Chapter 4: Types of Major Accounts (FAR

by: Millan)
Learning Competencies
1. Discuss the five major accounts.
2. Cite examples of each type of account.
3. Prepare a Chart of Accounts.

Chapter 4: Types of Major Accounts (FAR

by: Millan)
 The Account
• An account is the basic storage of
information in accounting. It is a record of
the increases and decreases in a specific
item of asset, liability, equity, income or
expense.

Chapter 4: Types of Major Accounts (FAR by: Millan)

The T-Account

Chapter 4: Types of Major Accounts (FAR by: Millan)

 The Five Major Accounts
1. ASSETS – are the resources you control that have resulted from
past events and can provide you with economic benefits.
2. LIABILITIES – are your present obligations that have resulted
from past events and can require you to give up economic
resources when settling them.
3. EQUITY – is assets minus liabilities.
4. INCOME – are increases in economic benefits during the period
in the form of inflows or enhancements of assets or decreases
of liabilities that result in increases in equity, other than those
relating to investments by the business owners.
5. EXPENSES – are decreases in economic benefits during the
period in the form of outflows or depletions of assets or
increases of liabilities that result in decreases in equity, other
than those relating to distributions to the business owners.
Chapter 4: Types of Major Accounts (FAR by: Millan)
Classification of the Five Major
Accounts

Chapter 4: Types of Major Accounts (FAR by: Millan)

 Chart of Accounts
A chart of accounts is a list of all the accounts
used by a business.

Chapter 4: Types of Major Accounts (FAR by: Millan)

 Common Account Titles
• BALANCE SHEET ACCOUNTS
ASSETS
a. Cash
b. Accounts receivable
c. Allowance for bad debts
d. Notes receivable
e. Prepaid supplies
f. Prepaid rent
g. Prepaid insurance
h. Land
i. Building
j. Accumulated depreciation - Building
k. Equipment
l. Accumulated depreciation - equipment
Chapter 4: Types of Major Accounts (FAR
by: Millan)
 Common Account Titles - Continuation

• BALANCE SHEET ACCOUNTS

LIABILITIES
a. Accounts payable
b. Notes payable
c. Interest payable
d. Salaries payable
e. Utilities payable
f. Unearned

Chapter 4: Types of Major Accounts (FAR

by: Millan)
 Common Account Titles - Continuation

• BALANCE SHEET ACCOUNTS

EQUITY
a. Owner’s capital (or Owner’s equity)
b. Owner’s drawings

Chapter 4: Types of Major Accounts (FAR

by: Millan)
 Common Account Titles - Continuation

• INCOME STATEMENT ACCOUNTS

INCOME
a. Service fees
b. Sales
c. Interest income
d. Gains

Chapter 4: Types of Major Accounts (FAR

by: Millan)
 Common Account Titles - Continuation
• INCOME STATEMENT ACCOUNTS
EXPENSES
a. Cost of sales (or Cost of goods sold)
b. Freight-out
c. Salaries expense
d. Rent expense
e. Utilities expense
f. Supplies expense
g. Bad debt expense
h. Depreciation expense
i. Advertising expense
j. Insurance expense
k. Taxes and licenses
l. Transportation and travel expense
m. Interest expense
n. Miscellaneous expense
o. Losses
Chapter 4: Types of Major Accounts (FAR
by: Millan)
 PROBLEM 3: FOR CLASSROOM DISCUSSION

Chapter 4: Types of Major Accounts (FAR by: Millan)

 QUESTIONS
 REACTIONS

Chapter 4: Types of Major Accounts (FAR

by: Millan)
END

Chapter 4: Types of Major Accounts (FAR

by: Millan)