ANSWERS:

ACTIVITY 1:
1. WHAT IS AN ACCOUNT?
- An account in accounting terms, refers to assets, liabilities, income, expenses, and
equity, as represented by individual ledger pages, to which changes in value are
chronologically recorded with both debit and credit entries.

2. WHAT ARE THE MAJOR ACCOUNTS? IN ONE OR TWO SENTENCES, DISCUSS

EACH BRIEFLY AND GIVE AT LEAST 3-5 EXAMPLES OF EACH MAJOR
ACCOUNT.
- ASSETS – AN ASSET IS A RESOURCE WITH ECONOMIC VALUE THAT AN
INDIVIDUAL, CORPORATION, OR COUNTRY OWNS OR CONTROLS WITH
THE EXPECTATION THAT IT WILL PROVIDE A FUTURE BENEFIT.
(EXAMPLES: LAND, SUPPLIES, ACCOUNTS RECEIVABLES, BUILDING,
CASH)
- LIABILITIES – A LIABILITY IS SOMETHING THAT A PERSON OR
COMPANY OWES, USUALLY A SUM OF MONEY. (EXAMPLES: ACCOUNTS
PAYABLE, NOTES PAYABLE, TAXES OWED, MORTGAGE DEBT, BONDS
PAYABLE)
- OWNER’S EQUITY – IT IS THE OWNER’S RIGHT TO THE ASSETS OF THE
BUSINESS.
(EXAMPLES: COMMON STOCK, ADDITIONAL PAID-IN CAPITAL,
PREFERRED STOCK, RETAINED EARNINGS AND OTHER ACCUMULATED
COMPREHENSIVE INCOME)
- REVENUES – IT IS THE INCOME GENERATED FROM NORMAL BUSINESS
OPERATIONS AND INCLUDES DISCOUNTS AND REDUCTIONS FOR
RETURNED MERCHANDISE. (EXAMPLE: SERVICE INCOME, SALES,
INTEREST REVENUE, FEES EARNED, INTEREST INCOME)
- EXPENSES – IT IS THE COST OF OPERATIONS THAT A COMPANY INCURS
TO GENERATE REVENUE. (EXAMPLES: SUPPLIES EXPENSE, UTILITY
EXPENSE, RENT EXPENSE. SALARY EXPENSE, INSURANCE EXPENSE)
3. DIFFERENTIATE CURRENT AND NON-CURRENT ASSETS
- CURRENT ASSETS ARE ASSETS THAT ARE EXPECTED TO BE
CONVERTED TO CASH WITHIN A YEAR, WHILE NONCURRENT ASSETS
ARE ASSETS THAT ARE NOT TO BE REALIZED INTO CASH IN 1 YEAR.
4. DIFFERENTIATE CURRENT AND NONCURRENT LIABILITIES
- CURRENT LIABILITIES ARE SHORT-TERM LIABILITIES THAT ARE DUE
AND PAYABLE WITHIN 1 YEAR, WHILE NONCURRENT LIABILITIES ARE
LONG TERM LIABILITIES THAT ARE DUE AFTER A YEAR OR MORE.
5. WHAT ARE THE CONTRA-ASSET ACCOUNTS?
 - ACCUMULATED DEPRECIATION, ACCUMULATED DEPLETION,
DISCOUNTS ON NOTES RECEIVABLE, ALLOWANCE FOR DOUBTFUL
ACCOUNTS, OBSOLETE INVENTORY SERVICES

6. WHAT IS A CHART OF ACCOUNTS?

- IT IS AN INDEX OF ALL THE FINANCIAL ACCOUNTS IN THE GENERAL
LEDGER OF A COMPANY.
7. HOW IS THE CHART OF ACCOUNTS DESIGNED?
- THE CHART OF ACCOUNTS STARTS WITH CASH, PROCEEDS THROUGH
LIABILITIES AND SHAREHOLDER’S EQUITY, AND THEN CONTINUES
WITH ACCOUNTS FOR REVENUEWS AND THEN EXPENSES.

ACTIVITY 2
NUMBER ACCOUNT ACCOUNT TYPE
DESCRIPTION
101 CASH ASSET
102 ACCOUNTS RECEIVABLE ASSET
103 INTEREST RECEIVABLE ASSET
104 UNUSED SUPPLIES ASSET
105 PREPAID RENT ASSET
106 EQUIPMENT ASSET
107 FURNITURES AND ASSET
FIXTURE
108 LAND ASSET
109 ACCUMULATED ASSET
DEPRECIATION-
EQUIPMENT
110 ALLOWANCE FOR BAD ASSET
DEBTS
111 ACCUMULATED ASSET
DEPRECIATION-
FURNITURE AND
FIXTURES
112 NOTES RECEIVABLE ASSET
201 ACCOUNTS PAYABLE LIABILITY
202 NOTES PAYABLE LIABILITY
203 SALARIES PAYABLE LIABILITY
204 INCOME TAX PAYABLE LIABILITY
205 UNEARNED SERVICE LIABILITY
INCOME
206 INTEREST PAYABLE LIABILITY
207 MORTGAGE PAYABLE LIABILITY
 208 LOAN PAYABLE LIABILITY
301 MJJ CAPITAL OWNER’S EQUITY
302 MJJ DRAWINGS OWNER’S EQUITY
303 INCOME AND EXPENSE OWNER’S EQUITY
SUMMARY
401 SERVICE INCOME INCOME
402 INTEREST INCOME INCOME
403 OTHER INCOME INCOME
501 TAXES AND LICENSES EXPENSE
502 SALARIES EXPENSE EXPENSE
503 SUPPLIES EXPENSE EXPENSE
504 UTILITIES EXPENSE EXPENSE
505 RENT EXPENSE EXPENSE
506 DEPRECIATION EXPENSE EXPENSE
507 BAD DEBTS EXPENSE EXPENSE

ACTIVITY 3
OCTOBER, DESCRIPTION AMOUNT NUMBER ACCOUNT
2020 TYPE
5 CASH 25,000 310 OWNER’S
INVESTMENT EQUITY
SHOP TOOLS 12,000 110 ASSET
SUPPLIES 15,000 111 ASSET
SERVICE CAR 200,000 112 ASSET
6 ADVERTISING 2,500 510 EXPENSE
EXPENSE
7 FURNITURES 65,000 113 ASSET
AND FIXTURES
9 ACCRUED 12,000 114 ASSET
INCOME
13 SERVICE 22,000 410 INCOME
INCOME
CASH 10,000 115 ASSET
18 SALARIES 3,500 511 EXPENSE
EXPENSE
21 ACCOUNTS 32,500 210 LIABILITY
PAYABLE
23 ACCOUNTS 12,000 116 ASSET
RECEIVABLE
28 GONZALES 7,500 311 OWNER’S
DRAWING EQUITY
30 SERVICE 15,000 411 INCOME
INCOME
31 UTILITY 1,500 512 EXPENSE
 EXPENSE
RENT EXPENSE 10,000 513 EXPENSE
SALARIES 3,500 514 EXPENSE
EXPENSE