Scribd
Upload
29 views29 pages

Types of Major Accounts - FABM11

The document discusses the five major accounts used in accounting: assets, liabilities, equity, revenue, and expenses. It provides examples of accounts that fall under each category and distinguishes between current and non-current assets and liabilities. It also covers the chart of accounts and how to classify different account titles.

Uploaded by

yoreberly
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
29 views29 pages

Types of Major Accounts - FABM11

The document discusses the five major accounts used in accounting: assets, liabilities, equity, revenue, and expenses. It provides examples of accounts that fall under each category and distinguishes between current and non-current assets and liabilities. It also covers the chart of accounts and how to classify different account titles.

Uploaded by

yoreberly
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
You are on page 1/ 29

Types of Major

Accounts
Five (5) Major Accounts

• Assets
• Liabilities
• Equity or Owner’s Equity
• Revenue or Income
• Expenses
Assets

• Are the resources owned and controlled by


the firm or the company.
Example:
Cash, computer system, and patents, etc.
Liabilities

• Are the obligations of the company arising from the past


events which are to be settled in the future. These represent
what the company owes to other people, organization, and
financial institutions.
Example:
Mortgage, vehicles and loans
Equity or Owner’s Equity

• Is the owner’s claims in the business. It is


part of the total assets that the owners of the
company fully own.
Example of this is capital.
Revenue or Income

• Is the money that the company earns from its regular


sales of products or services. This is earned by the
company through sales of products or services.
Example of this are sale of building materials and
accounting services by a CPA firm.
Expenses

• Are the money that the company spends to


produce the goods or services it sells.
Example of these are rent expense, supplies
expense and salaries expense.
Assets: there are two (2) classifications

• Current assets
• Non-current assets
Current Assets

• Are assets that can be collected, sold, and


even used up to one year after year end date.
Examples of Current Assets are:

• Cash is money on hand, or in banks, and other items considered


as a medium of exchange in business transactions.
• Accounts receivable are amounts due from customers arising
from debts.
• Notes receivable are amounts due from clients supported by a
written note or promise.
Examples of Current Assets are:

• Inventories are assets held for resale in the course of the


business.
• Suppliers are items purchased by an enterprise that is unused as
of the reporting date.
• Prepaid Expenses are advance payment for expenses
Examples of Current Assets are:

• Accrued Income is an income or revenue earned by the firm


but not yet collected.
• Short-term Investment are the investment made by the
company that is intended to be sold immediately.
Non-current Assets

• Are assets that cannot be collected, sold, and even


used up to one year after year end date.
Examples of Non-current Assets
• Property, plant, and equipment are long-lived assets that have been acquired
for use in operations.
• Long term Investment are the investment of the firm made for long term
purposes.
• Tangible Assets are physical assets in the form of cash, furniture and fixture, and
supplies.
• Intangible Assets are non-physical assets in the form of trademarks and patterns.
Current Liabilities

• Are those that reach its due date for payment


(paid, recognized as revenue) within one year
after year-end date.
Examples of Current Liabilities
• Accounts payable are amounts due or debts to the suppliers for goods
purchased or for services received on account.
• Notes payable are amounts due to third parties supported by a written note
or promise.
• Accrued expenses are treated as liabilities since these are the expenses
that are incurred but not yet paid (e.g. salaries payable, taxes payable).
• Unearned Income is cash or payment collected in advance.
Non-current Liabilities

• Are those that do not reach its due date for


payment, (paid, recognized as revenue) within
one year after year-end date.
Example of Non-current Liabilities
• Loans payable is a contract wherein the owner of the property
gives the right to use it to another party in exchange for an
interest payment and gives back the property at the end of their
contract. It is documented by promissory note. and in the case
there is still a portion which is unpaid as of the date of a
company’s balance sheet, the remaining balance on the loan is
called a loan payable.
Mortgage payable
• is the liability of a property owner to pay a loan that is secured
by property and from the borrower’s point of view. The
mortgage is considered as long-term liability. Some part of the
debt that is payable within the next 12 months is classified as a
short-term liability. The remaining unpaid principal will be the
total amount due of the loan.
Owner’s Equity

There are two elements that comprised equity:


• Capital is the worth of cash and other assets invested in
the business.
• Drawing is an account debited for assets withdrawn by
the owner for personal use from the business.
Income

• Is the increase in resources resulting from the performance of service


or selling goods.
Examples of income accounts are:
• Service revenue for service entities
• Sales for merchandising and manufacturing companies
• Interest income
Expense

• Is the decrease in resources resulting from the operations of the


business.
Examples of expense accounts are:
• Salaries expense
• Interest expense
• Utilities expense
Chart of accounts

• Is a listing of all accounts used by


companies in their financial records.
Here are five steps in preparing a basic chart of accounts:

1. Make 2 columns.
2. Prepare the assets, liabilities, equity, revenue and expenses,
respectively.
3. List all assets, liabilities, equity, revenue, and expenses account in the
first column.
4. In the second column, choose an account code (this may vary
depending on the company).
5. In the third column, write the description of each account title.
Account Code Account Title
Assets
101 Cash
102 Accounts Receivable
103 Inventory
104 Prepaid Expense
105 Supplies
106 Equipment
107 Building

108 Land
Liabilities
201 Accounts Payable
202 Notes Payable
Capital
301 Owner’s Capital
302 Owner’s Drawing
401 Service Revenue
501 Salaries Expense
502 Rent Expense
503 Utilities Expense
Activity: Copy & Answer
Put a check on the right column where each item belongs.
Account Title Assets Liabilities Owner’s Revenues Expenses
Equity
Current Non- Current Non-
assets current Liabilities current
assets Liabilities

1. Cash
2. Accounts
payables

3. Building

4. Mortgage

5. Service
revenues
Activity: Copy & Answer
Put a check on the right column where each item belongs.
Account Title Assets Liabilities Owner’s Revenues Expenses
Equity
Current Non- Current Non-
assets current Liabilities current
assets Liabilities
6. Accounts
receivable
7. Salaries
Expense
8. Inventory
9. Rent expense
10. Unearned
service revenue
Coverage of Exam: (50 items)
• Accounting Equation
• Types of Major Accounts

Types of exam:
Identification
Multiple Choice
Problem solving – record the transactions using financial worksheet

You might also like