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    ACCT Lesson 5 - The Major Books of Accounts

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    Fiona Chelsea Merin

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    ACCT Lesson 5 - The Major Books of Accounts

    Uploaded by

    Fiona Chelsea Merin
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    ACCT Lesson 5_ the Major Books of Accounts

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    6 views5 pages

    ACCT Lesson 5 - The Major Books of Accounts

    Uploaded by

    Fiona Chelsea Merin

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 5

    The Major Books of Accounts

    BALANCE SHEET ACCOUNTS (Permanent Accounts)

    ASSETS – classified into two, namely current assets and non-current assets

    Current Assets – expected to be realized, sold and consumed within the enterprise’s
    normal operating cycle (useful life of one year or less).

    Account Titles :
    ● Cash
    ● Petty Cash Fund
    ● Cash equivalents
    ● Accounts Receivable
    ● Allowance for Uncollectible Accounts – contra-asset accounts
    ● Notes Receivable
    ● Advances to Employees
    ● Inventories
    ● Prepaid supplies
    ● Prepaid rent
    ● Prepaid insurance

    Non-Current Assets – company's long-term investments that have a useful life of more
    than one year. Noncurrent assets cannot be converted to cash easily.

    Account Titles :
    ● Property Plant and Equipment
    ● Land
    ● Building
    ● Furniture & Fixtures
    ● Accumulated Depreciation – contra-asset account

    LIABILITIES –classified into two, namely current and non-current liabilities

    Current Liabilities - financial obligations of the enterprise that are expected to be settled
    in the normal operating cycle; due to be settled within one year from the balance sheet
    date.

    Account Titles :
    ● Accounts Payable
    ● Notes Payable
    ● Interest payable
    ● Salaries payable
    ● Utilities payable
    ● Accrued Expenses – incurred or used by the business but not yet paid
    ● Unearned Income – income collected or received in advance but no services has
    been rendered yet.

    Non- Current Liabilities - financial obligations of the enterprise that are not due to pay
    for at least 12 months. They're also called long-term liabilities.
    Account Titles :
    ● Notes Payable
    ● Mortgage Payable

    OWNER’S EQUITY – the residual interest in the assets of the business after deducting all its
    liabilities. It is increased by profit and additional investment or contributions of owners and
    decreased by losses and withdrawals of owners.

    Account Titles :
    ● Owner’s Capital
    ● Withdrawals by Owners
    ● Dividends
    ● Retained Earnings

    INCOME STATEMENT ACCOUNTS (Temporary Accounts)

    Income Account Titles:


    Sales
    Sales Returns & Allowances
    Sales Discount
    Service Income
    Professional Income
    Rental Income
    Interest Income
    Miscellaneous Income
    Gain on Sale
    Note: b. & c. are contra-sales account.

    Cost Account Titles:


    Cost of sales (or Cost of goods sold)
    Freight-in – addition to purchases
    Purchases
    Purchase Returns & Allowances
    Purchase Discounts
    Merchandise Inventory, ending
    Note: d. & e. are contra-purchase accounts.

    Expense Account Titles:


    Freight-out
    Salaries expense
    Rent expense
    Utilities expense
    Supplies expense
    Bad debt expense
    Depreciation expense
    Advertising expense
    Insurance expense
    Taxes and licenses
    Transportation and travel expense
    Interest expense
    Miscellaneous expense
    Losses

    What are Business Transactions?


    Business transactions are exchanges of equal monetary values. This definition implies on the
    concept of understanding that:
    1. For every value received, another value is given away as an exchange.
    2. These values are measured in terms of pesos which are presumed to be equal.

    How are business transactions analyzed? Business transactions are analyzed from the view
    point of the business.
    ● If the transaction is “Purchased”, it is the business that is buying.
    ● If the transaction is “Sold”, it is the business that is selling.
    ● If the transaction is “Paid”, it is the business that is paying.
    ● If the transaction is “Sold”, it is the business that is selling.
    ● If the transaction is “Collected”, it is the business that is collecting.
    ● If the transaction is “Rendered Services”, it is the business that is rendering services.

    Analysis:
    T-account:
    The effect of the changes in Assets, Liabilities and Equity are being summarized in an accounting
    device called “account title”. This device will group those accounting values with their amounts
    belonging to one item only.

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