TYPES OF MAJOR

ACCOUNTS AND
CHART OF ACCOUNTS
MAJOR ACCOUNT TITLES
 ASSETS
represents what
the company
owns. These are
the resources that
the entity controls
in order to attain
future benefits
 LIABILITIES
represent the
claims of the
entity’s
creditors
 It is what the
company owes
to its creditors
and customers.
 EQUITY
represents
the residual
interest of
the owners
of the entity.
 ELEMENTS of the Accounting
Equation

 A. ASSETS
 These are the resources that an entity
owns in order to derive some future
benefits
 These assets are used by the company in
its normal operations such as the
manufacture of goods or delivery of
services.
 Two kinds of Assets
 1. Current assets
◦ Are all assets which are expected to be realized
within the ordinary course of business,or a span
of 12 months, whichever is longer.
◦ Realization here only means that these assets are
expected to be converted into cash, sold, or
disposed after a certain time, or through the
passage of time
 2. Non Current Assets
 These are those assets not classified as current
 These are the tangible assets used in the operation
of the business which have useful life that exceeds
beyond one year, and are not intented for sale.
Chart of
accounts for
current assets
a. CASH
 CASH ON HAND
◦ Coins, currency, and other cash equivalents
owned by the business and not yet deposited
in the bank
 CASH IN BANK
◦ These are the unwithdrawn deposits in the
bank. Usually name of the bank is used as the
account title
b. NOTES RECEIVABLE
 Amounts collectible from
customers for goods sold
and services rendered on
credit or form others for
loan granted. Such claims
are evidenced by a
promissory note.
 A promissory note is a
written promise to pay
certain amount of money
on a specified or
determinable future date.
c. ACCOUNTS RECEIVABLE
 Claims from
customers arising
from goods sold
or services
rendered on
credit.
 It represents the
debtor’s oral
promises to pay.
d. MERCHANDISE INVENTORY
 Goods purchased by
the business to be
sold at a profit

e. INTEREST RECEIVABLE
 Interest earned on notes on
hand which has not been
received in cash.
f. SUPPLIES UNUSED
 Miscellaneous supplies
which have been
bought for office use
but are still unused as
of the balance sheet
date.
 Other account titles
which can be used are
supplies on hand, office
supplies, store supplies,
and factory supplies
g. PREPAID INSURANCE
 Already paid
insurance
premiums which
are applicable in
the future
periods.
2. CHART OF ACCOUNTS
FOR NON CURRENT ASSETS
a. FURNITURES AND FIXTURES
 It include tables,
chairs, showcases,
counters and other
similar assets
owned and used by
the business in its
operation.
EQUIPMENT
 It includes computers, printers,
typewriters, calculators, cash registers,
and other similar assets

 DELIVERY EQUIPMENT
◦ Includes assets used for transporting
merchandise
LAND
 Land owned by the business used for
building sites and other business
purposes.

BUILDING
 Buildings owned and used by the business
in its operation.
 B. LIABILITIES
 Liabilities are debts or obligations of the
business to a party other than its owner.
1. CURRENT OR SHORT TERM
 These are due for payment within a short
period of time or within one year from
the balance sheet date.
 These obligations require a current asset
for payment.
a. ACCOUNTS PAYABLE
 These are indebtedness arising from
purchase of goods and services in the
ordinary course of business
 Amounts due to creditors for the goods
or services bought on credit.

b. NOTES PAYABLE
 These are short term indebtedness
supported by written promises to pay.
c. INTEREST PAYABLE
 Interest incurred but
not yet paid.

d. SALARIES PAYABLE
 Amounts due to the employees for
services they have rendered.
e. ACCRUED EXPENSES
 These are expenses already incurred but are
not yet paid as of the balance sheet date.

f. UNEARNED INCOME
 It arises when payments for undelivered
goods or services not yet rendered are
received.
◦ This item is included among current liabilities
because it requires current asset for its
liquidation, say the delivery of merchandise
inventory
2. Non-Current OR LONG-TERM
 These are those which mature beyond
one year from the balance sheet date.
 EXAMPLES ARE:
◦ Mortgage payable
◦ Bonds payable
◦ Notes payable due beyond one year
C. CAPITAL OR
PROPRIETORSHIP
 It represents the
owner’s equity or
investment in the
business.
 It can be used
synonimously with
OWNER’S EQUITY and
PROPRIETORSHIP
PROPRIETORSHIP TITLES
 OWNER’S CAPITAL
◦ Amount of capital contributions of the owner
or owners to the business

 OWNER’S DRAWING
◦ Amount withdraws by the owner from the
assets of the business for personal use.
INCREASES IN EQUITY
 Equity increases as a result of revenues,
gains or capital contributions.
 REVENUES are the amounts received by
a business earned as a result of selling
something or rendering a service
 It is the increases in equity as a result of
day-to-day operations.
Revenues can be classified as
follows:
 OPERATING REVENUE
◦ Revenues that originate from main business
operations (e.g. Sales, sales revenues, etc.)
 NON-OPERATING REVENUE
◦ Revenues that do not originate from main
business operations and are a result of some
side activities
◦ Examples of which are interest revenue, rent
revenue of a business not engaged in the
renting industry
 INCOME TITLES
 SALES
◦ Total sales of merchandise sold
 PROFESSIONAL FEE INCOME
◦ Amounts earned by professionals such as CPAs,
doctors, lawyers, etc. for services they render
 RENT INCOME
◦ Amounts of rental earned for the period
 SERVICE INCOME
 Amounts of income earned from services
rendered of a service concern business.
 INTEREST INCOME
◦ Amounts earned for lending money
DECREASES IN EQUITY
 Equity decreases as a result of expenses,
losses, and distribution to owners.
 EXPENSES are the amounts consumed by
the business to operate.
 They are the result of attempting to
generate revenues.
 EXPENSE TITLES
 COST OF SALES
◦ Cost of goods purchased and sold or materials
manufactured and sold.
 ADVERTISING EXPENSE
◦ Expenses incurred to promote the product of
the business
 SALESMEN’S SALARIES
◦ Compensation given to sale agents
 SALESMEN’S COMMISSIONS
◦ Compensation given to sales agents based on
the amount of their sales
 SALESMEN’S TRAVELLING EXPENSES
◦ Travelling allowance given to sales agents
 OFFICE SALARIES
◦ Compensation of administrative employees
 SUPPLIES EXPENSE
◦ Amount of supplies used
 TAXES
◦ Duties incurred in the current period
 UTILITIES EXPENSE
◦ Amount of light and water consumed by the
business
 REPAIRS AND MAINTENANCE
◦ Expenses incurred for repairing the assets of the
business
 BAD DEBTS
◦ Estimated amount of losses from uncollectible
accounts of the business
 DEPRECIATION EXPENSE
◦ Allocated cost of fixed asset in the current
period.
Expanded Basic Accounting Equation

A=L+OE (C+I-E-D)
Transactions ASSETS LIABILITIES CAPITAL

CASH OFFIC REPAI A/R REPAI A/P A/P E.MAN SERVI RENT
E R ROCE R GARCI ABC DE E EXPE
FURNI SUPPL S EQUIP A CAPIT INCOM NSE
TURE IES MENT AL E
S
1. E.Mande invested
150,000 cash in the business 150,000 150,000

2. Bought pieces of furniture

from Garcia furniture on
credit, 25,000 25,000 25,000
3. Bought for cash repair
supplies worth 5,000 (5,000) 5,000

4. Paid the rent of the shop

7,000 (7,000) 7,000
5. Billed S. Roces for repair
services done on his
automobile 8,000 8,000 8,000

6. Bought repair equipment 20,000 20,000

from abc trading on credit
20,000
ACCOUNTS TOTAL 138,000 25,000 5,000 8,000 20,000 25,000 20,000 150,000 8,000 7,000

TOTAL A, L & C 196,000 45,000 151,000

A= L+ C 196,000 196,000