Lesson 1- Basic account titles of accounting equation

Elements of the Accounting Equation:

Assets – are resources that an entity owns in order to
derive some future benefits. These are used by the
company in its normal operations ex. Manufacture of
goods. These are recognized in Balance Sheet.
Liabilities-these are claims of external parties from the
entity. Amount due to creditors for goods and services
bought on account that will be due within one year or
longer.
Equities –reflect the residual claims or net assets of the
owners of an entity.
Income – any increase in proprietorship resulting from
business transaction.
Expense – any decrease in proprietorship resulting from
business transaction.
Account Title - is the name given to an account.
Accountant do not record all transaction that occur, but
only business transaction that affects the entity's assets,
liabilities and owner's equity. It can be measured in
monetary terms. These transaction is called " accounting
transactions".
 Chart of Accounts

ASSETS

Current ASSETS :
It is expected to be realized in or that can be converted
into cash within a year. intended for sale or consumption in the
entity’s normal cycle.
CASH - includes money or its equivalent that is
readily available for unrestricted use. ex. cash on hand, cash in bank
ACCOUNT RECEIVABLES - amount collectible from
customers for the sale of goods or services.
 ALLOWANCE FOR BAD DEBTS - estimated losses for
uncollected account receivable.
NOTES RECEIVABLES - amounts receivable that are
evidenced by a promissory note.
ACCRUED REVENUE - receivable for the value of
services earned but not yet collected.
ex. interest receivable and rent receivable.
MERCHANDISE INVENTORY - goods for sale in
ordinary course of business.
PREPAID EXPENSES - advance payment for services or
rights to be received within the year. ex. prepaid rent , prepaid
insurance
OFFICE SUPPLIES - unused stationery and supplies for
use in the office.
Non-Current ASSETS
LAND - lot presently used in the business
BUILDING - building used in the business.
FURNITURE AND FIXTURE - ex. chairs, tables,
fixtures, filling cabinets etc.
OFFICE EQUIPMENT - machines, computers, etc.
DELIVERY EQUIPMENT - ex. trucks, vans, other
equipment for delivery of goods and services.
ACCUMULATED DEPRECIATION - portion of
property that expired during the period
 LIABILITIES

Current LIABILITIES-
It is due to settled within twelve months after the balance sheet date.
The entity does not have the an unconditional right to defer settlement
of the liability for at least twelve months after balance sheet
dat
ACCOUNTS PAYABLE - amount due to supplier for
the purchase of goods or services.
NOTES PAYABLE - obligation to pay evidenced by a
promissory notes.
 ACCRUED EXPENSES - liabilities for services already
incurred but not yet paid. ex. salaries payable, interest payable.
utilities payable.
UNEARNED REVENUES - liability for items already
collected but not yet earned.
Non- Current LIABILITIES
LOANS / MORTGAGE PAYABLE - obligation due to
banks or other institution and has pledge certain assets to the
creditor, wherein the creditor can foreclose or cause the assets to be
sold.
OWNER'S EQUITY

CAPITAL - represent the owner's investment in the business.

DRAWING - represent withdrawal made by the owner for his own
personal use or in
anticipation of profits.