Fundamentals of

Accountancy, Business and

Management 1 (First Quarter)
 COVERAGE OF THE SESSION

• Introduction to Accounting
• Branches of Accounting
• Users of Accounting Information
• Forms of Business Organization
• Types of Business According to Activities
• Accounting Concepts and Principles
• Types of Major Accounts and Accounting Equation
• Financial Statements and Books of Accounts
• Business Transactions and Their Analysis As Applied to the
Accounting

DEPARTMENT OF EDUCATION – BUREAU OF CURRICULUM DEVELOPMENT

TYPES OF MAJOR ACCOUNTS

ASSETS

LIABILITIES

EQUITY

INCOME

EXPENSES

DEPARTMENT OF EDUCATION – BUREAU OF CURRICULUM DEVELOPMENT

TYPES OF MAJOR ACCOUNTS

resources controlled by the entity as a result of past transactions or events and from
ASSETS which future economic benefits are expected to flow to the entity.

are present obligations of the entity arising from past transactions or events the
LIABILITIES settlement of which is expected to result in an outflow from the entity of resources
embodying economic benefits

EQUITY residual interest in the assets of the entity after deducting all its liabilities

increase in economic benefit during the accounting period in the form of inflow or
INCOME increase in asset or decrease in liability that results in increase in equity, other than
contribution from equity participants
decrease in economic benefit during the accounting period in the form of outflow or
EXPENSES decrease in asset or increase in liability that result in decrease in equity other than
distribution to equity participants
DEPARTMENT OF EDUCATION – BUREAU OF CURRICULUM DEVELOPMENT
TYPES OF MAJOR ACCOUNTS

STATEMENT OF FINANCIAL POSITION

OR
BALANCE SHEET
(Real or Permanent Accounts)

3 ELEMENTS

1. ASSETS
2. LIABILITIES
3. OWNER'S EQUITY

DEPARTMENT OF EDUCATION – BUREAU OF CURRICULUM DEVELOPMENT

TYPES OF MAJOR ACCOUNTS
ASSETS LIABILITIES

Current Current
- are financial obligations
- all assets that are
of the enterprise which are
expected to be realized,
expected to be settled in
sold or consumed within 1
the normal course of the
year
operating cycle (1 year)

Non Current Non Current

DEPARTMENT OF EDUCATION – BUREAU OF CURRICULUM DEVELOPMENT

TYPES OF MAJOR ACCOUNTS

ASSETS
CURRENT ASSETS NON CURRENT ASSETS
Cash Property and Equipment
Cash Equivalent Land
Petty Cash Fund
Building
Notes Receivable
Equipment
Accounts Receivable
Furniture and Fixtures
Est. Uncollectible Accounts
Intangible Assets
Advances to Employees
Accumulated Depreciation
Inventories
Accrued income
Prepaid Expenses
DEPARTMENT OF EDUCATION – BUREAU OF CURRICULUM DEVELOPMENT
TYPES OF MAJOR ACCOUNTS
CURRENT ASSETS

the account title to describe money, either in paper or in coins and

Cash money substitutes like check, postal money orders, bank drafts and
treasury warrants. When cash is within the premise of the businsess, the
account title is Cash on Hand and Cash in Bank if deposited in the bank

as short term, highly liquid investments that are readily convertible to

Cash Equivalent known amounts of cash and which are subject to an insignificant risk of
changes in values because of changes in interest rates.

Petty Cash Fund an account title for money that is separetely placed inside the box and
set aside for petty or small expenses.

DEPARTMENT OF EDUCATION – BUREAU OF CURRICULUM DEVELOPMENT

TYPES OF MAJOR ACCOUNTS
CURRENT ASSETS

this is a promisory note that is received by the business from the

Notes Receivable customer arising from rendering of services, sale of merchandise, etc.
This can be an interest bearing or non-interest bearing.

the account title for amounts collectible arising from services rendered to
Accounts Receivable 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.

this is an asset offset or a contra-asset account. It provides for possible

Estimated Uncollectible losses from uncollectible accounts. This is not actually and asset, it is
Accounts classified as such because it is shown as a deduction form the Accounts
Receivable which is a Current Asset Account. (allowance for doubtful
accounts or allowance for bad debts.)
DEPARTMENT OF EDUCATION – BUREAU OF CURRICULUM DEVELOPMENT
TYPES OF MAJOR ACCOUNTS
CURRENT ASSETS

the account title for amounts collectible from employees for allowing
Advances to Employees
them to make cash advances which are deductible against their salaries
and wages.

these are assets which are (1) held for sale in the ordinary course of
Inventories business; (2) in the process of production for such sale; or (3) in the form
of materials or supplies to be consumed in the production process or in
the rendering of services.

an account title for cost of stationery and other supplies purchased for
Supplies Inventory or Unused
use but are left on hand and still unused. The account title should be
Supplies
specified as to Unused Office Supplies if intended for the office, Unused
Shop Supplies if intended for the shop, etc.

DEPARTMENT OF EDUCATION – BUREAU OF CURRICULUM DEVELOPMENT

TYPES OF MAJOR ACCOUNTS
CURRENT ASSETS

Accrued Income
income already earned but not yet received.

account title for expenses that are paid in advance but are not yet
Prepaid Expenses incurred or have not yet expired such as Prepaid Rental, Prepaid
Insurance, Prepaid Interest, Prepaid Advertising, etc.

These accounts are normally arranged according to liquidity (ready

conversion to cash) in the Statement of Financial Position.

DEPARTMENT OF EDUCATION – BUREAU OF CURRICULUM DEVELOPMENT

TYPES OF MAJOR ACCOUNTS
NON CURRENT ASSETS

the International Accounting Standards No. 16 defines property and

Property and Equipment equipment as tangible assets which are held by an enterprise for use in
production or supply of goods and services, for rental to others, or for
administrative purposes, and which are expected to be used during
more than one period, such as:

an account title for the site where the building used as office or store is
Land
constructed.

an account title for a finished construciton owned by the business where

Building
operations and transactions took place.

DEPARTMENT OF EDUCATION – BUREAU OF CURRICULUM DEVELOPMENT

TYPES OF MAJOR ACCOUNTS
NON CURRENT ASSETS

includes calculators, typewriters, adding machine, computers, steel filing

Equipment cabinets and the like. If these are used in the office, the account title is
Office Equipment and if used in the store, Store Equipment. Trucks, jeeps
vans, automobiles and other kinds of motor vehicles are used exclusively
for delivering goods, the account title is Delivery Equipment.

includes chairs, tables, counters, display cases and the like. If these are
Furniture and Fixtures used the office, the account title is Office Furniture and Fixture and if
these are used in store, the account title is Store Furniture and Fixtures.

DEPARTMENT OF EDUCATION – BUREAU OF CURRICULUM DEVELOPMENT

TYPES OF MAJOR ACCOUNTS
NON CURRENT ASSETS

this is an asset offset or contra-asset account. This is called a Valuation

Accumulated Depreciaiton Account which is shown as a deduction form property and equipment.
Each property and equipment should be provided with their individual
valuation account.

identifiable, non-monetary assets without physical substance held for use

Intangible assets in the production or supply of goods or services, for rental to others, or
for administrative purposes. These include goodwil, patents, copyrights,
licenses, franchises, trademarks, brand names, secret processes,
subscription lists, and non-competition agreements.

The assets that are classified as Property & Equipment or Fixed Assets are called Depreciable Assets are
subject to Decpreciation except “land”. Land is not subject to depreciation because it is expected to be
useful to the business enterprise for an indefinite period of time.
DEPARTMENT OF EDUCATION – BUREAU OF CURRICULUM DEVELOPMENT
TYPES OF MAJOR ACCOUNTS

LIABILITIES EQUITY
CURRENT LIABILITIES Ayao, Capital
Accounts Payable Ayao, Drawings
Notes Payable Share Capital
Loan Payable Share Premium
Unearned Income Retained Earnings
Accrued Expenses Income and Expense Summary

NON CURRENT LIABILITIES

Notes Payable
Mortgage Payable

DEPARTMENT OF EDUCATION – BUREAU OF CURRICULUM DEVELOPMENT

TYPES OF MAJOR ACCOUNTS
CURRENT LIABILITIES

Accounts Payable an account title for a financial obligation of an enterprise that

constitutes an oral or verbal promise to pay.

same as Accounts Payable in nature but only the obligation is

Notes Payable (short-term) evidenced by a promisory note. The enterprise is the one who
issued the note.

these are expense incurred by the enterprise but are not yet
Accrued Expenses paid. This normally occurs when the accounting period ended,
such as rent payable, salaries payable, interest payable, taxes
payable etc.

Unearned Income this is an account title for an income collected or received in

advance but services have not been rendered yet.

DEPARTMENT OF EDUCATION – BUREAU OF CURRICULUM DEVELOPMENT

TYPES OF MAJOR ACCOUNTS
CURRENT LIABILITIES

is a liability to pay the bank or other financing institutions arising

Loan Payable from funds borrowed by the business from these institutions
payable within twelve months or shorter. (Note: if the loan is
payable beyond twelve months, then it is classified under non-
current liabilities).

DEPARTMENT OF EDUCATION – BUREAU OF CURRICULUM DEVELOPMENT

TYPES OF MAJOR ACCOUNTS
NON CURRENT LIABILITIES

Notes Payable (long-term) same nature with that of Notes Payable (short-term) but only, this
requires payment for more than a year.

a financial obligation of the enterprise which requires a fixed or

Mortage Payable tangible property to be pledged as a collateral or ensure
payment.

is a certificate of indebtedness under the seal of a corporation,

Bonds Payable specifying the terms of repayment and the rate of interest to be
charged.

DEPARTMENT OF EDUCATION – BUREAU OF CURRICULUM DEVELOPMENT

TYPES OF MAJOR ACCOUNTS
EQUITY

Owner's Equity or Capital - is the amount of money or value of property

put by the proprietor into the business to start with the operation
which is referred to as Initial Investment or Inital Capital. Capital
is synonymous to Proprietorship, Proprietory Interest or Net Worth.

- Owner's Equity or Capital, increased when there is Profit or

additional contributions by the owner and decreased when there
is Loss or Withdrawal by the owner.

- The owner's capital be given a title by indicating the name, with

the word capital written after the name which is separated by a
“comma”. Thus, if the owner's name is Robert Jaworski, the title
his capital account is: “Robert Jaworski, Capital”
DEPARTMENT OF EDUCATION – BUREAU OF CURRICULUM DEVELOPMENT
TYPES OF MAJOR ACCOUNTS
EQUITY

Withdrawal - the owner's withdrawal is likewise indicated by the use of the

owner's name with the word Drawing or Personal written after the name which the
owner separated by a comma. Thus, if the owner is Robert Jaworski who made
withdrawal, the title for his drawing account is:
“Robert Jaworski, Drawing”

Income Summary - is a temporary account used at the end of the accounting

period to close income and expense accounts. The balance of this account shows the
net income or net loss for the period before it is closed to the capital account.

DEPARTMENT OF EDUCATION – BUREAU OF CURRICULUM DEVELOPMENT

TYPES OF MAJOR ACCOUNTS

STATEMENT OF COMPREHENSIVE INCOME

OR
INCOME STATEMENT
( Temporary/Nominal Accounts)

2 ELEMENTS

1. INCOME OR REVENUE
2. EXPENSES

DEPARTMENT OF EDUCATION – BUREAU OF CURRICULUM DEVELOPMENT

TYPES OF MAJOR ACCOUNTS
INCOME EXPENSES
Service Income Supplies Expense
Rent Income Rent Expense
Professional Income Repairs and Maintenance
Sales Supplies Expense
Miscellaneous Income Insurance Expense
Other Income Transportation
Salaries and Wages
Utilities Expense
Taxes and Licenses
Bad Debts
Depreciation
DEPARTMENT OF EDUCATION – BUREAU OF CURRICULUM DEVELOPMENT
TYPES OF MAJOR ACCOUNTS

INCOME OR REVENUE - these refers to the proceeds from services rendered by a

servicing firm, income from use by other entities of the resources of the enterprises like
royalties income, rent income, interest income etc. It also includes proceeds from sale of
merchandise.

Service Income - this is the account title used for all types of income derived from
rendering of services. Sometimes the account title used is Service Revenue.

Professional Income - the account title used by professional for income earned from the
practice of their profession or may be specified as Accounting or Auditing Fees Income
for Accountants, Legal Fees Income for Lawyers, Dental Fees Income for Dentists, Medical
Fees Income for Doctors, etc.

DEPARTMENT OF EDUCATION – BUREAU OF CURRICULUM DEVELOPMENT

TYPES OF MAJOR ACCOUNTS

Rental Income - income earned on buildings, space or other properties owned and
rented out by the business as the main line of its activity.

Interest Income - income received by the business arising from an amount of money
borrowed by a customer and usually covered by a promissory note.

Miscellaneous Income - income earned by the business which is not the main line of its
activity and could not be clearly classified.

DEPARTMENT OF EDUCATION – BUREAU OF CURRICULUM DEVELOPMENT

TYPES OF MAJOR ACCOUNTS

EXPENSES - these are the gross outflow of economic benefits ng the period arising in the
course of ordinary activities of an enterprise when those outflow result in decrease in
equity, other than those relating to distribution to owners.

Supplies Expense - this represents cost of supplies that were used and consumed that
bears specific titles as office supplies expense, store supplies expense, shop supplies
expense etc.

Rent Expense - for the amount paid or incurred for use of property, usually premises.

Repairs and Maintenance - for expenses incurred in repairing or servicing the buildings,
machineries, vehicles, equipments, etc., which aer owned by the business.

DEPARTMENT OF EDUCATION – BUREAU OF CURRICULUM DEVELOPMENT

TYPES OF MAJOR ACCOUNTS

Salaries Expense - for compensation given to employees of a business. It may be

specified as Office Salaries, Salesmen's Salaries etc.

Uncollectible Accounts - for the anticipated loss that the business may incur arising from
uncollectible accounts.

Depreciation Expense - for the portion of the cost of property and equipment or fixed
assets that has expired based on rational and systematic allocation procedure.

Taxes and Licenses - for the amount paid for business permits, licenses and other
government dues except the Income Tax paid which is not allowable by law as a
deduction.

DEPARTMENT OF EDUCATION – BUREAU OF CURRICULUM DEVELOPMENT

TYPES OF MAJOR ACCOUNTS
Insurance Expense - the account title for the expired portion of the insurance premium
paid.

Utilities Expense - the account title for telephone, light and water bills.

Interest Expense - an expense incurred from borrowed money. This is separately shown
as a deduction form Profit before finance charges to arrive at Profit.

Miscellaneous Expense - any amount paid as expense which is not significant enough to
warrant a particular classification.

Gas & Oil - the account title for gasoline, diesoline, lubricants, grease, fluids, lube oils,
etc.

DEPARTMENT OF EDUCATION – BUREAU OF CURRICULUM DEVELOPMENT

TYPES OF MAJOR ACCOUNTS

CHART OF ACCOUNTS - is the list of account titles

arranged from Assets, Liabilities, Owner's Equity,
Income and Expenses prepared beforehand to guide
bookkeeper and accountant of what specific titles are
to be used in describing the exchange of values in a
transaction.

DEPARTMENT OF EDUCATION – BUREAU OF CURRICULUM DEVELOPMENT

DEPARTMENT OF EDUCATION – BUREAU OF CURRICULUM DEVELOPMENT
DEPARTMENT OF EDUCATION – BUREAU OF CURRICULUM DEVELOPMENT