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    Accounts are names assigned to transactions involving the exchange of values. There are two types of accounts: real accounts and nominal accounts. The five major types of accounts are assets, liabilities, owner's equity, revenue, and expenses. Assets are resources owned by a firm, while liabilities are obligations arising from past events. Owner's equity represents the owner's claim, and revenue and expenses affect equity. A chart of accounts lists and codes all accounts used, and debits increase asset accounts while credits increase liability and equity accounts.

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    Accounts are names assigned to transactions involving the exchange of values. There are two types of accounts: real accounts and nominal accounts. The five major types of accounts are assets, liabilities, owner's equity, revenue, and expenses. Assets are resources owned by a firm, while liabilities are obligations arising from past events. Owner's equity represents the owner's claim, and revenue and expenses affect equity. A chart of accounts lists and codes all accounts used, and debits increase asset accounts while credits increase liability and equity accounts.

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    32 views70 pages

    Fabm Module 3 Powerpoint

    Uploaded by

    Charlene Mae Borromeo
    Accounts are names assigned to transactions involving the exchange of values. There are two types of accounts: real accounts and nominal accounts. The five major types of accounts are assets, liabilities, owner's equity, revenue, and expenses. Assets are resources owned by a firm, while liabilities are obligations arising from past events. Owner's equity represents the owner's claim, and revenue and expenses affect equity. A chart of accounts lists and codes all accounts used, and debits increase asset accounts while credits increase liability and equity accounts.

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    of 70

    “ACCOUNTS”

    ACCOUNTS
    “names” assigned to
    transactions involved in
    an exchange of values.
    ACCOUNTS
    Brief description of
    items that represent the
    accounting elements
    ACCOUNTS
    Devise used to record the
    changes (increases or
    decreases) in the accounting
    elements
    TWO TYPES OF ACCOUNTS

    Real Account
    vs.
    Nominal Account
    FIVE MAJOR
    TYPES OF
    ACCOUNT
    TASES
    ILITIBALY
    ’WSEONR TUQEIY
    NREUEVE
    XEEPNES
    ASSET
    LIABILITY
    OWNER’S EQUITY
    REVENUE
    EXPENSE
    ASSET
    Assets are the resources
    owned and controlled by
    the firm.
    LIABILITIES
    Liabilities are
    obligations of the firm
    arising from past events
    which are to be settled in
    OWNER’S EQUITY
    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
    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. Income
    includes revenue and gains.
    EXPENSES
    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
    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
    Accrued Income is
    revenue earned
    but not yet
    Short term investments are
    the investments made by
    the company that are
    intended to be sold
    immediately
    NON-CURRENT
    ASSETS
    Land is defined as the ground the
    company uses for business
    operations; it includes ground on
    which the company locates its
    headquarters or land used for
    outside storage space or as a parking
    lot.
    A Building is a Structure owned by
    the business used in the operation of
    the business.
    Property, Plant and
    Equipment are long-lived
    assets which have been
    acquired for use in
    operations.
    Furniture and Fixtures are
    larger items of movable
    equipment that are used to
    furnish an office.
    Long term Investments are
    the investments made by
    the company for long-term
    purposes.
    Intangible Assets are assets
    without a physical
    substance.
    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
    Loan is an arrangement under which the
    owner of property allows another party
    the use of it (usually cash) in exchange
    for an interest payment and the return of
    the property at the end of the lending
    arrangement.
    Mortgage Payable
    A mortgage payable is the liability of
    a property owner to pay a loan that
    is secured by property.
    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.
    REVENUE OR INCOME
    Sales is the account used to
    summarize sale of good or a
    trade or merchandising
    business; includes cash sales
    and sales on account
    Service Revenue are earnings
    derived from service rendered
    by a servicing business to its
    customers; may be cash or on
    account
    Professional fees are earnings
    derived from services
    rendered by a professional or
    professional servicing firm
    Interest Income are earnings
    representing the time value of
    money derived from
    promissory notes
    Rent Income is an income
    earned from allowing others
    to use the property or facility
    of the business.
    EXPENSES
    Cost of Sales is the
    value of merchandise
    sold.
    Supplies expense is the
    amount of supplies
    consumed or used by the
    business during the period
    Salaries and Wages
    expense is the amount paid
    to services rendered by the
    employees in the operation
    of the business
    Transportation
    expense is the fare
    paid to public utility
    vehicles
    Rent expense is an account
    that lists the cost of
    occupying rental property
    during a reporting period
    Utilities expense is the cost
    consumed in a reporting
    period related to electricity,
    heat, sewer, and water
    expenditures
    Taxes and Licenses expense is the cost
    of local as well as national taxes that are
    incurred and required to be paid in
    connection with the conduct of the
    business; examples are cost to acquire
    mayor’s permit, registration cost of the
    business, percentage tax on sales, etc
    CHART OF ACCOUNTS
    CHART OF ACCOUNTS
    • A chart of accounts is a listing of the
    accounts used by companies in their financial
    records.
    • The chart of accounts helps to identify
    where the money is coming from and where it
    is going.
    • The chart of accounts is the foundation of
    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
    CHART OF ACCOUNTS
    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.
    DEBIT AND CREDIT
    DEBIT AND CREDIT
    Debits and Credits are an integral
    part of the journalization process. In
    accounting, debits or credits are
    abbreviated as DR and CR
    respectively.
    DEBIT AND CREDIT
    When to Debit and when to Credit: An increase in an
    asset account is called a debit and an increase in
    a liability or equity account is called a credit. Likewise,
    if we decrease an asset account we credit that
    account. On the other side of the equation, if we
    decrease a liability or equity account we debit those
    accounts.

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