and sell"
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Examples are: shoe manufacturing businesses, car manufacturing plants
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A
bakery, for example, combines raw materials in making
loaves of bread (manufacturing), sells hot pan de sal (merchandising), and caters
customers’ orders in small coffee table servings of ensaymada
and hot coffee (service)
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Examples :
o If the owner has a barber shop, the cash of the barber shop should be reported
separately from personal cash
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The expenses that come
with that meeting should be part of the company’s
expenses
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• Going concern principle – business is expected to continue indefinitely
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• Time period principle – financial statements are to be divided into specific time
intervals
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o The salary expenses from January to December 2015 should only be reported in 2015
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o IHOP should report financial statements in dollars even if they have a branch here in
the Philippines
• Objectivity principle – financial statements must be presented with supporting
evidence
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o When a company incurred a transportation expense, a voucher should be prepared as
evidence
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Example :
o When Jollibee buys a cash register, it should record the cash register at its price when
they bought it
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• Accrual Accounting Principle – revenue should be recognized when earned
regardless of collection and expenses should be recognized when
incurred regardless of payment
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Cash basis is not the generally accepted principle today
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When the barber shop receives an electricity bill, it should record it as an
expense even if it is unpaid
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Example: When you provide tutorial services to a customer and there is a
transportation cost incurred related to the tutorial services, it should be
recorded as an expense for that period
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Example: The company should report all relevant information
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In case of doubt, assets and
income should not be overstated while liabilities and expenses should not be
understated
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Revenue
should be recorded at a lower amount
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Example: A school purchased an eraser with an estimated useful life of three years
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