TYPES OF ACCOUNTS

Asset Accounts
Liability Accounts
Revenue Accounts
Expense Accounts
 ASSET ACCOUNTS
1. Cash 8. Furnitures and Fixtures
a. Cash on Hand a. Chairs and Tables
b. Cash in Bank b. Air Conditioners
c. Cash in Fund c. Cabinets
- Petty Cash Fund d. Electric Fans
d. Cash Equivalent 9. Offices Equipment
2. Accounts Receivable a. Computer
3. Notes Receivable b. Calculator
4. Merchandise Inventory c. Typewriter
5. Prepayments d. Fax Machine
a. Prepaid rent e. Photocopier
b. Prepaid Advertising f. Telephone Units
c. Prepaid Insurance g. Store equipment
d. Unused Office Supplies 10. Delivery Equipment
6. Land
7. Building
LIABILITY REVENUE CAPITAL
ACCOUNTS ACCOUNTS ACCOUNTS

1. Accounts 1. Service Income 1. X, Capital

Payable a. Beauty Parlor

2. Notes b. Barber Shop 2. X, Withdrawal

Payable c. Repair Shop

2. Interest Income

3. Sales

4. Sales Discount

5. Sales Returns

6. Sales Allowances
EXPENSE
ACCOUNTS
1. Purchases 9. Rent Expense
2. Purchase Discounts 10. Advertising Expense

3 . Purchase Returns 11. Insurance Expense

4. Purchase Allowances

5. Salaries and Wages

6. Employee Benefits

a. Bonuses
b. Uniforms

c. Meal Allowances
d. 13th Month Pay

e. Vacation and Sick leave

benefits

7. Office Supplies Expense

8. Utilities Expense
 ACCOUNTING EQUATION

ASSETS = LIABILITIES + CAPITAL

ASSETS LIABILITIES CAPITAL

- Resources controlled by the entity - Present obligation of the - Residual interest in the
as a result of past transactions or entity arising from past assets of the entity after
events from which future economic transactions or events deducting all of its
benefits liabilities
are expected to the entity
Components:
- Investment
- Withdrawal
- Revenues
- Expenses
 DEBIT NORMAL BALANCE CREDIT NORMAL BALANCE
ASSETS WITHDRAWAL EXPENSES LIABILITIES INVESTMENT REVENUE

The normal balance of the account is the increase side of the account

BASIC RULE ON WHEN TO DEBIT AND CREDIT

DEBIT CREDIT
Assets, Expenses, Drawing Increase Decrease

Liabilities, Capital, Revenue Decrease Increase

 MODEL 1. Increase in Asset, Increase in Capital (Investment)

Example:
Paul, the owner, opened up a business enterprise with a trade name of
Via Nar Services and he;
* invested Php100,000 cash into the business
* contributed land amounting to Php150,000
* contributed office chairs and tables amounting to Php50,000

ANALYSIS OF THE TRANSACTION

EQUATION ELEMENTS ASSETS = LIABILITIES + CAPITAL

EFFECTS INCREASE NO EFFECT INCREASE

SPECIFIC ACCOUNT CASH PAUL, CAPITAL

AFFECTED
TREATMENT DEBIT CREDIT
Journal Entry of Transaction DEBIT CREDIT
Cash 100,000.00
Paul, Capital 100,000.00
To record the investment of
Paul

MODEL 2. Increase in Asset, Increase in Capital (Revenue)

Example;
Via Nar Services rendered services to its customers for cash amounting
to Php50,000

ANALYSIS OF THE TRANSACTION

EQUATION ELEMENTS ASSETS = LIABIILITIES + CAPITAL

Effects Increase No effect Increase

Specific Account Cash Service Income

Affected
Treatment Debit Credit
Journal Entry of the Transaction
DEBIT CREDIT
Cash Receivable 50,000.00
Service Income 50,000.00
To record the services rendered
for cash

MODEL 3. Increase in Assets, Increase in Liabilities

Example
Via Nar Services borrowed money from the Bank X amounting to
Php300,000 to finance its operation.

ANALYSIS OF THE TRANSACTION

EQUATION ELEMENTS ASSETS = LIABILITIES + CAPITAL

Effects Increase Increase No effect

Specific Amount Cash Loans Payable

Affected
Treatment Debit Credit
Journal Entry of the Transaction
DEBIT CREDIT
Cash 300,000.00
Loans Payable 300,000.00
To record the proceeds of ban from
Bank X

MODEL 4. Decrease in Assets, Decrease in Capital

Example
Paul, the owner, withdraw Php2,000 for personal use

ANALYSIS OF THE TRANSACTION

Equation Elements Assets = Liabilities + Capital

Effects Decrease No effect Decrease

Specific Accounts Cash Paul, Drawing

Affected
Treatment Credit Debit
Journal Entry of its Transaction
Debit Credit
Paul, Drawing 2,000.00
Cash 2,000.00
To record the cash withdrawal
of Paul

MODEL 5. Decrease in Assets, Decrease in Liabilities

Example.
Via Nar Services paid its loan account with Bank X amounting
to Php300,000

ANALYSIS OF THE TRANSACTION

Equation Elements Assets = Liabilities + Capital

Effects Decrease Decrease No effect

Specific Account Cash Loans Payable

Affected
Treatment Credit Debit
Journal Entry of the Transaction
Debit Credit
Loans Payable 300,000.00
Cash 300,000.00
To record the payment of loan with
Bank X

MODEL 6. Increase in one asset account and decrease in another asset account
Increase in one liability account and decrease in another liability account
Increase in one capital account and decrease in another capital account
Increase in capital, decrease in liability
Decrease in capital, increase in liability
Example:
Via Nar Services paid one year rental in advance for Php120,000

ANALYSIS OF THE TRANSACTION

EQUATION ASSETS = LIABILITIES + CAPITAL
ELEMENTS
Effect Increase No effect No effect

Specific Account Prepaid Rent

Affected
Effects Decrease
 EQUATION ASSETS = LIABILITIES + CAPITAL
ELEMENTS
Specific Account Cash
Affected
Treatment Debit

Journal Entry of the Transaction

DEBIT CREDIT
Prepaid Rent 120,000.00
120,000.00
Cash
To record the payment of 1-
year
rental