FINANCIAL ACCOUNTING

&
REPORTING
(Fundamentals)

Mr. John Lee J. Mamaril, CFPP, MBA

Chapter 4: Types of Major Accounts (FAR
by: Millan)
 Chapter 2
ALL ABOUT FINANCIAL STATEMENTS
Learning Objectives:
At the end of the discussion, the student will able to:

1. Discuss the five major accounts.

2. Cite examples of each type of account.
3. Prepare a Chart of Accounts.
4. The learners shall be able to know how to prepare basic financial statements
 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.
The T-Account
 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.
Classification of the Five Major Accounts

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

Chapter 4: Types of Major Accounts (FAR by: Millan)
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. Land
g. Building
h. Accumulated depreciation - Building
i. Equipment
j. Accumulated depreciation - equipment
 Common Account Titles - Continuation
• BALANCE SHEET ACCOUNTS
LIABILITIES 
a. Accounts payable
b. Notes payable
c. Interest payable
d. Salaries payable
e. Utilities payable
 Common Account Titles - Continuation
• BALANCE SHEET ACCOUNTS
EQUITY
a. Owner’s capital (or Owner’s equity)
b. Owner’s drawings
 Common Account Titles - Continuation
• INCOME STATEMENT ACCOUNTS
INCOME
a. Service fees
b. Sales
c. Interest income
d. Gains
 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
• 01/05/2020 Received a
P1,500.00 from the sales

T
of goods

• 01/10/2020 Payment of
CASH
ingredients to the
DEBIT CREDIT
supplier amounting to
P600.00 was paid on
cash
600

• 01/25/2020 Received
a P 1,200.00 from the
sales of goods ______________________________
2,100

**How much is the

Cash Balance at the end
of the month?
• 01/03/2020 Received a
P1,400.00 from the sales

T
of goods

• 01/15/2020 Payment of
CASH
ingredients to the
DEBIT CREDIT
supplier amounting to 1400
P1,600.00 was paid on 1600
cash
120
• 01/30/2020 Received
a P 120.00 from the
sales of goods ______________________________
(80)

**How much is the

Cash Balance at the end
of the month?
• 01/04/2020 Received a
P1,000.00 from the sales

T
of goods

• 01/12/2020 Payment of
CASH
ingredients to the
DEBIT CREDIT
supplier amounting to 1000
P750.00 was paid on
cash
750
1450
• 01/25/2020 Received a
P 1450.00 from the
sales of goods ______________________________
1,700

**How much is the

Cash Balance at the end
of the month?
Classification of Account
Determine the given account title on their corresponding
account classification:

1400
-Accounts Receivable Asset 1600
120
-Freight out Expense

-Notes Receivable Asset

______________________________
(80)
-Interest Payable Liability

-Sales Income
 3. Statement of Owner's Equity
The statement of owner's equity
portrays changes in the capital balance
of a business over a reporting period.
The concept is usually applied to a sole
proprietorship, where income earned
during the period is added to the
beginning capital balance and owner
draws are subtracted
Statement of Changes in Owner's Equity -
FORMAT
 4. CASH FLOW STATEMENT
• It is also called as the sources and uses of
funds or flow of funds statement.
• It is prepared either for a farm business or to
a farm operator’s family.
• In Cash flow statement both the cash in flows
and out- flows are summarized over a given
period of time.
• In a cash flow statement the total cash
inflows must equal to the total cash out flows.
CASH FLOW - FORMAT
END