Fundamentals of SENIOR

Accountancy, Business HIGH

and Management 1 (FABM 1) SCHOOL

Self-Learning
Module

Five Major Accounts 10

666
Quarter 3
Fundamentals of Accountancy, Business and Management 1
Quarter 3 – Self-Learning Module10: Five Major Accounts
First Edition, 2020

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 Fundamentals of
SENIOR
Accountancy, Business HIGH
and Management 1 SCHOOL

(FABM 1)

Self-Learning
Module

Five Major Accounts 10

Quarter 3
Introductory Message

For the facilitator:

Welcome to the Senior High School – Fundamentals of Accountancy, Business

and Management 1 Self Learning Module on Five Major Accounts!

This Self-Learning Module was collaboratively designed, developed and

reviewed by educators from the Schools Division Office of Pasig City headed by its
Officer-in-Charge Schools Division Superintendent, Ma. Evalou Concepcion A.
Agustin, in partnership with the City Government of Pasig through its mayor,
Honorable Victor Ma. Regis N. Sotto. The writers utilized the standards set by the K
to 12 Curriculum using the Most Essential Learning Competencies (MELC) in
developing this instructional resource.

This learning material hopes to engage the learners in guided and independent
learning activities at their own pace and time. Further, this also aims to help learners
acquire the needed 21st century skills especially the 5 Cs, namely: Communication,
Collaboration, Creativity, Critical Thinking, and Character while taking into
consideration their needs and circumstances.

In addition to the material in the main text, you will also see this box in the
body of the module:

Notes to the Teacher

This contains helpful tips or strategies that
will help you in guiding the learners.

As a facilitator you are expected to orient the learners on how to use this
module. You also need to keep track of the learners' progress while allowing them to
manage their own learning. Moreover, you are expected to encourage and assist the
learners as they do the tasks included in the module.
 For the learner:

Welcome to Fundamentals of Accountancy, Business and Management 1 Self

Learning Module on Five Major Accounts!

This module was designed to provide you with fun and meaningful
opportunities for guided and independent learning at your own pace and time. You
will be enabled to process the contents of the learning material while being an active
learner.

This module has the following parts and corresponding icons:

Expectations - This points to the set of knowledge and skills

that you will learn after completing the module.

Pretest - This measures your prior knowledge about the lesson

at hand.

Recap - This part of the module provides a review of concepts

and skills that you already know about a previous lesson.

Lesson - This section discusses the topic in the module.

Activities - This is a set of activities that you need to perform.

Wrap-Up - This section summarizes the concepts and

application of the lesson.

Valuing - This part integrates a desirable moral value in the

lesson.

Posttest - This measures how much you have learned from the
entire module.
 EXPECTATIONS

After going through this module, you are expected to:

1. understand the nature of the five major accounts ;
2. classify and discuss the five major accounts;
3. enumerate examples of each type of account; and
4. identify the normal balance of each type of account.

PRETEST

Directions: Write TRUE if the statement is correct, and FALSE if otherwise.

1. In accounting, accounts are classified using two approaches. These approaches are
known as the modern approach and the traditional approach.
2. In the modern approach, accounts, are classified as asset accounts, liability accounts,
capital or owner’s equity accounts, withdrawal accounts, revenue or income accounts,
and expense accounts.
3. The normal balance for liabilities, capital, and income is credit.
4. Petty cash, inventory, and accounts receivable are considered as sub-accounts
for assets.
5. Product sales, interest earned and common stock are sub-accounts for income
accounts.

RECAP

Directions: Fill in the blanks.

1. The equity account is split into four elements. These are __________,
____________, ____________, and _____________.

2. The expanded accounting equation for a sole proprietorship is

___________________________________________________________________.

3. The expanded accounting equation for partnership is

______________________________________________________.

4. The expanded accounting equation for a corporation is

___________________________________________________________________ .
 LESSON

To fully understand the normal business operations and transactions, it is necessary

that you understand the five major accounts. You must be able to classify and record
each business transaction under a “head account” classified under the five major
accounts. These accounts include assets, liabilities, owner’s equity or capital,
income, and expense. An account is a record of all accountable and relevant business
transactions where similar information is stored. There are two sides of an account.
The left side of the account is called debit and the right side of the account is called
credit. Accounts are classified using two approaches: the traditional approach and
modern approach.
A. Assets
Assets are resources controlled by the entity as a result of past events and from
which future economic benefits are expected to flow to the entity. Assets are owned
and controlled by the business and are expected to yield future economic benefits.
Assets can be classified as tangible and intangible. Assets are also grouped as
current and noncurrent. Current assets are those reasonably expected to be realized
in cash within one year from the reporting date or the normal operating cycle,
whichever is longer. Otherwise, then it’s noncurrent. The normal balance for assets
is debit. Assets include but not limited to cash, accounts receivable, notes receivable,
inventories, unused supplies, prepaid rent, equipment, furniture and fixtures,
building, land, allowance for doubtful accounts, and the accumulated depreciation.

B. Liabilities
Liabilities are the present obligation of the entity arising from past events. The
settlement of liabilities is expected to result in an outflow from the resources
of the entity embodying economic benefits. The normal balance for liabilities
is credit. Liabilities are classified as current and non-current. Current
liabilities are debts that are expected to be paid with 12 months or less. These
consist mainly of operating debts. Current liabilities include accounts
payable, short-term debt, accrued expenses, and dividends payable. Non-
current liabilities are obligations reasonably expected to be paid in cash
beyond one year. Long-term loans, debentures, bonds payable, deferred tax
liability, and long-term lease obligations are examples of non-current
liabilities.
C. Capital or Equity
Capital in a sole proprietorship is called the owner’s equity. In a partnership
business, capital is called a partner’s equity and in corporation, it is called
stockholder’s equity. The normal balance for capital or equity is credit. Investments
and income increase equity while withdrawals and expenses decrease it.
D.Income
Income is the money that the business earns from selling a product or service, or
from interest and dividends on marketable securities. Income is measured
periodically and is ultimately included in the capital account. The normal balance
for income is credit. Service Revenue, Professional Fees, Sales, Rent Income,
Commission Income, and Interest Income are examples of income. The two types of
income are sale revenue and gains. Income earned in the ordinary course of the
business activities of the entity is called service income. Service income is
professional fees for service companies. Gains do not arise from the core operations.
Gains come from other activities. Gains include gain on the sale of equipment and
gain on short-term investments. Other names for income are revenue, gross income,
turnover, and “top line”.
E.Expenses
Expenses cause a decrease in economic benefits during the accounting period in the
form of outflows or depletions of assets that result in the decrease of an equity. The
normal balance of an expense account is debit. Expenses include ordinary expenses
such as cost of sales, advertising, salaries, rentals, and repairs. Depreciation
expenses are unique type of expense account used when purchasing fixed assets.
Expense is accounted for under the accrual principle. It is recognized in full for the
whole accounting period regardless if payments have been made or not.

ACTIVITIES

Activity 1
Classify the accounts below according to each type of head account. Write
asset, liability, equity or capital, income, or expense below each item
number.
___________ 1. Service revenue, Interest Income, Sales, Professional Fees
____________2. Cost of Sales, Rentals, Income Tax, Loss from Fire, Utilities
____________3. Loans from banks, Bank overdraft, Advances from customers
____________4. Owner’s Equity, Partner’s Equity, Stockholder’s Equity
____________5. Cash and Cash Equivalents, Receivables, Inventories, Prepayments
Activity 2
Directions: Complete the table below. Write DEBIT or CREDIT.

Head Account Normal Balance Increases Decreases

1. ASSETS
2.LIABILITIES
3.EQUITY OR CAPITAL
4.INCOME
5.EXPENSES
 WRAP-UP

To summarize what you have learned in the lesson, answer the following
questions:
1. What are the five major accounts or head accounts in accounting?
2. What are the two approaches for financial accounting transactions?
3. What is the normal balance for each type of major account?

VALUING

Reflect on this!

“He who accounts for all things easy will have many difficulties." – Lao Tzu

POSTTEST

Directions: Provide or supply what is asked.

1. It refers to the money that the business earns from selling a product or service.
2. These can cause an economic decrease in the form of outflows or depletions of
assets.
3. Investments and income will increase _________while withdrawals will decrease it.
4. These are the present obligations of the entity from past events.
5. These are resources controlled by the entity and from which future economic
benefits are expected to flow.
6. It is the normal balance for assets and expenses.
7. It is the normal balance for liabilities and income.
8. When liability and/or equity increases, assets normally ________________.
9. When asset decreases, liability and/or equity normally _________________.
10. Liabilities ________________ coupled with an offsetting decrease in equity.
 KEY TO CORRECTION

5.DEBIT,DEBIT,CREDIT 10. Increase

9. Decreases
4.CREDIT,CREDIT, DEBIT 8. Increases
3.CREDIT,CREDIT,DEBIT 7. Credit
2.CREDIT,CREDIT,DEBIT 6. Debit
RECAP 1.DEBIT,DEBIT,CREDIT
5. Assets
ACTIVITY 2
5. FALSE 5. Assets 4. Liabilities
4. TRUE 4. Capital or Equity 3. Capital or Equity
3. TRUE 3. Liabilities 2. Expenses
2. TRUE 2. Expenses 1. Income
1. TRUE 1. Income
PRETEST ACTIVITY 1: POSTTEST

REFERENCES
Ballada, W. 2017. Fundamentals of Accountancy, Business, and Management 1. VDomDane Publishers.

Banggawan, RB. Asuncion, DJ. 2017. Fundamentals of Accountancy, Business, and Management 1.
Real Excellence Publishing.

Feme, PM. Cabuñag, HP. 2017. Fundamentals of Accountancy, Business and Management 1. Fastbooks
Educational Supply, Inc

Ferrer, RC. Millan, CV. 2017. Fundamentals of Accountancy, Business, and Management 1. Bandolin
Enterprise. San Juan, DA. 2018. Fundamentals of Accounting. Elmoer Publishing

Rabo, JS. Tugas,FC.Salendrez, HE. 2016. Fundamentals of Accountancy, Business, and Management
1. Vibal Group Inc.

San Juan, D. A. 2018. Fundamentals of Accounting. ELMOER Publishing.

AccountingCoach.com.https://www.accountingcoach.com/search?q=expenses&stp=1. Accessed on
August 21, 2020.

AccountingCoach.com.https://www.accountingcoach.com/search?q=assets&stp=1.
Accessed on August 21, 2020.

AccountingCoach.com.https://www.accountingcoach.com/search?q=liabilities&stp=1.
Accessed on August 21, 2020.
AccountingCoach.com.https://www.accountingcoach.com/search?q=owner's+equity&stp=1
Accessed on August 21, 2020.

AccountingCoach.com.https://www.accountingcoach.com/search?q=income&stp=1.
Accessed on August 21, 2020.

https://bizfluent.com/info-10005386-five-types-accounts-accounting.html .
Accessed on August 31, 2020.

https://www.accountingformanagement.org/classification-of-accounts/.
Accessed on September 2, 2020.

https://www.thehardinggroup.biz/blog/essential-accounts-small-business-accounting/.
Accessed on September 2, 2020.