CAPITAL

CASH SALES
INVENTORIES RENT INCOME
PROF. FEES ACCOUNTS
DRAWINGS RECEIVABLE
INVENTORIES RENT EXPENSE
LAND
ADVERTISING
EXPENSE SALARIES EXPENSE
EQUIPMENT INCOME TAX
NOTES PAYABLE ACCOUNTS
PAYABLE
BONDS
REPAIRS EXPENSE
TRADEMARK
What are terms
flashed on the
screen about?
What are account
titles?
What are the five
major accounts in
accounting?
TYPES OF MAJOR
ACCOUNTS
CLASSIFICATION OF
ACCOUNTS
 How are these major
accounts different from
each other?
 A. ASSETS
• An asset is defined as “a
resource controlled by the entity
as a result of past events and
from which future economic
benefits are expected to flow to
the entity.
 A. ASSETS
• In simple words, “asset” is
something which a business
owns or controls that is expected
to yield benefits in future
periods.
 A. ASSETS
2 Classifications:
• Tangible Assets – assets having
physical existence
• Intangible Assets – assets having no
physical existence but their
possession gives rise to some rights
and benefits to the owner.
 A. ASSETS
Group according to either life span or
liquidity:
• Current Assets – assets that are expected
to be realized, consumed, or converted
into cash in 12 mos. Time or less.
• Fixed Assets – assets with a life span of at
least one year and usually longer.
 B. LIABILITIES
- A present obligation of the entity
arising from past events, the
settlement of which is expected to
result in an outflow from the entity
of resources embodying economic
benefits.
 B. LIABILITIES
- In simple words, liabilities are
“debts” or financial obligations of a
business.
 B. LIABILITIES
2 Classifications:
• Current Liabilities – debts that are
paid in 12 mos. Or less, and consist
of mainly of monthly operating
debts.
 B. LIABILITIES
2 Classifications:
• Non-current Liabilities – long-term
debts that are paid off in years
rather than months.
 C. CAPITAL OR EQUITY
- The residual assets of the entity
after deducting all of its liabilities.
- In other words, this is the amount
left to the owners after all liabilities
are settled.
 C. CAPITAL OR EQUITY
Examples of equity:
- Common Stocks
- Retained Earnings
 C. CAPITAL OR EQUITY
Equity is affected by the following:
1. Initial and additional contributions
of owner/s (investments)
2. Withdrawals made by owner/s
(dividends for corporations)
3. Income, and
4. Expenses
 C. CAPITAL OR EQUITY
Investments and income increase
equity; while,
Withdrawals and expenses
decrease equity.
 D. INCOME
- It is the increase in economic benefit
during the accounting period in the
form of inflow or enhancements of
assets or decreases of liabilities that
result in an increase in equity, other
than those relating to contributions
from equity participants.
 D. INCOME
- In simple words, it is the money
the business earns from selling a
product or service, or from
interest and dividends on
marketable securities.
 D. INCOME
2 Types of Income:
• Sale Revenue – income earned in the
ordinary course of business activities of
the entity.
• Gains – income that does not arise
from the core operations of the entity.
They come from other activities.
 E. EXPENSES
- It is the decrease in economic
benefits during the accounting period
in the form of outflows or depletions
of assets or incurrences of liabilities
that result in a decrease in equity,
other than those relating to
distributions to equity participants.
 E. EXPENSES
- In simple words, Expenses are
expenditures that allow a
company to operate.
- It reduces the net assets of the
company.
 E. EXPENSES
Expenses include:
1. Ordinary expenses
2. Losses
 CAPITAL
CASH SALES
INVENTORIES RENT INCOME
PROF. FEES ACCOUNTS RECEIVABLE
DRAWINGS RENT EXPENSE
ADVERTISING EXPENSE LAND
EQUIPMENT SALARIES EXPENSE
NOTES PAYABLE INTEREST PAYABLE
BONDS PAYABLE ACCOUNTS PAYABLE
REPAIRS EXPENSE
TRADEMARK
What is the significance
of knowing the different
major accounts in
accounting?
 CHART OF ACCOUNTS
- Is a listing of all accounts that a
company has identified and
made available for recording
transactions in the general
ledger.
 Why is it important to
create a Chart of account
before the beginning of
the business?
 GROUP ACTIVITY

THE FOLLOWING ARE THE

OPEN ACCOUNTS IN THE
LEDGER OF A ENTERPRISES:
Accounts Payable SSS premium payable
Furniture Accounts Receivable
Cash Accum. Depreciation-Furniture
Accum. Depreciation-Equipment
Equipment
Loans Payable Withholding Tax Payable
Unused Office Supplies Salaries Expense
Accrued Interest Payable Purchases
Mr. A, Capital Sales
Merchandise Inventory Notes Payable
Depreciation Expense Advertising Expense
Allowance for Bad Debts Mr. A, Drawings
Required: Determine the following:
1. Number of asset accounts.
2. Number of liability accounts.
3. What account should be listed immediately next to
cash?
4. What account should be listed immediately next to
equipment?
5. Prepare the Chart of Accounts of A.C.E Enterprises
using the following codes:
Asset - 100-200 Revenues - 600 -700
Liabilities - 300-400 Expenses - 800 - 900
Owner's Equity - 500