Senior High School

Fundamentals of
Accountancy, Business and
Management 1
Quarter 3 - Module 4:
Types of Major Accounts
Fundamentals of Accountancy, Business and Management 1 - Senior High School
Alternative Delivery Mode
Quarter 3 - Module 4: Types of Major Accounts
Second Edition, 2021

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Published by the Department of Education - Division of Misamis Oriental

Development Team of the Module

Writers: Sweet Francess B. Mabelin

Ken Witty V. Sabaldana, MBA
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 11

Fundamentals of
Accountancy, Business
and Management 1
Quarter 3 - Module 4:
Types of Major Accounts
Icons of this Module

What I Need to This part contains learning objectives that

Know are set for you to learn as you go along the
module.

What I know This is an assessment as to your level of

knowledge to the subject matter at hand,
meant specifically to gauge prior related
knowledge
What’s In This part connects previous lesson with that
of the current one.

What’s New An introduction of the new lesson through

various activities, before it will be presented
to you

What is It These are discussions of the activities as a

way to deepen your discovery and under-
standing of the concept.

What’s More These are follow-up activities that are in-

tended for you to practice further in order to
master the competencies.

What I Have Activities designed to process what you

Learned have learned from the lesson

What I can do These are tasks that are designed to show-

case your skills and knowledge gained, and
applied into real-life concerns and situations.
 Table Of Contents
Introduction ---------------------------------------------------------------------- 1

Pre-test ---------------------------------------------------------------------- 3

Lesson 5 ---------------------------------------------------------------------- 4

Post-test ---------------------------------------------------------------------- 13

Answer Key ---------------------------------------------------------------------- 16

Reference ---------------------------------------------------------------------- 17
 What I Need To Know

For the Learners

This is an introductory course in accounting, business and management

data analysis that will develop your appreciation of accounting as language
of business and an understanding of basic accounting concepts and
principles that will help you analyze business transactions.

Good Job! Thank you for completing Module 3. You are now ready for
the next lesson which is the Types of Major Accounts. You need to learn
more effectively. Good luck!

Module Content

This module in Fundamentals of Accountancy, Business and Management 1

for the 21st century learners is designed to make learning more engaging and
meaningful to ABM Senior High School learners in the flexible and blended learning
environments.

After learning about the accounting equation, it is important to understand the

five major accounts in accounting. You will get to apprehend more about Assets,
Liabilities, Owner’s Equity/Capital, Income/Revenue, and Expense. At the end of this
module, not only will you obtain knowledge on the types of accounts but you will also
get to make your own Chart of Accounts.

Learning is fun! So enjoy your journey as you unfold the most interesting and
worthwhile activities in accounting.

These are the competencies included in this module:

 Discuss the Five Major Accounts (ABM_FABM11- IIId-e-19)

 Prepare a Chart of Accounts (ABM_FABM11- IIId-e-21)

1
 General Instructions

To do well in this module, you need to remember the following:

1. Read texts carefully.

2. Answer questions with all honesty.

3. Review your answers.

4. Follow instructions given.

5. Do the tasks given and do not delay in submitting requirements.

6. Feel free to communicate with your teacher.

7. Remember to review every time you are done answering the activities.

8. Have fun as you learn.

2
 What I Know

Let us check your prior knowledge about this module’s coverage.

Fill in the blanks with your answer.

1. The _________________ includes everything that your company owns. It is

divided into tangible and intangible.

2. Any product or service that your company purchases to generate income or

manufacture goods is considered an _________________. This may include
advertising costs, utilities, rent, salaries and others.

3. _________________, one of the primary types of accounts in accounting,

includes the money your company earns from selling goods and services. This term
is also used to denote dividends and interest resulting from marketable securities.

4. _________________ include the debts or obligations payable to creditors and

other outsiders to which your company owes money. These can be loans, unpaid
utility bills, bank overdrafts, car loans, mortgages and more.

5. The ________________ defines how much your business is currently worth. It's
the residual interest in your company's assets after deducting liabilities. Common
stock, dividends and retained earnings are all examples of this.

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 The Five Major Accounts &
The Chart of Accounts
Types of mMajor Accounts
What’s In

Activity 1. Review

Complete the statement.

In the previous module, I learned that _____________________________________

__________________________________________________
__________________________________________________
__________________________________________________
__________________________________________________
__________________________________________________

What’s New

Activity 2. Scrambled Words

Directions: Correct the scrambled words below.

1. Tangible and intangible items that the Company owns that have value.
 _______________ (EASSST)

2. Money that the Company owes to others.

 _______________ (ABLITILIESI)

3. Money the company earns from its sales of products or services, and interest and
dividends earned from marketable securities.
 _______________ (CINEMO)

4. Money the company spends to produce the goods or services that it it sells.
 _______________ (PEENSSEX)

5. That portion of the total assets that the owners or stock holders of the company
fully own; have paid for outright.
 _______________(YQUITE)

4
 What Is It

There are five main types of accounts in accounting, namely: assets, liabilities,
capital / owner’s equity, income, and expense. Continue to read below to explore
on how each account can be further broken down into several categories.

FIVE TYPES OF MAJOR ACCOUNTS

1. ASSETS - These are all the economic resources owned by the company and are
expected for future gain. They include property and rights of value owned by the
company. Assets refer to items like cash, inventory, accounts receivable, buildings,
land, or equipment.

Assets can be categorized to Tangible and Intangible. Tangible assets are the
physical entities that the business owns such as its land, buildings, vehicles,
equipment, and inventory. While intangible assets are the things that represent
money or value such as Accounts Receivables, patents, contracts, and certificates of
deposit (CDs).

Two types of Assets:

1. Current Assets - cash and other assets that are expected to be converted to
cash within a year.

Examples:

 Cash includes coins, currencies, checks, bank deposits, and other

cash items readily available for use in the operations of the business

 Cash equivalents are short-term investments that are readily

convertible to known amounts of cash which are subject to an
insignificant risk to changes in value

 Marketable securities are stocks and bonds purchased by the

enterprise and are to be held for only a short span of time or duration.
They are usually purchased when a business has excess cash.

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 2. Non-Current Assets - an asset that is not likely to turn to unrestricted cash
within one year. It is also referred to as a long-term assets.

Examples:

 Long-term investments are assets held by an enterprise for the

accretion of wealth through capital distribution such as interests,
royalties, dividends and rentals, for capital appreciation or for other
benefits to the investing enterprise such as those obtained through
trading relationships.

 Property, plant, and equipment are tangible assets that are held by an
enterprise for use in the production or supply of goods or services, or
for administrative purposes.

a. Land - a piece of lot or real estate

b. Building - structure used to accommodate the office, store, or factory
c. Equipment - includes typewriter, air-conditioner, calculator, filing
cabinet, computer,electric fan, trucks, and cars used by the business
in its office or factory. Specific account titles may be used such as:
-office equipment,
-store equipment,
-delivery equipment,
-transportation equipment, and
-machinery equipment.
d. Furniture and fixtures - include tables, chairs, carpets, curtains,
lamp and lighting fixtures. Specific account titles may be used
such as:
-office furniture and fixtures
- store furniture and fixtures

2. LIABILITIES - These include the debts or obligations payable to creditors and

other outsiders to which your company owes money. Liabilities are one of three
ways in which a business can acquire funding.

Two types of Liabilities:

1. Current Liabilities - amounts due to be paid to creditors within twelve

months.

Examples:

 Accounts payable includes debts arising from the purchase of an asset

or the acquisition of services on account.

 Notes payable includes debts arising from the purchase of an asset or

the acquisition of services on account evidenced by a promissory note.

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  Loan Payable is a liability to pay the bank or other financing institution
arising from funds borrowed by the business from these institutions
payable within twelve months or shorter.

 Utilities payable is an obligation to pay utility companies for services

received from them. Examples of this are telephone services, electricity,
and water services.

 Unearned revenues represent obligations of the business arising from

advance payments received before goods or services are provided to
the customer. This will be settled when certain goods or services are
delivered or rendered.

 Accrued liabilities include amounts owed to others for expenses already

incurred but are not yet paid. Examples of these are salaries payable,
utilities payable, taxes payable, and interest payable.

2. Non-current Liabilities - are long term liabilities or obligations which are

payable for a period longer than one year.

Examples:

 Mortgage payable is a long-term debt of the business with security or

collateral in the form of real properties.

 Bonds payable is a certificate of indebtedness under the seal of a

corporation, specifying the terms of repayment and the rate of interest
to be charged.

3. OWNER’S EQUITY - defines how much your business is currently worth.

Owner’s Equity or Capital is an account bearing the name of the owner representing
the original and additional investment of the owner of the business. It is increased by
the amount of net income earned during the year and decreased by the cash or other
assets withdrawn by the owner as well as the net loss incurred during the year.
Drawing represents the withdrawals made by the owner of the business in cash or
other assets.

Two types of Equity:

1. Contribution (Investments) - may be start-up capital or a later infusion of cash.

2. Drawing (Withdrawals) - If a business is profitable, the owners often want

some of the profit returned to them.

7
4. INCOME OR REVENUE - is money the business earns from selling a product or
service, or from interest and dividends on marketable securities. Other names for
income are revenue, gross income, turnover, and the "top line."

Net income is computed as revenue less expenses. Other names for net income
include profit, net profit, and the "bottom line." Income accounts are classified
as temporary or nominal accounts. This is because their balance is reset to zero at
the beginning of each new accounting period.

5. EXPENSES - these are money the company spends that allow a company to
operate. This may include advertising costs, utilities, rent, salaries and others. Like
revenue accounts, expense accounts are temporary accounts that collect data for
one accounting period and are reset to zero at the beginning of the next accounting
period.

A unique type of Expense account, Depreciation Expense, is used when

purchasing Fixed Assets. Costly items, such as vehicles, equipment, and computer
systems, are not expensed, but are depreciated over the life expectancy of the item.
A contra-account, Accumulated Depreciation, is used to offset the Asset account for
the item.

Examples:

 Salaries or wages expense include all payments made to employees or

workers for rendering services to a company.

 Utilities expense is an expense related to the use of electricity, fuel,

water, and telecommunication facilities.

 Supplies expense covers office supplies used by a business in the

conduct of its daily operations.

 Insurance expense is the expired portion of premiums paid on

insurance coverage such as premiums paid for health or life insurance,
motor vehicles, or others.

 Depreciation expense is the annual portion of the cost of tangible

assets such as buildings, machineries, and equipment charged as
expense for the year.

 Uncollectible accounts expense/doubtful accounts expense/bad debts

expense means the amount of receivables charged as expense for the
period because they are estimated to be doubtful of collection.

 Interest expenses is the amount of money charged to the borrower for

the use of borrowed funds.

8
CHART OF ACCOUNTS

A chart of accounts is a list of all your company’s accounts used, and is listed
together in one place. The main account types include Assets, Liabilities, Owner’s
Equity, Income, and Expenses.

Here’s a sample chart of accounts list. This is a chart of accounts for a fictional
business: Ewing Cleaning Supply.

Figure 1. Chart of Accounts

Companies in different lines of business will have different looking charts of

accounts. The chart of accounts should give anyone who is looking at it a rough idea
of the nature of your business by listing all the accounts involved in your company’s
day-to-day operations.

The chart of accounts is designed to be a map of your business and its various
financial parts. A well-designed chart of accounts should separate out all the
company’s most important accounts, and make it easy to figure out which
transactions get recorded in which account.

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 What’s More

Activity 3.

Identify each account if it is part of the Asset, Liability, Owner’s Equity, Income, or
Expense. Write your answers on the spaces provided before each number.

_________________ 1. Partner A, Drawings

_________________ 2. Prepaid Insurance
_________________ 3. Revenue
_________________ 4. Salaries
_________________ 5. Interest Payable
_________________ 6. Land
_________________ 7. Common Stock
_________________ 8. Bonds Payable
_________________ 9. Unearned Revenue
_________________ 10. Office Equipment
_________________ 11. Machinery Equipment
_________________ 12. Uncollectible accounts
_________________ 13. Partner B, Capital
_________________ 14. Wages
_________________ 15. Cash

10
 What I Have Learned

In a maximum of 3 sentences, define the following terms based on your own

understanding. Write your answers on the space provided.

1. Owner’s Equity-

2. Revenue or Income-

3. Assets-

4. Expenses-

5. Liabilities-

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 What I Can Do

Activity 4. My Personal Chart of Accounts

Applying the lessons you learned on the chart of accounts, create your fictional
business and make your very own chart of accounts. Follow the format below.

CHART OF ACCOUNTS
Name of Business
Account Account Title Account Account Title
Number Number

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Self-Check!

Great job! You have completed Module 4 successfully! Before going to the next
lesson, check the icon that best shows your learning experience.

I have understood the lesson well and I can even teach

what I learned to others.

I have understood the lesson but there are still other

things that I need to review and relearn.

I need to do additional work to be able to master the

lesson. I need help in some tasks.

If you checked the first icon, you are ready for module 5. If you have checked the
second icon, you need to review the things that you need to relearn. If you have
checked the third icon, it would be best if you read more and ask help from your
teacher, parents or peers in clarifying the lessons that you find it difficult. Be honest
so that you will truly improve.

Assessment

Let us check how much you learned from this module’s coverage.

Essay. Write your answers on the space provided after each question. Rubrics
provided.

1. In your own opinion, why do companies need to create their personalized Chart of
Accounts?

13
2. In your own opinion, is it better for a company to acquire current or non-current
assets?

3. Differentiate current and non-current liabilities.

Short Essay Rubric:

Unsatisfactory Needs Satisfactory Outstanding
Improvement
0 pts 5 pts 15 pts 25 pts
Content & Unsatisfactory Needs Satisfactory Outstanding
Development Improvement
- Content is - Content is - Content is
incomplete. - Content is not accurate and comprehensive
- Major points comprehensive persuasive. , accurate, and
are not clear. and /or - Major points persuasive.
-Specific persuasive. are stated. - Major points
examples are - Major points - Responses are are stated
not used. are addressed, adequate and clearly and are
but not well address topic. well supported.
supported. - Content is - Responses
- Responses are clear. are excellent,
inadequate or -Specific timely and
do not address examples are address topic.
topic. used. - Content is
-Specific clear.
examples do not -Specific
support topic. examples are
used.
Organization & Unsatisfactory Needs Satisfactory Outstanding
Structure Improvement
- Organization - Structure is -Structure of
and structure - Structure of the mostly clear and the paper is

14
 detract from the paper is not easy to follow. clear and easy
message. easy to follow. - Transitions are to follow.
- Writing is - Transitions present. - Transitions
disjointed and need - Conclusion is are logical and
lacks transition improvement. logical. maintain the
of thoughts. - Conclusion is flow of thought
missing, or if throughout the
provided, does paper.
not flow from the - Conclusion is
body of the logical and
paper. flows from the
body of the
paper.
Grammar, Unsatisfactory Needs Satisfactory Outstanding
Punctuation & Improvement
Spelling - Paper contains - Rules of - Rules of
numerous - Paper contains grammar, grammar,
grammatical, few usage, and usage, and
punctuation, and grammatical, punctuation are punctuation are
spelling errors. punctuation and followed with followed;
spelling errors. minor errors. spelling is
Spelling is correct.
correct.

CONGRATULATIONS
FOR COMPLETING THIS MODULE!

15
 16
Activity 3.
1. Owner’s Equity 6. Asset 11. Asset
2. Asset 7. Owner’s Equity 12. Expense
3. Income 8. Liability 13. Owner’s Equity
4. Expense 9. Liability 14. Expense
5. Liability 10. Asset 15. Asset
Activity 2.
1. Assets
2. Liabilities
3. Income
4. Expenses
5. Equity
Pre-test
1. Assets
2. Expenses
3. Income
4. Liabilities
5. Owner’s Equity or Equity
Answer Key
References

BOOKS

Ong, Flocer Lao. 2016. Fundamentals of Accountancy, Business, and Management 1.

Quezon City: C&E Publishing, Inc.

Skousen, K. Fred, Earl Stice, and James Stice. 2000. Intermediate Accounting. 14th
ed. Vol. 1. Singapore: Thomson Learning Asia.

WEBSITES

“Teacher Sheila’s Lessons Portal: FABM-1.” n.d. Teacher Sheila’s Lessons Portal.
Accessed August 1, 2020. https://bit.ly/303Kp8Y.

“Chart of Accounts: A Simple Guide (With Examples) | Bench Accounting.” n.d.

Bench. https://bench.co/blog/accounting/chart-of-accounts/.

Keynote Support Tutorials. 2010. “Accounting Basics: Assets, Liabilities, Equity,

Revenue, and Expenses.” Keynotesupport.Com. 2010.
https://www.keynotesupport.com/accounting/accounting-assets-liabilities-equit
y-revenue-expenses.shtml.

OTHERS

DepEd Curriculum Guide

- Fundamentals of Accountancy, Business and Management 1

DepEd Teachers Guide

- Fundamentals of Accountancy, Business and Management 1

17
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Department of Education - Division of Misamis Oriental

Office Address: Del Pilar corner Velez Street, Brgy 29, Cagayan de Oro City

Telefax: (088) 881-3094 | Text: 0917-8992245 (Globe)

E-mail Address: misamis.oriental@deped.gov.ph