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20 views4 pages

SUBJECT - FUNDAM-WPS Office

I don't know

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abdullahpanonggo8
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SUBJECT: FUNDAMENTALS OF ACCOUNTANCY, BUSINESS AND MANAGEMENT 1 (FABM 1)

Topic: Account Titles and Normal Balance of an Account

An ACCOUNTING EVENT is an economic occurrence that causes changes in an enterprise's assets,


liabilities, and equity.

A TRANSACTION is a particular kind of event that involves the transfer of something of value between
two entities.

TYPICAL ACCOUNT TITLES

ASSETS

It is classified into two: current assets and non-current assets. Assets are classified as current assets as it
expects to realize the asset, or intends to sell or consume it, in its normal operating cycle. All other
assets should be classified as non-current assets.

CURRENT ASSETS

- Cash. Cash is any medium of exchange that a bank will accept for deposit at face value. Ex. Coins,
Checks, Money Orders, Bank deposits, currency, and etc.

- Cash Equivalents. These are short term, highly liquid investments that are readily convertible to known
amounts of cash,

- Notes Receivable. A note receivable is a written pledge that the customer will pay the business fixed
amount of money on a certain date.

- Accounts Receivable. These are claims against customers arising from sale of service or goods on
credit.

- Prepaid Expense. These are expense paid for by the business in advance.

NON-CURRENT ASSETS
- Property, Plant, and Equipment. These are tangible assets that are held by an enterprise for use in the
production or supply of goods or services, for rental to others, or for administrative purposes and which
are expected to be used during more than one period.

- Accumulated Depreciation. It is a contra asset account contains the sum of the periodic depreciation
charges.

- Intangible Assets. These are identifiable, nonmonetary assets without physical substance held for use
in the production or supply of goods or services, for rental to others, or for administrative purposes.

LIABILITIES

Liabilities that are classify as current when it expects to settle the liability in its normal operating cycle.
All other liabilities should be classified as non-current liabilities.

CURRENT LIABILITIES

- Accounts Payable. This account represents the reverse relationship of the accounts receivable. By
accepting goods or services, the buyer agrees to pay for them in the near future.

- Notes Payable. The business entity is the maker of the note; that is ,the business entity is the party who
promises to pay the other party a specified amount of money on a specified future date.

- Accrued Liabilities. Amounts owed to others for unpaid expenses.

- Unearned Revenues. When the business entity receives payment before providing its customers with
goods or services, the amounts received are recorded in the unearned revenue account.

NON-CURRENT LIABILITIES

- Mortgage Payable. This account records long-term debt of the business entity for which the business
entity has pledged certain assets as security to the creditor.

- Bonds Payable. Business organizations often obtain substantial sums of money from lenders to finance
the acquisition of equipment and other needed assets.

OWNER'S EQUITY

- Capital. This account is used to record the original and additional investments of the owner of the
business entity.
- Withdrawals. When the owner of a business entity withdraws cash or other assets, such are recorded
in the drawing or withdrawal account rather than directly reducing the owner's equity account.

- Income Summary. It is a temporary account used at the end of the accounting period to close income
and expenses. This account shows the profit or loss for the period before closing to the capital account.

INCOME

- Service Income. Revenues earned by performing services for a customer or client; for example,
accounting services by a CPA firm, and laundry service by a laundry shop.

- Sales. Revenues earned as a result of the sale of merchandise; for example, sale of building materials
by a construction supplies firm.

EXPENSES

- Salaries and Wages. Includes all payments as a result of an employer-employee relationship such as
salaries and wages.

- Telecommunication, Electricity, Fuel, and Water Expenses. Expenses related to use of


telecommunications facilities, consumption of electricity, fuel, and water.

- Rent Expense. Expense for space, equipment, or other assets rentals.

- Supplies Expense. The expense of using supplies in the conduct of daily business.

- Insurance Expense. A portion of premiums paid on insurance coverage which has expired.

- Depreciation Expense. The portion of the cost of tangible assets (e.g. buildings and equipment)
allocated or charged as an expense during an accounting period.

- Interest Expense. An expense related to use of borrowed funds.

The NORMAL BALANCE of an account

The normal balance of any account refers to the side of the account-debit or credit- where increases are
recorded. Assets, Owner's Withdrawals and expense accounts normally have debit balances; liability,
owner's equity and income accounts normally have credit balances.

REFERENCE: BASIC ACCOUNTING BY WIN BALLADA, CPA, CBE, MBA


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