Account Titles

Prepared by: Mr. Thomas Jefferson A. Fernando, LPT

Definition of Each Major Account
• Assets - are the resources owned and controlled by the firm.
• Liabilities - are obligations of the firm arising from the past
events which are to be settled in the future.
• Equity or Owner's Equity - are the owner's claims in the
business. It is the residual interest in the assets of the
enterprise after deducting all its liabilities.
• Revenue or Income - is the increase in economic benefits
during the accounting period in the form of inflows of cash or
other assets or decreases of liabilities that result in increase in
equity.
• Expenses - are decreases in economic benefits during the
accounting period in the form of assets or incidences of
liabilities that result in decreases in equity.
Different Types of Assets
• Current Assets are assets that can be realized
(collected, sold, used up) one year after year-end
date)
• Non-Current Assets are assets that cannot be
realized (collected, sold, used up) one year after
year-end date.
• Tangible Assets are physical assets such as cash,
supplies, and furniture & fixtures.
• Intangible Assets are non-physical assets such as
patents and trademarks.
Account Titles used for Asset Account
Current Assets
• Cash is money on hand, or in banks, and
other items considered as medium of
exchange in business transactions.
• Accounts Receivable are amounts due from
customers arising from credit sales or credit
services.
• Notes Receivable are amounts due from
clients supported by promissory notes.
Account Titles used for Asset Account
Current Assets
• Merchandise Inventories are assets held for
resale.
• Supplies or Supplies Unused are items
purchased by an enterprise which are unused
as of the reporting date.
• Prepaid Expenses are expenses paid in
advance. They are assets at the time of
payment and become expenses through the
passage of time
Account Titles used for Asset Account
Non-Current Assets
• Furniture and Fixtures it includes tables, chairs,
showcase, counters, and other similar assets owned and
used by the business in its operation.
• Equipment it includes computers, calculators, cash
registers, and other similar assets.
• Automobile includes assets used for transporting
merchandise.
• Land owned by the business used for building sites and
other business purposes.
• Building owned and used by the business in its
operation.
 ASSET ACCOUNTS
Prepared by: Mr. Thomas Jefferson A. Fernando, LPT
ASSETS
Cash – currency (bills and coins), checks, postal money orders and treasury
warrants received by the business
Accounts Receivable – amounts collectible from customers or clients (for
goods sold and services rendered). In general, this account is not supported
by promissory notes so that it is often referred to as arising from sales “on
open account”.
(Note: When a business does not expect to collect all its receivables, bad
debts are provided and the accumulated amount thereof in “allowance for
bad debts” is treated as a deduction from receivables.)
Merchandise Inventory – goods acquired for sale and are still unsold
Notes Receivable – amounts collectible that are covered by promissory notes
Prepaid Expenses – expenses to be incurred yet in the future but are already
paid. Examples are Prepaid Rent, Prepaid Interest and Prepaid Insurance.
ASSETS
Unused Supplies – supplies that are still unused as of the end of an
accounting period
Prepaid Expenses – expenses of future accounting period(s) that are paid
in advance. Examples: Unexpired portion of insurance premiums (prepaid
insurance) and advertisements paid in advance (prepaid advertising)
Land – land acquired by the business for its use
Building – structures or edifices acquired for use of the business
Machinery and Equipment – heavy, metallic, and movable items that are
capable of performing certain functions or used to perform certain
functions. Examples are sewing machines, lathe machines, cutting
machines, and tractors.
Delivery Equipment – wheeled items used in making deliveries to
customers or clients. Examples are vans and trucks.
ASSETS
Furniture and Fixtures. This account title is used in referring to movable
items of significant value and acquired to improve the workable condition of a
place such as tables, chairs, cabinets, electric fans and air-conditioners.
Office Equipment – heavy, metallic and movable items used in an office to
perform certain functions or can perform certain functions. Examples are
typewriters, posting machines, and computers.
Tools – handy, small, and usually metallic items used in performing certain
function such as saws, hammers, pliers, scissors, screw drivers and jacks.
Tools in general have long useful life but do not have significant peso value.
Note: The cost of assets with relatively permanent life (such as buildings,
machinery and equipment and furniture) is allocated based on useful (or
economic) life. The allocated portion to each accounting period is charged to
Depreciation Expenses. The reduction in the asset value is accumulated in
the Accumulated Depreciation account, a deduction from the corresponding
asset account. In the case of tools, a portion of their cost may be written off
by charges to Tools
Different Types of Liabilities
• Current Liabilities are liabilities
that fall due (paid, recognize as
revenue) within one year after year-
end date.
• Non-Current Liabilities are
liabilities that do not fall due (paid,
recognized as revenue) within one
year after year-end date.
Account Titles used for Liabilities Account
Current Liabilities
• Accounts Payable are amounts due, or payable to
suppliers for goods purchased on account or for
services received on account.
• Notes Payable are amounts due to third parties
supported by promissory notes.
• Unearned Income is cash collected in advance; the
liability is the services to be performed or goods to
be delivered in the future.
• Salaries Payable are unpaid salaries of the
employees at the end of the accounting period.
Account Titles used for Liabilities Account
Current Liabilities
• Accounts Payable are amounts due, or payable to suppliers
for goods purchased on account or for services received on
account.
• Notes Payable are amounts due to third parties supported by
promissory notes.
• Unearned Income is cash collected in advance; the liability is
the services to be performed or goods to be delivered in the
future.
• Salaries Payable are unpaid salaries of the employees at the
end of the accounting period.
• Taxes Payable are present obligation due to the government.
Account Titles used for Liabilities Account
Non-Current Liabilities
• Loans Payable differs from accounts payable
in that. Accounts payable do not charge interest
unless payment is late and are typically based
on the goods or services acquired.
• Mortgage Payable is the liability of a property
owner to pay a loan that is secured by property.
• Interest Payable are interests incurred
mounted from the loan incurred but unpaid at
the end of the period.
LIABILITY ACCOUNTS
Prepared by: Mr. Thomas Jefferson A. Fernando, LPT
Account Titles used for Liabilities Account
Accounts Payable – obligations to suppliers for items
bought and are not supported by promissory notes. It
is often referred to as arising from purchases “on open
account”.
Notes Payable – obligations covered by promissory
notes.
Expenses Payable (Accrued Expenses) – obligations for
expenses already incurred but not yet paid. Examples
are Taxes Payable, Salaries and Wages Payable, and
Accrued Advertising.
Loans Payable – obligations arising from loans obtained.
Accounts Title used for Capital Account
• Owner's Equity is the residual
interest of the owner from the
business. It can be derived by
deducting liabilities from assets.
• Owner's Drawing is an account
debited for assets withdrawn by the
other for personal use from the
business.
Accounts Title used for Capital Account
Owner, Capital – capital of the sole proprietor
in his business. If the owner is Jose P. Golez,
the account becomes Jose P. Golez, Capital. At
the end of the accounting period, it is adjusted
for withdrawals and net income (net loss).
Owner, Drawing. This account title is used for
withdrawals made by the owner. If the owner’s
name is Jose P. Golez, the account title is Jose
P. Golez, Drawing or Jose P. Golez, Personal.
Account Titles used for Income/Revenue Account
• Sales is the total of merchandise sold.
• Service Income or Service Revenue is the amount
of income earned for service rendered by as service
concern.
• Professional Fees is the amount earned by the
professionals such as CPAs, doctors, lawyers, etc.
for services they rendered.
• Rent Income is the amount of rental earned for
the period.
• Interest Income amount earned for lending
money.
REVENUE ACCOUNTS
Prepared by: Mr. Thomas Jefferson A. Fernando, LPT
Account Titles used for Income/Revenue Account

Service Income. This refers to revenue

realized by providing services to customers
Fees Income. This refers to revenue
realized by providing professional services
to clients. Examples are legal, dental and
medical fees.
Sales. This account title is used to refer to
revenue from sale of goods that went
previously acquired for sale.
Account Titles used for Expense Account
• Cost of Sales is the cost of goods purchased and
sold or materials manufactured and sold.
• Advertising Expense ie incurred to promote the
product of the business.
• Salaries Expense it is the compensation given to
the workers.
• Travelling Expense it is the travelling allowance
given to sales agents.
• Supplies Expense amount of supplies used.
• Taxes Expense duties incurred in the current
period.
Account Titles used for Expense Account
• Utilities Expense amount of power/light and water
consumed by the business. This also include the
telephone bill, etc.
• Repairs and Maintenance expenses incurred for
repairing the assets of the business.
• Bad Debts or Uncollectible Account Expense is the
estimated amounts of losses from uncollectible
accounts of the business.
• Depreciation Expense is the allocated cost of fixed
assets in the current period.
• Rent Expense expenses that have been use for rent.
EXPENSE ACCOUNTS
Prepared by: Mr. Thomas Jefferson A. Fernando, LPT
EXPENSE
Taxes and Licenses –cost of permits and taxes incurred
Advertising Expenses– incurred in making the public aware
of the goods and services being offered by the business.
Examples are costs of or rentals for signboards and neon
signs and advertisements in the newspapers and through
radio and television.
Salaries and Wages – the compensation earned by
employees for services rendered to the business. Examples
are the salaries of sales and office employees and wages of
employee holding blue collar jobs (factory and shop
workers, maintenance men, drivers and mechanics).
EXPENSE
Supplies Expenses – cost of supplies already used.
Examples are factory and shop supplies (rags, brooms and
lubricants), office supplies (paper, pencils, adding
machine tapes, and erasers) and dental supplies (cotton,
dental floss, and facial tissue paper).
Light, Power and Water – cost of light, power and water
consumption as indicated on bills presented by utility
companies (MERALCO and Manila Water Co., Inc.)
Telephone and Telegram – telephone and telegraph
charges as indicated on bills presented by
telecommunication companies (PLDT, PT & T, RCPE, etc.)
EXPENSE
Rent Expense – the amount of rentals incurred
based on occupancy of space or usage of property
and equipment
Tools Expense – cost of tools treated as expense
Depreciation Expense – the portion of property
cost allocated to an accounting period. Example:
A machine costing P20,000 has estimated useful
life of 5 years. Annual depreciation expense may
be P4,000 (or P20,000/5 years).
EXPENSE
Insurance Expense – insurance premiums
related to current period
Bad Debts – provision for uncollectible
receivables
Miscellaneous Expenses – the different minor
expenses incurred and for which no specific
account title has been adopted. Examples are
transportation expenses for P2.00 and bank
service charges for P10.00.