Description of Account Titles

ASSETS
Items of value owned and used by the business that will benefit future operations.

Current Assets include cash and other assets, which in the regular course of the business
are readily convertible into cash, used or consumed, usually within one year from the
balance sheet date. The current asset section of the balance sheet may contain the
following items:

Cash on Hand includes currencies (coins and paper bills) and miscellaneous cash items
already received by the business but not yet deposited in the bank. Some examples of
cash items are checks, bank drafts, money order and treasury warrants.

Cash in Bank refers to the cash deposits at the bank readily available for the operation
of the business.

Petty Cash is a fund set aside for petty expenses which are not reasonably paid by
check.

Notes Receivables are amounts due or collectible from customers for goods or services
sold, or from others, which are evidenced by written promises called promissory notes.

Accounts Receivables are amounts collectible on open account from customers for
services rendered or merchandise sold to them. They differ from notes receivable
because the accounts receivable is not supported by written promises to pay.

Allowance for doubtful accounts or bad debts is a contra-asset account item. It

provides for possible losses from possible uncollectible accounts. It is deducted from
Accounts Receivable in order to present the estimated amount of cash collectible from
customers or the Net Realizable Value (NRV).

Interest Receivable is the interest earned on notes receivable but not yet received or
collected.

Merchandise Inventory includes merchandise or goods bought by the business which

will be sold, sooner or later for profit and those still on hand and ready for sale as of
reporting date.

Prepaid Expenses are amounts paid in advance, which are applicable to expenses of
future periods. Examples are advance payments for rent, commission and interest.

Unused Supplies or Supplies on Hand are supplies bought for use but still unused as
of the balance sheet date. Common examples are office supplies like paper, ball pens,
carbon paper, paper clips, staple wires, etc.

Non-Current Assets refer to assets that are not classified as current assets.
 Investments are assets not directly identified with the operating activities of the
company or assets not involved in the sale or production of goods or services. Thus,
investments occupy only an auxiliary relationship or a secondary role to the central
activities of the enterprise. They represent stockholdings acquired for the purpose of
controlling another firm or creating good customer-supplier relationship. Examples are
investment in stocks and investment in bonds.

Property, Plant and Equipment/Fixed Assets are assets which are permanent in
nature and acquired for use rather than for resale. Examples of fixed assets are:

Land is the lot owned by the business on which the building used for business is
built.

Building is the structure owned and used by the business. This also includes major
repairs of the building.

Equipment includes office equipment like printers, computers, calculators, cash

registers and the like; delivery equipment like delivery van, delivery truck and
wagon; and other equipment, which are primarily used in the operation of the
business.

Furniture and Fixtures include tables, chairs, counters, showcases, shelves,

dividers and similar assets owned by the business for its operation.

Tools are necessary assets used by shops extending services to the public.

Accumulated Depreciation is another contra-asset item. It represents the total

depreciation expenses of the past and current periods. It is a valuation account that
reduces the total cost of fixed assets to its Net Book Value (NBV).

Intangible Assets are relatively long-lived assets without physical characteristics whose
value lies in rights, privileges and competitive advantage which they give the owner.
Examples are franchises, trademarks and patents.

Franchise is a contract-based intangible asset. It may be between the government

and a private entity or individual or between private entities or individuals.

Patent is an exclusive right granted by the government to an inventor enabling the

grantee to control the manufacture, sale or other use of the invention for a specified
period of time.

Trademark is a symbol, sign, slogan or name used to mark a product to distinguish

it from other products.

LIABILITIES
Obligations that the business owes from other individuals or entities for the acquisition of
goods and/or services.

Current Liabilities are obligations or debts payable by the business to the creditors and are
expected to be paid or liquidated within the operating cycle of the business. This section of
the balance sheet may contain the following:
 Notes Payable are unpaid promissory notes given to creditors for money borrowed,
merchandise and/or other assets bought and services acquired on credit.

Accounts Payable are obligations or debts payable by the business to other parties for
services acquired or merchandise and/or other assets purchased on credit not evidenced
by a promissory note.

Accrued Expenses are expenses already incurred but not yet paid. These may include
unpaid salaries, taxes already due, unpaid interest and similar items.

Unearned Income includes income from rent, interest or commission that has already
been received in advance but the corresponding service has not yet been rendered.

SSS, PAG-IBIG and Medicare Contributions Payable refer to the employer’s

contributions paid as benefit to employees.

Noncurrent Liabilities are obligations of the business with maturity dates beyond one year
from reporting date.

Notes Payable are obligations supported by promissory notes that are payable or due
after one year.

Mortgage Payable are obligations which are evidenced by a mortgage of real properties
(Real Estate Mortgage) or personal properties (Chattel Mortgage).

Loans Payable are obligations of the business to individuals or financial institutions for
money borrowed payable beyond one year from balance sheet date.

Bonds Payable are long-term promissory notes under seal which are issued to the
public.

CAPITAL / OWNER’S EQUITY / PROPRIETORSHIP

It represents the claim of the owner in the assets of the business.

Name of the proprietor, Capital represents the total investment of the owner.

Name of proprietor, Drawing or Personal represents withdrawals or amount of cash

and/or other assets taken by the owner from the business for personal use.