Types of Major Accounts

Antique National School
Senior High School

Grade 11, First Semester SY 2017-2018
___________________________________________________________________________________________________________________________
TYPES OF MAJOR ACCOUNTS
Specific Learning Objectives

At the end of this lesson, the learners will be able to:
• identify the account as assets, liabilities, capital, income or expenses
• cite an example of each type of account
• prepare a chart of accounts
The device used to record changes in accounting equation is called the Account.
Types of Major Accounts: Assets, Liabilities, Owner's Equity, Income and Expenses.
Assets are the resources owned and controlled by the firm.

Liabilities are obligations of the firm arising from past events which are to be settled in the future. The debts and obligations of the
company to another entity.
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.
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. Income includes revenue and gains.
Expenses are decreases in economic benefits during the accounting period in the form of outflows of assets or incidences of liabilities that
result in decreases in equity.
ASSETS
Current Assets vs Non-current Assets
Current Assets are assets that can be realized (collected, sold, used up) one year after year-end date. Examples include Cash, Accounts
Receivable, Merchandise Inventory, Prepaid Expense, etc.
Non-current Assets are assets that cannot be realized (collected, sold, used up) one year after year-end date. Examples include Property,
Plant and Equipment (equipment, furniture, building, land), long term investments, etc.
Tangible Assets vs Intangible Assets

Tangible Assets are physical assets such as cash, supplies, and furniture and fixtures.
Intangible Assets are non-physical assets such as patents and trademarks
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.
Inventories are assets held for resale
Supplies 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.
Accrued Income is revenue earned but not yet collected
Short term investments are the investments made by the company that are intended to be sold immediately
Non-Current Assets
Property, Plant and Equipment are long-lived assets which have been acquired for use in operations.
Long term Investments are the investments made by the company for long-term purposes
Intangible Assets are assets without a physical substance. Examples include franchise and copyright.
LIABILITIES
Current Liabilities. Liabilities that fall due (paid, recognized as revenue) within one year after year-end date. Examples include 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-end date. Examples include Notes
Payable, Loans Payable, Mortgage Payable, etc.
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.
Accrued Expenses are expenses that are incurred but not yet paid (examples: salaries payable, taxes payable)
Unearned Income is cash collected in advance; the liability is the services to be performed or goods to be delivered in the future.
Non-Current Liabilities
Loans Payable
Mortgage Payable
OWNER'S EQUITY
Capital is the value of cash and other assets invested in the business by the owner of the business.
Drawing is an account debited for assets withdrawn by the owner for personal use from the business.
INCOME
References: Wild, J. (2009). Principles of Accounting 19th ed. McGraw Hill Publishing Haddock, M., Price, J., & Farina, M. (2012). College Accounting: A Contemporary Approach, 2nd ed. New
York: McGraw-Hill/Irvin Valencia, E.G.& Roxas, G.F. (2010). Basic Accounting 3rd ed., Mandaluyong City, Philippines: Valencia Educational Supply.
Antique National School
Senior High School
Grade 11, First Semester SY 2017-2018
___________________________________________________________________________________________________________________________
- Increase in resources resulting from performance of service or selling of goods. Income increases equity.
Ex. Service revenue for service entities, Sales for merchandising and manufacturing companies.
EXPENSE
- decrease in resources resulting from the operations of business. Expenses decreases Equity in the accounting equation.
Ex. Salaries Expense, Interest Expense, Utilities Expense, Telephone Expense, Office Supplies Expense, Internet Expense, Repair and Maintenance
Expense, Miscellaneous Expense, Rent Expense.
CHART OF ACCOUNTS
a. A chart of accounts is a listing of the accounts used by companies in their financial records.
b. The chart of accounts helps to identify where the money is coming from and where it is going.
c. The chart of accounts is the foundation of the financial statements.
The following are the steps in the preparation of a basic chart of accounts:
1. Create three columns.

2. Prepare the assets first, then liabilities, then equity, then revenue and expenses.
3. List all assets, liabilities, equity, revenue and expenses account in the first column.
4. On the second column, choose an account code (discretion of the company).
5. On the third column, write the description for each account on when to use it.
Assets
Account Account Code Description
*may vary
Cash 1000 Use for actual cash transactions
Accounts Receivable 1200 Use for customers who will pay in the future
Inventory 1300 Use for items held for sale
Prepaid Expenses 1400 Use for expenses paid in advance
Office Equipment 1500 Use for equipment that are used in the office
Store Equipment 1600 Use for equipment that are used in the store
Land 1700 Use for land used in operations
Liabilities
Accounts Payable 2000 Use for the debts of the company
Notes Payable 2100 Use for promissory notes issued by the company
Salaries Payable 2200 Use for salaries to be paid in the future
Capital
Owner’s, Capital 3000
Owner’s, Withdrawal 4000
Service Revenue 5000 Use for earnings
Salaries Expense 6000 Use for salaries incurred, regardless of payment
Utilities Expense 6100 Use for electricity and water expenses incurred
References: Wild, J. (2009). Principles of Accounting 19th ed. McGraw Hill Publishing Haddock, M., Price, J., & Farina, M. (2012). College Accounting: A Contemporary Approach, 2nd ed. New
York: McGraw-Hill/Irvin Valencia, E.G.& Roxas, G.F. (2010). Basic Accounting 3rd ed., Mandaluyong City, Philippines: Valencia Educational Supply.

Types of Major Accounts

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Antique National School

Senior High School

Specific Learning Objectives

Assets are the resources owned and controlled by the firm.

Tangible Assets vs Intangible Assets

1. Create three columns.

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