REVIEWER IN FABM 1 Accounts Payable amounts due, or payable to,
FIVE MAJOR ACCOUNTS
Assets the resources owned and controlled by the
firm.
Liabilities the obligations of the firm arising from
past even which are to be settled in the future
Equity or Owners Equity the owners claim in the
business
Income the increase in economic benefits during
the accounting period
Expenses the decrease in economic benefits during
the accounting period
ASSETS
Current Assets are assets that can be realized
(collected, sold, used up) one year after year-end
date.
Ex. Cash, accounts receivable, merchandise inventory,
prepaid expense (prepaid insurance, prepaid rent)
CURRENT ASSETS
Cash money on hand, or in banks
Account Receivable amounts due from customers
arising from credit sales or credit services
Notes Payable amounts due from clients supported
by promissory notes
Inventories assets held for resale
Supplies items purchased by an enterprise which
are unused as of the reporting date
Prepaid Expenses are expenses paid in advance
Accrued Income revenue earned but not yet
collected
Short term investments the investments made by
the company that are intended to be sold
immediately
Non-Current Assets are assets that cannot be
realized (collected, sold, used up) one year after
year-end date
Ex. Property, plant and equipment (equipment, furniture,
building, land) vehicle, long term investment
Tangible Assets physical assets such as cash,
supplies, furniture and fixtures
Intangible Assets non-physical assets such as
patents and trademarks
Current Liabilities are liabilities that fall due (paid,
recognized as revenue) within one year after year
and date
Ex. Accounts payable, utilities payable and unearned
income
Non-Current Liabilities are liabilities that do not fall
due (paid, recognized as revenue) within one year
after year and date
Ex. Notes payable, loans payable and mortgage payable
suppliers for goods purchased on account or for
serviced received on account
Accrued Expenses are expenses that are incurred but
not yet paid (ex. Salaries, payable, taxes payable)
Unearned Income cash collected in advanced
Capital is the value of cash and other assets
invested in the business by the owner of the
business
Drawing an account debited for assets withdrawn
by the owner for personal use from the business
Service Revenue for service entities
Sales for merchandising and manufacturing
companies
CHART OF ACCOUNT
-Is a listing of the accounts used by companies in
their financial records
-it helps to identify where the money is coming
from and where it is going
-is the foundation of the financial staements
ASSETS starts @ 1
LIABILITIES starts @ 2
EQUITY starts @ 3
INCOME starts @ 4
EXPENSES starts @ 5
ACCOUNTING EQUATION
Assets = Liability + Equity
Equity = Assets – Liability
Liability = Assets – Equity
ACCOUNTING EQUATION
-a mathematical expression which shows that the
assets and liabilities of a frim are equal
NATURE OF ACCOUNTING EQUATIONS
-every change that occurs in an accounting equation
is due to transaction entered
-a transaction may affect either both sides of the
equation by the same amount or one side of the
equation only, by both increasing or decreasing it by
equal amounts – Double Entry
Procedures to Prepare Accounting Equations
Analyze
Decide
Record
Journal book of original entry, shows the debit and
credit effects of the transaction on specific accounts
2 types of Journals
General Journal most basic journal, has spaces for
dates, accounts title and explanations, reference
and two amount columns
Special Journal