LO1.

PREPARE CHART OF ACCOUNTS

ASSESSMENT CRITERIA:

1. List of asset, liability, equity, income, and expense account titles

are prepared in accordance with Generally Accepted Accounting
Principles.
2. Chart of Accounts is coded according to industry practice.

CONTENTS:

 Definition and functions of Bookkeeping and Accounting.

 Types of business organization
 Definition of Chart of Accounts

CONDITIONS:

The students/trainees must be provided with the following:

 Calculator
 Paper
 Learning Materials
 Pencil
 Eraser

METHODOLOGIES:

 Group discussion
 Interaction
 Lecture
 Practical exercises

ASSESSMENT METHODS:

 Written test
 Practical/performance test
 Interview
 LEARNING EXPERIENCES

PREPARE CHART OF ACCOUNTS

LEARNING ACTIVITIES SPECIAL INSTRUCTIONS

1. Read Information Sheet 1 on Prepare Go through the Information Sheets and

Chart of Accounts
2. Answer self-check 1. Compare
answers to answer key 1
3. Read and analyze Task Sheet 1 on
Prepare Chart of Accounts
4. Perform Task Sheet 1 on Prepare
Chart of Accounts
answer the self-checks and perform the task
given to ensure the knowledge you have
learned in Journalizing Transactions. You
are required to get all answers correct. If
not, read the information sheets again to
answer all questions correctly. Evaluate
your own work using the Performance
Criteria Checklist. Show your output to your
trainer for feedback/evaluation and
recording.

5. Evaluate performance using

Performance Criteria Checklist 1
 Information Sheet 1.1
Definition and functions of Bookkeeping and Accounting

Bookkeeping is the process of recording business transactions in a

chronological order in other words it records day to day activities of a business
unit, bookkeeping is also a part of accounting it becomes a tool of business entities
in determining the result of their business venture, so anybody who engages in
business needs bookkeeper in order to know whether the business realizes income
or suffer a loss.

Accounting has been defined by the American Institute of Certified Public

Accountants (AICPA) as the process of recording, classifying, summarizing in a
significant manner and in terms of money transactions and events which are in
part at least of a financial character and interpreting the result there of.

Bookkeeper is a person whose job is to keep records of the financial affairs

of a business. Bookkeepers oversee a company's financial data and compliance by
maintaining accurate books on accounts payable and receivable, payroll, and daily
financial entries and reconciliations. They perform daily accounting tasks such as
monthly financial reporting, general ledger entries, and record payments and
adjustments.

How to Maintain Employee Records

The detailed individual records you keep on each employee should include this
basic information, most of which is collected or determined as part of the hiring
process:
 Name, address, phone number, and Social Security number
 Department or division within the company
 Start date with the company
 Information Sheet 1.2
Determine nature of business

A business is defined as an
organization or enterprising entity
engaged in commercial, industrial, or
professional activities. ... The term
"business" also refers to the organized
efforts and activities of individuals to
produce and sell goods and services for
profit.

Types of Business
1. Service Type

A service type of business provides intangible

products (products with no physical form). Service type
firms offer professional skills, expertise, advice, and other
similar products. Those which derive their income from
sales of service to clients and customers.

Examples of service businesses are: salons/Beauty parlors, repair shops,

schools, dental clinic, banks, accounting firms, and law firms.

2. Merchandising or Trading Type

This type of business buys products at

wholesale price and sells the same at retail
price. They are known as "buy and sell"
businesses. They make profit by selling the
products at prices higher than their purchase
costs. A merchandising business sells a
product without changing its form. Businesses
which buys goods on without changing their form, sell them at a profit.
Examples are: grocery stores/Sari sari store, convenience stores,
Drugstores, Department Store, distributors, and other resellers.

3. Manufacturing Type
Unlike a merchandising business, a
manufacturing business buys products with
the intention of using them as materials in
making a new product. Thus, there is a
transformation of the products purchased. A
manufacturing business combines raw
materials, labor, and overhead costs in its
production process. The manufactured goods
will then be sold to customers. Those business
 who buys raw materials, convert them to finished product before finally
selling them at a profit.
Examples are: Furniture Factories, Car Assembles, Battery Makers.

Information Sheet 1.3

Prepare list of Assets, Liabilities, Equity, income and expenses account titles

Chart of Accounts for a Small Company

This is a partial listing of another sample chart of accounts. Note that each
account is assigned a three-digit number followed by the account name. The
first digit of the number signifies if it is an asset, liability, etc. For example,
if the first digit is a "1" it is an asset, if the first digit is a "3" it is a revenue
account, etc. The company decided to include a column to indicate whether
a debit or credit will increase the amount in the account. This sample chart
of accounts also includes a column containing a description of each account
in order to assist in the selection of the most appropriate account.

Asset Accounts
Liability Accounts

Owner's Equity Accounts

Operating Revenue Accounts

Operating Expense Accounts

Non-Operating Revenues and Expenses, Gains, and Losses

Note: Additional Definitions
Account Titles

Assets

Current Assets – are assets refers to cash and other assets that are easily
converted into cash or consumed during the accounting period usually one year.

Property and Equipment – refer to assets that have the following characteristics.
Property, plant and equipment is the long-term asset or noncurrent asset section of
the balance sheet that reports the tangible, long-lived assets that are used in the
company's operations. These assets are commonly referred to as the company's
fixed assets or plant assets.

Cash on hand – refers to cash and other cash items which are not yet deposited in
the bank. It includes: Coins, currencies, checks, money orders, and other money
equipment.

Cash in bank – is money deposited in the bank.

Notes Receivable – are claims of the business from anyone evidenced by a note.

Accounts Receivable – refers to claims of the business from anyone for sales made
or services rendered on account.

Advances to officers and employees – is a term that refers to amounts given to

officers and employees usually deductible from their salaries.

Merchandise inventory – refers to goods unsold at the end of the accounting

period or on hand at the beginning of the year.

Tools – refers to small items of equipment like pliers, hammer, screwdrivers, etc.
Land – refers to land space owned by the business

Building – refers to the building or edifice constructed, owned and intended for use
by the business.

Furniture and fixtures – is a term used to include tables and chairs, cabinets,
counters, and other pieces of furniture used in the business sometimes specific
terms are use like store furniture and fixtures.

Delivery equipment – is a term that includes cars, jeeps, trucks, vans and other
transportation vehicles owned by the business.

Intangible assets – are assets that do not have physical existence owned by the
business.

Liabilities

Current liabilities – are obligations or debts of the business which will be paid
during the accounting period by means of payment of current asset or a creation of
another current liability,
Examples are: Notes payable, accounts payable, etc.

Accounts payable – is a current liability which refers to debts or obligations that

arise from the purchase of goods or services on account.

Notes payable – is a current liability if the note is payable beyond one year, it is
classified as a long term liability.

Capital or Owner’s Equity

Owner’s equity – is a term that refers to the vested interest of the owner in the
business. The difference between the assets & the liabilities of the business is
called the owner’s equity or owner’ capital.

Owner’s drawing – is a term that shows the withdrawal of cash or other items from
the business by the owner. This is deducted from the income earned by the
business.

Income and expenses summary – is a temporary account opened at the end of the
accounting period to absorb income and expenses accounts before finally closing it
to capital. It relieves the capital account of the many debts and credits.

Income

Income – is a general term to mean any earning made by the business.

Service Income – refers to the earnings derived from services rendered whether on
cash or an account.

Fee – is another general term used to designate income.

Legal fees – is income derived from rendering legal services. Medical fees,
accounting fees, dental fees, and other terms may be used to denote income from a
particular type of professional services.

Sales – is a term to denote income derived from the sales of good.

Commission Income – is an income account to designate earnings received from

selling anything on a commission basis.

Other Income – is another income account to designate earnings received from

sources other than its main source of income.

Cost and Expenses

Taxes and licenses - are payments made by the business to the government for its
business operations like privileged taxes, percentage taxes, mayors permit, etc.

Salaries expense – refers to the cost of services rendered by the employees or

workers of the business.

Delivery Expense – refers to the cost of transportation in delivering goods or

services to customer.

Rent expense – refers to the space occupied by the business or the payment for
the use of any property by the business.

Advertising expense – includes promotional expenses in the selling of the

products.

Utilities expense – is a term used to denote the cost of light and water consumed
by the business.

Repairs and maintenance – are expenses for repairing or servicing buildings,

machineries, or equipment of the business.

Cost of sales or cost of goods sold – is the purchase price or the manufacturing
cost of goods sold.

Debit – comes from latin word “debere” which means the value received.
Credit – comes from the latin word “credere” which means a value parted with.
 SELF CHECK 1.1
Definition and functions of Bookkeeping and Accounting

QUESTION?

1. What is the difference of Bookkeeping & Accounting?

2. What is the role of a Bookkeeper?

 SELF CHECK 1.2
(Determine nature of business)

Instructions: Read the questions carefully. On your answer sheet, write the
letter of the correct answer.

1. These businesses which buys goods on without changing their form, sell
them at a profit.
a. Manufacturing Type
b. Service Type
c. Merchandising Type
2. Those business who buys raw materials, convert them to finished product
before finally selling them at a profit.
a. Service Type
b. Manufacturing Type
c. Merchandising Type
3. Those which derive their income from sales of service to clients and
customers.
a. Service Type
b. Manufacturing Type
c. Merchandising Type
4. It is defined as an organization or enterprising entity engaged in commercial,
industrial, or professional activities.
a. Service Type
b. Business
c. Partnership
5. Grocery stores/Sari sari store, convenience stores, Drugstores, Department
Store, distributors, and other resellers are example of what business type?
a. Service Type
b. Manufacturing Type
c. Merchandising Type
6. Furniture Factories is an example of?
a. Service Type
 b. Manufacturing Type
c. Merchandising type
7. Convenience stores and Drugstores is an example of?
a. Service Type
b. Manufacturing Type
c. Merchandising Type
8. Dental clinic is an example of?
a. Service Type
b. Manufacturing Type
c. Merchandising Type
9. Salons/Beauty parlors is an example of?
a. Service Type
b. Manufacturing Type
c. Merchandising Type
10.Car Assembles and Battery Makers?
a. Service Type
b. Manufacturing Type
c. Merchandising Type

SELF CHECK 1.3

(Prepare list of Assets, Liabilities, Equity, income and expenses account titles)

Instructions: Read the questions carefully. On your answer sheet, write the
letter of the correct answer.

1. It is the process of recording business transactions in a chronological order

in other words it records day to day activities of a business unit.
a. Accounting
b. Bookkeeping
c. Bookkeeper
2. It refers to cash and other cash items which are not yet deposited in the
bank. It includes: Coins, currencies, checks, money orders, and other money
equipment.
a. Cash
b. Accounts Receivable
c. Merchandise Inventory
3. It is the cost of telephone used during the current accounting period.
a. Rent Expense
b. Salaries Expense
c. Telephone Expense
4. It is the cost to purchase or construct buildings for the use of company.
a. Land
b. Equipment
c. Building
5. It is the cost of occupying rented facilities during the accounting period.
a. Salaries Expense
b. Rent Expense
c. Telephone Expense
6. These are expenses for repairing or servicing buildings, machineries, or
equipment of the business?
a. Repairs and maintenance
b. Rent Expense
 c. Salaries expense
7. It includes promotional expenses in the selling of the products.
a. Telephone Expense
b. Salaries Expense
c. Advertising Expense
8. It is a term to denote income derived from the sales of good.
a. Sales
b. Fees
c. Legal fees
9. It is a term that refers to the vested interest of the owner in the business.
a. Owner’s Drawing
b. Owner’s Equity
c. Income and expenses summary
10.It is a current liability which refers to debts or obligations that arise from the
purchase of goods or services on account.
a. Notes Payable
b. Accounts Payable
c. Accounts Receivable

TASK SHEET
Title: Preparing Chart of accounts
Performance Objective:

As a learner you must be able to memorize/familiarize all the definitions of Chart of

Accounts.
Supplies:
LMS, online course site
Equipment:
Computer, internet connection
Steps/Procedures:

1. Get a copy of definitions of Chart of Accounts.

2. Read and analyze all the definitions.
3. Memorize all the Chart of Accounts from Asset, Liability, Capital, Drawing,
Income, and Expenses.
4. After memorizing all the Chart of Accounts prepare the Zoom Meeting for the
recitation of Chart of Accounts individually.
5. After the meeting you can now end the meeting and wait for the response of the
trainer for grading.
Assessment Method:
Performance Criteria Checklist
PERFORMANCE CRITERIA CHECKLIST
Trainee’s Name: _____________________ Date: _________________
Please tick (√) the column that best describes your evaluation of each identified evidences.

CRITERIA YES NO
Did you:
1. Get a copy of definitions of Chart of Accounts?
2. Read and analyze all the definitions?
3. Memorize all the Chart of Accounts from Asset, Liability,
Capital, Drawing, Income, and Expenses?
4. Prepare the Zoom Meeting for the recitation of Chart of
Accounts individually?
5. End the meeting after the recitation?

For satisfactory achievement, all items should receive a YES response.

Comment:

JAMAYCA F. MANALIGOD
Name and Signature of Trainer