5 Major Accounts

5 Major Accounts
*Juan Sumulong Memorial Schools System Inc. – SENIOR HIGH SCHOOL

5 Major Accounts
The essential characteristics of an

Defined as “resources asset are:
controlled by the entity
Resources controlled by the
as a result of past entity
transactions and events
and from which future Result of past transaction
and events
economic benefits are
expected to flow to the Assets provide future economic
entity.” benefits
The cost of assets can be

measured reliably.

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In layman’s language and in

short, assets are properties
owned

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CLASSIFICATION OF ASSETS

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CURRENT ASSETS
The asset is restricted from being exchanged or used to “settle a

liability for at least twelve months after the reporting period.
The entity holds the asset primarily for the purpose of trading.
The entity expects to realize the asset within twelve months

after the reporting period.
The entity expects to realize the asset or intends to sell or consume it within
the entity’s normal operating cycle.

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CURRENT ASSETS

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Includes money and any

other negotiable instrument
that is payable in money and
acceptable by the bank that is
payable in money and
acceptable by the bank for
deposit and immediate
credit.

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cash items included in “cash”
1 2 CASH IN BANK 3 CASH FUND

CASH ON HAND
this includes this includes demand set aside for current
undeposited cash deposit or checking purposes such as
collection and other account and saving petty cash fund,
cash items awaiting deposit which are payroll fund and
deposit such as restricted as to dividend fund.
customer’s check, withdrawal.
bank drafts and
money orders.
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CASH EQUIVALENT
PAS 7 paragraph 6 defines cash

equivalents as “short term and
highly liquid investments that
are readily convertible into cash
and so near their maturity that
they present insignificant risk of
changes in value because of
changes in interest rates.”

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CASH EQUIVALENT
PAS 7 paragraph 6 defines cash

equivalents as “short term and
highly liquid investments that
are readily convertible into cash
and so near their maturity that
they present insignificant risk of
changes in value because of
changes in interest rates.”

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Financial assets that

represents a
contractual right to
receive cash or
another financial
asset from another
entity.

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refer to claims arising

from sale of represent claims arising
merchandise or from sources other than
services in the sale of merchandise or
ordinary course of services in theordinary
business. It includes course of business.
accounts receivable
and notes receivable.
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is the amount
collectible from the is a promissory ote issued
customer to whom sales by the client or the
have been done or customer in exchange for
services on account( on services or goods as
credit) or those not evidence of his/her
supported by
obligation to pay.
promissory notes.

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Advance to Employees- certain Trade Receivables-amount of interest

amount of money loaned to collectible on promissory notes received
employees payable in cash or from customer or client.
through salary deduction.
Accrued Income – income already

earned but not yet received.

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CONTRA ASSET-ACCOUNT
Allowance for Bad Debts- are losses due to

uncollectible accounts.
this is deducted from

accounts receivable accounts
to get the net realizable
value.

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PAS 2 paragraph 6 define

inventories are assets held for
sale in the ordinary course of
business, in the process of
production for such sale or in the
form of materials or supplies to
be consumed in the production
or in the rendering of services.

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A prepaid expense is
expenditure paid for in
one accounting
period, but for which
the underlying asset
will not be consumed
until a future period.

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5 Major Accounts

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CLASSIFICATION OF ASSETS – NON-CURRENT ASSETS
PAS 1 paragraph 66 provides that an entity shall classify an asset as current when:
the asset is not restricted in used, readily

convertible to cash or to be sold or consumed
within the normal operating cycle of the
business, whichever is higher is classified as
Current Asset. Those assets that do not
qualify as current are categorized as
Noncurrent Asset

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are assets whose benefits will be realized over more than one
year and cannot easily be converted into cash

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o Goodwill
o Patents
Property and Plant Equipment o Copyright
o Licenses
o Franchise
o Trademark
o Brand Names
o Secret Proccesses
o Subscription List
o Non-competition
agreement
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5 Major Accounts
NON-CURRENT ASSETS- PROPERTY AND PLANT EQUIPMENT
PAS 16 par. 6 which are held by an entity for

use in production or supply of goods and
services, for rental to others, or for
administrative purposes and are expected to
be used during more than one period.

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is a piece of lot or real

estate owned by the
enterprise on which a
building can be
constructed for the
business purpose.

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is an edifice or structure
used to accommodate the
office, store, or factory of a
business enterprise in the
conduct of operations.

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EQUIPMENT

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SPECIAL ACCOUNT
Store Equipment
Office Equipment

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SPECIAL ACCOUNT

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Accumulated Depreciation- represents the expired

cost of property, plant and equipment as a result
of usage and passage of time.
This is deducted from the cost of the related asset account

to get the carrying value or book value of the assets

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NON-CURRENT ASSETS: INTANGIBLE ASSETS
PAS 38 par. 8 simply defines an intangible asset as

“An intangible asset is an identifiable nonmonetary
asset without physical substance.” held for use in the
production or supply of goods or services, for rental
to others, or for administrative purpose.

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NON-CURRENT ASSETS

5 Major Accounts
NON-CURRENT ASSETS

5 Major Accounts Resources controlled by the entity
Result of past transaction and events
Assets provide future economic benefits
The cost of assets can measured reliably.
CASH- negotiable instrument

RECEIVABLES- promise to pay (client)
MERCHANDISE INVENTORY-held for sale
PREPAID EXPENSE - advance payment but will not be
consumed until future period.
production Identifiable non-

Supply of goods monetary asset
without physical
Service
susbsance
Rental

Cash on Hand ACCOUNT RECEIVABLES Prepaid
Cash in Bank NOTES RECEIVABLES Rent
INTEREST RECEIVABLES Prepaid
Cash Fund
ACCRUED INCOME Insurance
Cash ALLOWANCE FOR BAD
DEBTS Prepaid
Equivalent
Interest
Property, Plant Equipment INTANGIBLE

Land
Building
Office Equipment
Store Equipment
Transportation Equipment
Machinery Equipment
Delivery Equipment

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Defined as “present
obligation of an entity
arising from past
transaction or events, the
settlement of which is
expected to result in the
flow from the entity of
resources embodying
economic benefit.

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The entity expects to settle the liability The term “noncurrent

within the entity’s normal operating cycle. liabilities” is also a
residual definition.
The entity holds the liability primarily for
the purpose of trading.
PAS 1 par 69 simply
The liability is due to be settled within twelve states that “all
months after the reporting period. liabilities not
classified as current
The entity does not have an unconditional right liabilities are classified
to defer settlement of the liability for at least as non-current
twelve months after the reporting period. liabilities.”

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The opposite of right to
collect is to the obligation
to pay.
Payables are the

obligations to make
payments to creditors.

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Accounts payable (AP) is an

A note payable is a written
accounting entry that represents
an entity's obligation to pay off promissory note.
a short-term debt to its creditors. Under this agreement, a
borrower obtains a specific
Debts arising from purchase of an amount of money from a
asset or acquisition of services on lender and promises to pay it
account. back with interest over a
predetermined time period
Is a liability to pay the bank or
other financing institution
payable within twelve months
or shorter (Note: if loan is
payable beyond twelve months,
then it is classified under non-
current liabilities.

In November 15, 2020, Josco Day purchased eight
sacks of rice at P2, 000.00 per sack. The credit term is
2/10, n/30.
1. How much Josco Day will pay if he will pay on

November 25, 2020?

December 15, 2020?

November 25, 2020?

December 15, 2020?

An accrued expense is an
accounting expense recognized
in the books before it is paid
for.
It is a liability, and is usually

current
These expenses are typically

periodic and documented on
a company's balance sheet
due to the high probability
that they will be collected

Interest Payable
A current liability account
that is used to report the
amount of interest that has
been incurred but has not
yet been paid as of the
date of the balance sheet.

Rent Payable
The liability account Rent
Payable is used by the
tenant to report the
amount of rent that the
tenant owes for rent but
has not been paid as of the
balance sheet date.
Utilities Payable-is the amount
owed to suppliers for
electricity, gas, Internet
connections, telephones, and
water. This liability is
considered a current liability,
since the amounts owed are
typically payable in less than
one year.

Salaries Payable-is a liability
account that contains the
amounts of any salaries owed
to employees, which have not
yet been paid to them. The
balance in the account
represents the salaries liability
of a business as of the balance
sheet date.

Tina Pai hired Jenny Lee as storekeeper with salary of P500.00 per day.
Jenny is paid every Saturday for work rendered during the week.
Sunday is her day-off. December 31, 2019 falls on a Tuesday.
Determine the balance of Salaries Payable to be reported as of
December 31, 2019.

is money received by an individual
or company for a service or
product that has yet to be fulfilled.
Unearned revenue can be thought
of as a "prepayment" for goods or
services that a person or company
is expected to produce for the
purchaser. As a result of this
prepayment, the seller has
a liability equal to the revenue
earned until delivery of the good
or service.

Keri Kiray, a neighbor of Kit Cruz operates a coffee vending machine
business. On October 1, 2019, Keri entered in a contract with Kit
Cruz to rent a small space on the countertop of the Store where he
can put his coffee vending machine. The rent is P6, 750.00 per
month. Keri paid six month advance rent on October 1, 2019.
How much should be reflected as Unearned

Rent Income on the Store’s SFP as of
December 31, 2019.

How much should be reflected as Unearned
Rent Income on the Store’s SFP as of
December 31, 2019.

Is a long term debt of the business with security or collateral in
form of real properties.
In case the business fails to

pay the obligation the creditor
can foreclose or caused the
mortgaged asset to be sold
and the proceeds of the sale to
be used to settle the
obligation.

5 Major Accounts
Long-term debt consists

of loans and financial
obligations lasting over one
year. Long-term debt for a
company would include any
financing or leasing obligations
that are to come due in a
greater than 12-month period.
(Loan Payable)

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Is a certificate of
indebtedness under
the seal of a
corporation, specifying
the terms of
repayment to settle
the obligations.
5 Major Accounts Present Obligation
From Past Transaction
Settlement from resources
PAYABLE- business promise to pay
ACCRUED EXPENSE- recognized before it is paid for.
UNEARNED INCOME- payment received but products/services
not yet fulfilled.
LONG-TERM PAYABLE- obligation for more than one year.

MORTGAGE PAYABLE – long term obligation with security/collateral.
BONDS PAYABLE – business obligation to pay back specified amount to
the lender.

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Salaries Payable Unearned Income

Accounts Payable
Utilities Payable
Note Payable
Rent Payable
Interest Payable
Long Term Payable

Mortgage Payable
Bonds Payable

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The net assets of the business. It is composed of the

owner’s investment and the accumulated net income of
the company, net of any distributions to the owners. It
reflects the portion of the asset that belongs to the
owner of the business.

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Equity is the residual interest of the owner of the business.
Any assets left after paying liabilities is the right of the

owner of the business.

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Represents the withdrawals made by the

owner of the business either in cash or
other asses.

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Under the Conceptual

Framework, expense is
defined as “decrease in
economic benefit during the
accounting period in the form
of outflow or decrease in
asset and increase in liability
that results in decrease in
equity, other than
distribution to equity
participants.”

5 Major Accounts
Simply stated,
expense is outflow of
future economic
benefit that decrease
equity, other than
distribution or
dividend paid to
owners.

COST OF GOOD SOLD/COST OF SALES
SALARIES OR WAGES EXPENSE
UTILITIES EXPENSE
SUPPLIES EXPENSE
RENT EXPENSE
INSURANCE EXPENSE
DEPRECIATION EXPENSE
UNCOLLECTIBLE EXPENSE
INTEREST EXPENSE

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An account used by companies that sells goods instead of

services.
For trading operations, cost of sales collects the cost of the
merchandise sold.
This include the purchase price of the inventory, brokerage and

shipment cost to bring the goods to the premises of the company.
The shipment cost is called Freight-in.

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Includes all payments as a result of an

employer-employee relationship such as
salaries or wages, 13th month pay, cost of
living allowances and other related
benefits.

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Expenses related to use telecommunication,

facilities, consumption of electricity, fuel and
water.

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Expenses using supplies (office

supplies) in the conduct of daily
business.

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Expense for space, equipment

or other asset rentals.

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Portion of premiums paid on

insurance coverage (on vehicle,
life, fire, typhoon or flood) which
has expired.

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The portion of the cost of tangible

assets (building and equipment)
allocated or charged as expense
during an accounting period.

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refer to the value reduction

of the non-current assets
primarily due to natural wear
and tear of other value
reducing factor.

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Bought Php 20,000.00 equipment with five-year

estimated life and salvage value of Php 2,000.00,
depreciation is computed on a straight line.

5 Major Accounts
Bought Php 20,000.00 equipment with five-year

estimated life and salvage value of Php 2,000.00,
depreciation is computed on a straight line.
Cost 20,000.00
Less: Salvage Value 2,000.00
Depreciable cost 18,000.00
Divided by: Estimated life _____5___
Annual Depreciation 3,600.00

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The amount of receivables estimated to

be doubtful of collection and charged as
expense during an accounting period.

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An expense related to use of

borrowed funds.

related to borrowed funds.
estimated to be doubtful of collection.
a portion of the cost of tangible assets.
a portion of premium paid on insurance.
expense for space.
expenses using supplies.
electric, telephone, fuel and water.
Monthly payroll,13th month, bonus, allowance
cost of the purchase sold.

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The Conceptual Framework defines income as

“increase in economic benefit during the accounting
period in the form of inflow or increase in assets or
decrease in liability that results in increase in equity,
other than contribution from equity participants.
Income includes revenue and gains.

Arise in the course
of the ordinary
regular activities of
an entity and are
referred to be by a
variety of different
names including :

Represents other
items that meet the
definition of income
and do not rise in the
course of ordinary
regular activities of
an entity.

Income derived from the following ordinary activities:
1. Rendering of
services-Income
from rendering of
services, among
others, includes:

2. Use of
entity
resources-
This income
include

3. Disposal of
resources
other than
products-
Example
include:

Revenues earned by
performing services for a
customer or client; for
example accounting
services by a CPA firm,
laundry services by a
laundry shop.

Revenues earned as
result of sale of
merchandise, for
example sale of
building materials by a
construction supplies
firm.
Asset Code
1000 Chart of Accounts
ACCOUNT NAME CODE FINANCIAL STATEMENT GROUP SUB GROUP NORMALLY
Cash 1001 Current Assets Cash and Cash Equivalent
Investement in Treasury Bills 1002 Current Assets Cash and Cash Equivalent
Investement in Notes 1003 Current Assets Cash and Cash Equivalent
Investment in Stocks 1004 Current Assets Cash and Cash Equivalent
Trade Receivables 1005 Current Assets Receivales
Accounts Receivable 1006 Current Assets Receivales
Notes Receivable 1007 Current Assets Receivales
Interest Receivable 1008 Current Assets Receivales
Allowance for Bad Debts 1009 Current Assets Contra Account Receivables
Merchandise Inventory 1010 Current Assets Inventory
Prepaid Rent Expense 1011 Current Assets Prepaid Expense
Prepaid Insurance Expense 1012 Current Assets Prepaid Expense
Prepaid Interest Expense 1013 Current Assets Prepaid Expense
Land 1014 Non Current Assets Property Plant & Equipment
Building 1015 Non Current Assets Property Plant & Equipment
Accumulated Depreciation- Building 1026 Non Current Assets Contra Asset
Office Equipment 1016 Non Current Assets Property Plant & Equipment
Accumulated Depreciation- Office Equipment 1017 Non Current Assets Contra Asset -PPE
Store Equipment 1018 Non Current Assets Property Plant & Equipment
Accumulated Depreciation- Store Equipment 1019 Non Current Assets Contra Asset -PPE
Transportation Equipment 1021 Non Current Assets Property Plant & Equipment
Accumulated Depreciation- Transportation Equipment 1022 Non Current Assets Contra Asset -PPE
Machinery Equipment 1023 Non Current Assets Property Plant & Equipment
Accumulated Depreciation- Machinery Equipment 1024 Non Current Assets Contra Asset -PPE
Delivery Equipment 1025 Non Current Assets Property Plant & Equipment
Accumulated Depreciation- Delivery Equipment 1025 Non Current Assets Contra Asset -PPE
Office Furniture and Fixtures 1026 Non Current Assets Property Plant & Equipment
Accumulated Depreciation- Office Furniture and Fixtures 1027 Non Current Assets Contra Asset -PPE
Store Furniture and Fixtures 1028 Non Current Assets Property Plant & Equipment
Accumulated Depreciation- Store Furniture and Fixtures 1029 Non Current Assets Contra Asset -PPE
Goodwill 1030 Non Current Assets Goodwill
Intelectual Property 1031 Non Current Assets Intellectual Property
Trademark 1032 Non Current Assets Trademark
Accumulated Depreciation 1033 Non Current Assets Contra Asset

5 Major Accounts

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5 Major Accounts

*Juan Sumulong Memorial Schools System Inc. – SENIOR HIGH SCHOOL

The essential characteristics of an

The cost of assets can be

*Juan Sumulong Memorial Schools System Inc. – SENIOR HIGH SCHOOL

In layman’s language and in

*Juan Sumulong Memorial Schools System Inc. – SENIOR HIGH SCHOOL

*Juan Sumulong Memorial Schools System Inc. – SENIOR HIGH SCHOOL

The asset is restricted from being exchanged or used to “settle a

The entity expects to realize the asset within twelve months

*Juan Sumulong Memorial Schools System Inc. – SENIOR HIGH SCHOOL

*Juan Sumulong Memorial Schools System Inc. – SENIOR HIGH SCHOOL

Includes money and any

*Juan Sumulong Memorial Schools System Inc. – SENIOR HIGH SCHOOL

cash items included in “cash”

1 2 CASH IN BANK 3 CASH FUND

PAS 7 paragraph 6 defines cash

*Juan Sumulong Memorial Schools System Inc. – SENIOR HIGH SCHOOL

PAS 7 paragraph 6 defines cash

*Juan Sumulong Memorial Schools System Inc. – SENIOR HIGH SCHOOL

Financial assets that

*Juan Sumulong Memorial Schools System Inc. – SENIOR HIGH SCHOOL

*Juan Sumulong Memorial Schools System Inc. – SENIOR HIGH SCHOOL

refer to claims arising

*Juan Sumulong Memorial Schools System Inc. – SENIOR HIGH SCHOOL

*Juan Sumulong Memorial Schools System Inc. – SENIOR HIGH SCHOOL

*Juan Sumulong Memorial Schools System Inc. – SENIOR HIGH SCHOOL

Advance to Employees- certain Trade Receivables-amount of interest

Accrued Income – income already

*Juan Sumulong Memorial Schools System Inc. – SENIOR HIGH SCHOOL

Allowance for Bad Debts- are losses due to

this is deducted from

*Juan Sumulong Memorial Schools System Inc. – SENIOR HIGH SCHOOL

PAS 2 paragraph 6 define

*Juan Sumulong Memorial Schools System Inc. – SENIOR HIGH SCHOOL

*Juan Sumulong Memorial Schools System Inc. – SENIOR HIGH SCHOOL

*Juan Sumulong Memorial Schools System Inc. – SENIOR HIGH SCHOOL

*Juan Sumulong Memorial Schools System Inc. – SENIOR HIGH SCHOOL

CLASSIFICATION OF ASSETS – NON-CURRENT ASSETS

the asset is not restricted in used, readily

*Juan Sumulong Memorial Schools System Inc. – SENIOR HIGH SCHOOL

CLASSIFICATION OF ASSETS – NON-CURRENT ASSETS

*Juan Sumulong Memorial Schools System Inc. – SENIOR HIGH SCHOOL

CLASSIFICATION OF ASSETS – NON-CURRENT ASSETS

*Juan Sumulong Memorial Schools System Inc. – SENIOR HIGH SCHOOL

*Juan Sumulong Memorial Schools System Inc. – SENIOR HIGH SCHOOL

PAS 16 par. 6 which are held by an entity for

*Juan Sumulong Memorial Schools System Inc. – SENIOR HIGH SCHOOL

is a piece of lot or real

*Juan Sumulong Memorial Schools System Inc. – SENIOR HIGH SCHOOL

*Juan Sumulong Memorial Schools System Inc. – SENIOR HIGH SCHOOL

*Juan Sumulong Memorial Schools System Inc. – SENIOR HIGH SCHOOL

*Juan Sumulong Memorial Schools System Inc. – SENIOR HIGH SCHOOL

*Juan Sumulong Memorial Schools System Inc. – SENIOR HIGH SCHOOL

Accumulated Depreciation- represents the expired

This is deducted from the cost of the related asset account

*Juan Sumulong Memorial Schools System Inc. – SENIOR HIGH SCHOOL

*Juan Sumulong Memorial Schools System Inc. – SENIOR HIGH SCHOOL

PAS 38 par. 8 simply defines an intangible asset as

*Juan Sumulong Memorial Schools System Inc. – SENIOR HIGH SCHOOL

*Juan Sumulong Memorial Schools System Inc. – SENIOR HIGH SCHOOL

*Juan Sumulong Memorial Schools System Inc. – SENIOR HIGH SCHOOL

CASH- negotiable instrument

production Identifiable non-