Republic of the Philippines

Department of Education
REGION I
SCHOOLS DIVISION OF LAOAG CITY
GABU NATIONAL HIGH SCHOOL
Laoag City

DETAILED LESSON PLAN IN ABM3 / GA 7 – FUNDAMENTALS OF ACCOUNTANCY, BUSINESS AND MANAGEMENT 1

Quarter 1, Week 4

I. Content Standard: The learners demonstrate an understanding of the five major accounts, namely, assets, liabilities, capital, income,
and expenses.
II. Performance Standard: The learners are able to define, identify, and classify accounts according to the five major types.
III. Learning Competency: The learners
1. Discuss the five major accounts. (ABM_FABM11-IIId-e-19)
2. Prepare a Chart of Accounts. (ABM_FABM11-IIId-e-21
IV. Learning Objectives: At the end of the lesson, learners are expected to:
1. Discuss the five major accounts;
2. Cite examples of each type of account; and
3. Prepare a chart of accounts.
V. Content: Types of Major Accounts
A. Reference: Dep Ed Curriculum Guide; Book/Teaching Guide; Fundamentals of Accountancy, Business and
Management by R.B. Banggawan & D.J.O. Asuncion;
CBLM in FABM1
B. Materials:
1. Slide presentation
2. TV
3. Laptop
4. Chalk and chalkboard
5. Pen and paper

VI. Activity

Analysis LESSON PROPER: Introduce the types of major accounts: Assets, Liabilities, Owner’s Equity, Income, Expense

Ask the learners: What is an Account Title?

That’s correct! Account titles are identifications or brief descriptions of items that fall to same kind, class or nature.
In recording business transactions, the elements of financial statements which are better known as “accounting
elements” or “accounting values” are to be assigned with their individual names called “accounting title.”

These are the different account titles which we have classified into Balance Sheet and Income Statement
accounts.

BALANCE SHEET ACCOUNTS (Permanent Accounts)

1. ASSETS. Assets are classified only into two, namely: current assets and non- current assets.

Current Assets - refer to all assets that are expected to be realized, sold or consumed within the enterprise's
normal operating cycle. Operating cycle is the interval of time from the date of acquisition of merchandise
inventory, sell the inventory to customers and the ultimate collection of cash from the sale.

Cash - the account title to describe money, either in paper or in coins and money substitutes like check, postal
money orders, bank drafts and treasury warrants.

Petty Cash Fund - the account title for money placed and set aside for petty or small expenses.

Cash Equivalents - cash equivalent is defined as short-term, highly liquid instruments that are readily convertible
into cash.

Notes Receivable - this is a promissory note that is received by the business from the customer arising from
rendering of service, and sale of merchandise.

Accounts Receivable - account title for amounts collectible arising from services rendered to a customer or client
on credit. This constitutes an oral or verbal promise to pay by a customer or client.

Estimated Uncollectible Account - It provides for possible losses from uncollected accounts.

Inventories - these are assets which are held for sale in the ordinary course of business, in the process of
production for such sale or in the form of materials or supplies to be consumed in the production process or in the
rendering of services.

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

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

Non-Current Assets – “all other assets are not classified as current should be noncurrent assets".
 Republic of the Philippines
Department of Education
REGION I
SCHOOLS DIVISION OF LAOAG CITY
GABU NATIONAL HIGH SCHOOL
Laoag City
Property and Equipment - these are "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 are expected to be used
during more than one period".

Land - an account title for the site where the building used as office, store or shop, are constructed.

Building - account title for a finished construction owned by the business where operations and transactions took
place.

Machinery and Equipment - includes welding machine, compressors, equipment and tools, which are termed as
"Shop equipment". Calculators, adding machines, computers, cash registers, steel filling cabinets are termed as
"office equipment" while trucks, jeeps, vans and other motor vehicles are called "transportation equipment" or
"delivery equipment" when used in delivering goods.

Furniture & Fixtures - include chairs, tables, counters, display and cases. If these are used in the office, the
account title is "Office Furniture and Fixtures", if these are used in shop, the account title is "Shop Furniture &
Fixtures" and if used in store, the account title is "Store Furniture & Fixtures”.

Accumulated Depreciation - this is an "asset offset" or "contra-asset" account. This is called a "Valuation Account
which is shown as a deduction from property and equipment. The assets that are classified as Property and
Equipment are called Depreciable Assets and are subject to depreciation except land. Land is not depreciated
because it is expected to be useful to the business enterprise for an indefinite period of time.

Intangible Assets - these are identifiable non-monetary assets without physical substance. Examples are patent,
copyrights, franchise, goodwill, etc.

2. LIABILITIES
Current Liabilities - are financial obligations of the enterprise which are 1a) expected to be settled in the normal
course of the operating cycle; (b) due to be settled within one year from the balance sheet date.

Accounts Payable - an account title for a financial obligation of an enterprise that constitutes an oral or verbal
promise to pay.

Notes Payable (short-term) - same as Accounts Payable in nature but only the obligation is evidenced by a
promissory note. The enterprise is the one who issued the note.

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

Unearned Income - this is an account title for an income collected or 3 – received in advance and is not yet
considered as "earned".

Non-current Liabilities - are financial long-term obligations of the enterprise which are due and payable for more
than one year. This usually occurs in a corporate form of business organization.

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

Mortgage Payable – a financial obligation of the enterprise which requires a fixed or tangible property to be
pledged as a collateral to ensure payment. This is usually found in a corporate business organization.

3. OWNER'S EQUITY
Capital - This is the center of the owner's concern because this may increase or decrease at any time as a result
of business operation. In the normal course of operation, Owner's Equity will be increased by "income" and
decrease by "expenses". The owner's capital investment is indicated by the use of the owner's name with a word
"capital" written after the name which is separated by a "comma". Thus, if the owner Marfen Tan, the title for his
capital account is, "Marfen Tan, Capital"

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 is separated by a "comma". Thus, if the owner is Marfen Tan who made
withdrawal, the title for his drawing account is, "Marfen Tan, Personal" or “Marfen Tan, Drawing"

Income & Expense Summary - this is a temporary account created at the end of the accounting period where
Income and Expenses are temporarily closed to this account.

INCOME STATEMENT ACCOUNTS (Temporary Accounts)

4. INCOME OR REVENUE
Sales - refers to the account title for merchandise sold either in cash or account.

Sales Returns & Allowances - this is a reduction from sales account for goods that were sold but were returned
by the buyer or bad order or not conforming with the order. This is a reduction from sales account.

Sales Discounts - refers to discounts given to buyers for early payment of merchandise purchased on account
or payment within the discount terms. This is a reduction from sales account.
 Republic of the Philippines
Department of Education
REGION I
SCHOOLS DIVISION OF LAOAG CITY
GABU NATIONAL HIGH SCHOOL
Laoag City
Service Income - In general, this is the account title used for all types of income derived from rendering of
services. Sometimes, the account title used is "Service Revenue". Other specific income account titles used are:

Professional Income - the account title generally used by professionals for income earned from the practice of
their profession or maybe specified as; "Accounting and Auditing Fees Income" for Accountants, "Legal Fees
Income" for Lawyers, “Dental Fees Income" for Dentists, "Medical Fees Income" for Doctors, etc.

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

Shop Income or Income from Repairs - income derived from repair of cars and other vehicles.

Interest Income - for income received by the business arising from an amount of money borrowed by a customer
and is usually covered by a promissory note. This is typical in a lending institution.

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

COSTS AND EXPENSES COSTS

Cost of Sales or Cost of Goods Sold - refers to cost to produce and sell the merchandise.

Freight-In - refers to transportation cost incurred in buying goods.

Purchases - the account title for "merchandise" purchased under the periodic inventory system. Under perpetual
inventory system, the account title is "merchandise inventory".

Purchase Returns and Allowances - refers to cost of merchandise that were purchased but returned to the
suppliers for bad order or does not conform to the specification. This is reduction from purchases account.

Purchase Discounts - refers to discount availed for early payment of merchandise purchased. This is a reduction
from purchases account.

5. EXPENSES
Freight-Out - refers to transportation cost of merchandise sold.

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

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
and equipment which are owned by the business.

Salaries Expense - for compensation given to employees of a business. It may be specified as "Office Salaries"
or "Salesmen's Salaries”.

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

Depreciation Expense - for the allocated portion of the cost of property and equipment or fixed assets.

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.

Insurance Expense - account title for the expired portion of the insurance premium paid.

Utilities Expense – the account title for telephone, light and water bills. Also included is gasoline, lubricants and
oil.

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

CHART OF ACCOUNTS
A chart of accounts is a listing of all the accounts and is usually tailored to the operations of the business. It
functions as a guide to the accountant or the bookkeeper in ensuring uniformity of and consistency in the use of
all accounts in recording business transactions.

Illustrative Example: Chart of Accounts

To illustrate, Jose Mercado’s photocopying business would have the following chart of accounts which reflects the
major accounts:

JM Photocopying Center Chart of Accounts

Assets Owner’s Equity
101 Cash 301 Mercado, Capital
112 Accounts Receivable 302 Mercado, Drawing
113 Allowable for Doubtful Accounts 399 Income Summary
 Republic of the Philippines
Department of Education
REGION I
SCHOOLS DIVISION OF LAOAG CITY
GABU NATIONAL HIGH SCHOOL
Laoag City
114 Notes Receivable
115 Interest Receivable
122 Unused Supplies Revenues
123 Prepaid Rent 401 Photocopying Revenues
151 Photocopying Equipment 402 Interest Income
152 Accumulated Depreciation – 499 Other Income
Photocopying Equipment
153 Furniture and Fixtures
154 Accumulated Depreciation – Furniture
and Fixtures
199 Other Assets
Liabilities Expenses
201 Accounts Payable 501 Taxes and License
202 Notes Payable 502 Salaries Expenses
203 Salaries Payable 503 Supplies Expense
204 Income Tax Payable 504 Utilities Expense
205 Interest Payable 505 Rent Expense
208 Unearned Photocopying Revenues 506 Depreciation Expense
212 Mortgage Payable 507 Doubtful Accounts Expense
215 Loan Payable 512 Interest Expense
299 Other Liabilities 599 Other Expense

Prepared by: Checked and Reviewed by: Noted by:

ANGELITO B. CORPUZ ROMEO G. UGANIZA ARNEL C. SABUCO, JR.

SHS Teacher II Assistant School Principal II School Principal IV