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Chapter 8 Types of Major Accounts

The document discusses transactions for Jo's Health Spa, including Jo Valdez investing cash and land and purchasing equipment, supplies, and furniture on account. A bank loan was also obtained and used to construct a new clinic building.

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Jc Locsin
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106 views

Chapter 8 Types of Major Accounts

The document discusses transactions for Jo's Health Spa, including Jo Valdez investing cash and land and purchasing equipment, supplies, and furniture on account. A bank loan was also obtained and used to construct a new clinic building.

Uploaded by

Jc Locsin
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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•REVIEW

• What is the formula of accounting equation?


• What does accounting equation show?
• Give common accounts under assets
• Give common accounts under liabilities
• Give common accounts under owner’s equity
• What are the assets that you have right now? (it
could be personal, school or business assets)
• Do you have money owed?
• Did you buy anything on account?
• Do you have a part-time job or mini-business?
• What are your everyday expenses?
LEARNING OBJECTIVES
• At the end of this lesson, learners are expected
to :
1. understand the types of major accounts
2. be responsible and organized in recording
financial data
3. record financial data using accounts
TYPES OF MAJOR ACCOUNTS
Chapter 8
TYPES OF MAJOR ACCOUNTS

1. Assets
2. Liabilities
3. Owner’s Equity
4. Income
5. Expenses
ASSETS = LIABILITIES + OWNER’S
EQUITY
ASSETS

• Usually in the form of properties and rights owned


by the business
• Classified into CURRENT and NON-CURRENT
ASSETS.
CURRENT ASSETS

•Assets which are expected to be


realized within the ordinary course
of business or a span of 12 months
(1 accounting period.)
ACCOUNTING PERIOD

• It is period of one year, 12 months or


shorter.
• CALENDAR Year
• FISCAL Year
CURRENT ASSETS

1. Cash
2. Receivables
3. Supplies
4. Inventories
5. Prepaid Expense/ Prepayment
CASH
• Most basic and familiar of all assets
• Cash on hand
• Cash in bank - Includes money in the form of
bank deposits in checking accounts and savings
accounts
• “Most LIQUID among all assets”
RECEIVABLES

• These are collectibles from customers,


clients and other persons for goods, services,
or money given by the company.
• ACCOUNTS RECEIVABLE
• NOTES RECEIVABLE
SUPPLIES

•Items purchased by an enterprise


which are unused as of the
reporting date.
INVENTORIES

•Stocks of good available for sale


PREPAID EXPENSE/PREPAYMENT

•Advance payment made for


benefits or services to be
received by the business in the
future.
NON-CURRENT ASSETS

•Assets that cannot be realized


(collected, sold, used up) one year
after year-end date.
Non- Current Assets

Fixed Assets Intangible Assets


FIXED ASSETS

• Assets needed to support the operation of the


business over a long period of time and they
are not intended for sale.
• Also known as PROPERTY, PLANT and
EQUIPMENT
FIXED ASSETS

1.Land
2.Building
3.Equipment
4.Furniture and Fixture
INTANGIBLE ASSETS

• Assets that lack physical substance and yet are


similarly realizable over long periods of time.
• Simply represented by written documents or
certificates stating their description and ownership
status
Examples: copyright, franchises, trademarks and
licenses
Liabilities

Current Liabilities

Non-Current Liabilities
CURRENT LIABILITIES

• Debts or obligations which are expected to


be settled or paid out by the entity within 12
months
CURRENT LIABILITIES

• Accounts Payable
• Loans Payable
• Accrued Expenses – utilities & salaries payable
• Unearned Income/Revenue
• Notes Payable
NON-CURRENT LIABILITIES

• Long term liabilities or obligations


which are payable longer than one year
• NOTES PAYABLE
• MORTGAGE PAYABLE
OWNER’S EQUITY

•Residual interest of the owner from


the business. It can be derived by
deducting liabilities from assets.
OWNER’S EQUITY

• Capital
• Drawing/ Withdrawal
REVENUE / INCOME

•Sales/ Sales Revenue


•Service Income
EXPENSES
• Gas and Oil
• Rent
• Repair
• Salaries
• Supplies
• Utilities
• Taxes and Licenses
CHART OF ACCOUNTS
• listing of the accounts used by companies in their financial
records.
• helps to identify where the money is coming from and where
it is going.
• arranged according to the order of their appearance in
the financial statements.
• Assets (1__)
• Liabilities (2__)
• Owner’s equity (3__)
• Income (4__)
• Expense (5__)
MS. LEE’S FAMOUS BARBEQUE
• June 25 Initial Investment. Ms. Lee invested 25,000 as initial capital.
• 26 Ms. Lee went to the local hardware store and bought the necessary
equipment such as grills and utensils for P 20,000
27 Ms. Lee bought meat (inventories) worth 10,000 on an account.
28 Ms. Lee needs to obtain business and other permits from the local
government. As such, she paid P 1000 to obtain such permits.
29 During the first day of her business venture, she was able to sell 1000
of her famous barbecues with a selling price of P 20,000. Half of which
was paid cash. The other half was to be paid in 5 days.
30 She paid 5000 of the accounts in June 27
 
ASSETS = Liabi- + Owner’s Equity
lities
  Cash Accounts Equipment Inventories   Accounts   Owner’s Sales Expenses
Receivabl Payable Capital Revenue
June e
25 P 25,000             P 25,000    
26 (20,000)   P 20,000        
27     P10,000 P 10,000    
28 (1,000)       (P 1,000)
29 10,000 P10,000   P 20,000
30 (5000)
(5,000)

  P 9,000 P 10,000 P 20,000 P 10,000 = P 5,000 + P25,000 P20,000 (P 1,000)

P 49,000 = P 49,000
• DIRECTION: Analyze the transactions in an
accounting equation. Include money columns
for Cash, Supplies, Land, Building,
Equipment, Furniture and Fixtures, Accounts
Payable, Loans Payable, Valdez, Capital and
Valdez, Drawing
LISTED BELOW ARE SEVERAL TRANSACTIONS
FOR “JO’S HEALTH SPA”
June 4- Jo Valdez invested P 1,500,000 cash and a vacant lot
worth P 300,000 in a health clinic called Jo’s Health Spa
8-Purchased for cash P 900,000 worth of equipment and
P15,000 worth of supplies
10 - Bought furniture and fixtures from a friend at a cost of
P 150,000 promising to pay after 7 days. Only P 80,000 was
placed in the clinic, the remaining amount was placed in his
newly built house.
“JO’S HEALTH SPA”

12- Applied for P 2,500,000 business loan from a bank. He


plans to use this to construct a clinic.
14-Withdrew supplies worth P 1,000 for personal use
15 -The loan from the bank was approved and the was money
deposited in the name of the business which Valdez opened on
the same date.
“JO’S HEALTH SPA”

• 17 - Paid one half of the account due on the furniture


and fixtures
• 30- A two-story clinic was constructed on the vacant
lot. The construction cost was P 1,500,000 and was
paid out of the new bank loan

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