ACCOUNTS

Assets
1.Cash
2.Accounts Receivable
3.Notes Payable
4.Inventories
5.Unused Supplies
6.Prepaid rent
7.Equipment
8.Furniture and fixtures
9.Building
10.Land
11.Allowance for Doubtful Accounts
12.Accumulated Depreciation
LIABILITIES
• are present obligations of an entity arising from past
transactions or events, the settlement of which of which is
expected to result in an outflow from the business of
resources embodying economic benefits.

• These are what the business owes.

2 Classifications of Liabilities
• Current Liabilities-those reasonably expected to be settled
by payment of cash, delivery of goods or performance of
service within its normal operating cycle or within one year
from the reporting date, whichever is longer.

• Non-current liabilities- are obligations reasonably

expected to be paid in cash beyond one year.
Current Liabilities Accounts:

1. Accounts Payable – refers to open accounts

Open account occurs when a seller ships the
which represent
goods thenecessary
and all the amount of moneyand
shipping owed by
the commercial
nosiness todocuments
creditors directly to a buyer who
or suppliers.
agrees to pay a seller's invoice at a future
date. Open account is typically used between
Ex.
established and trusted traders.
July 15 – Various equipment were purchased on account from
Fortune for PHP55,000
Current Liabilities Accounts:

2. Loans Payable – this represents the amount of

money borrowed by the business from third party
creditors.
Ex.
July 2 – Reyes borrowed PHP100,000 cash from PNB for use in his
business.
Current Liabilities Accounts:

3. Unearned Revenues – this represents cash

collected by the business in advance for a
service or good that is yet to be rendered or
delivered.
Current Liabilities Accounts:

4. Notes Payable - this represents the amount of

money owed by the business to the supplier or
creditor evidenced by a promissory note.
Ex.
For example, assume the Nicholas Corporation purchases $50,000 of
office equipment on January 15 by signing a $50,000, 10%, 180 day
note payable.
Current Liabilities Accounts:
5. Accrued liabilities- amounts owed to others for
unpaid expenses. This account includes salaries
payable, utilities payable, interest payable and
taxes payable.
Non-Current Liabilities accounts:

1. Mortgage Payable – this represents the amount

of money borrowed by the business from a bank
or a lending institution which is secured by
collateral.
Non- Current Liabilities Accounts:

2. Bonds Payable – Business organization often

obtain substantial sums of money from lenders to
finance the acquisition of equipment and other
needed assets. Bonds is a contract between the
issuer and the lender specifying the terms of
repayment and the interest to be charged.
Non- Current Liabilities Accounts:

3. Bonds Payable – this account records long-term

debt of the business entity for which the business
entity has pledged certain assets as security to
the creditor.
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.
OWNER’S EQUITY

• Service revenue – refers to earning made by any

business.

• Interest income – represents interest credited by

the bank to the account of the business arising from
the bank deposits.
OWNER’S EQUITY

• Sales – represents the earnings made by any business

that is into selling goods or merchandise.

• Professional fees- represents earnings made BY

PROFESSIONALs or experts from rendering services to
their clients.

• Doctor, lawyers, certified public accountants

1. What is the accounting equation?
2. In your own words, what is meant by double entry?
3. What are the major accounts?
4. Differentiate current assets from non-current assets.
5. Explain what is:
a. Allowance for doubtful Accounts
b. Accumulated Depreciation
6.In addition to the standard chart of
accounts for a specific industry, you will
likely want to expand and/or modify the
chart of accounts to fit your business. One
tool that would be helpful in determining
the accounts for your company would be
your company's __________ chart.