PREVIOUS LESSON

WHAT WENT WELL LAST MEETING?

• What is the accounting equation?
• ASSET = LIABILITIES + OWNERS EQUITY
• WHO CAN DEFINE
• ASSET?
• LIABILITIES?
• OWNERS EQUITY?
 ACTIVITY - NUMBER 1
• OBSERVE THE PROPERTIES INSIDE THE CLASS WRITE ONE OF IT
ON THE PAPER PROVIDED AND CLASSIFY IT WEATHER IT IS
ASSET, LIABILTIES OR OWNERS EQUITY
• FORM A GROUP ACCORDING TO THE COLOR OF THE PAPER.
• EVERY LEARNER WILL SUBMIT THE IDENTIFIED PROPERTY TO THE
GROUP AND WILL MAKE A SUMMARY.
 ACTIVITY - NUMBER 2

• LET ASSUME THAT EVERY GROUP IS AN ENTREPRENUER…

THINK OF A BUSINESS THE GROUP WANT TO OPEN IN BRGY.
VIGO (CONSIDER THE NEEDS AND WANTS OF THE PLACE )
• MAKE A LIST OF THINGS YOU NEED TO PURCHASED TO START
THE BUSINESS ( ATLEAST FIVE ) THEN RECORD THE EFFECTS OF
THE TRANSACTION TO THE ACCOUNTING EQUATION.
• CHOOSE A REPRESENTATIVE AND SHARE THE ANSWER TO THE
CLASS
• HOW DO YOU RECORD THE TRANSACTIONS?
• WHAT DEVICE DID YOU USED?
• You should use a device to record the changes in the
accounting equation. The device used to record changes in
accounting equation is called the Account.
 FIVE MAJOR ACCOUNTS
FUNDAMENTALS OF ABM 1

MARK Q. TURBANADA
SHS TEACHER
VIGO NATIONAL HIGHSCHOOL
• LEARNING COMPETENCY:
• The learners shall be able
• Discuss the five major accounts (ABM_FABM11-IIId-e-19)
• Cite examples of each type of account (ABM_FABM11-IIId-e-
20)

• 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
 THE FIVE MAJOR ACCOUNT

• 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.
• 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.
 ASSETS
TANGIBLE 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
A patent is a form of intellectual property that gives its owner the
legal right to exclude others from making, using, selling, and
importing an invention for a limited period of years, in exchange for
publishing an enabling public disclosure of the invention.

A trademark (also written trade mark or trade-mark) is a type of

intellectual property consisting of a recognizable sign, design, or
expression which identifies products or services
TRADEMARK
PATENT
 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 VS. NON-CURRENT
• Current 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 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
• Owner’s Equity is the residual interest of the owner from the
business. It can be derived by deducting liabilities from
assets.
• 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
• Income is the Increase in resources resulting from
performance of service or selling of goods.

• Income increases equity.

• Service revenue for service entities, Sales for merchandising

and manufacturing companies
 EXPENSE

• Expense is the decrease in resources resulting from the

operations of business

• Expenses decreases Equity in the accounting equation

Examples of Expense
Accounts Salaries Expense, Interest Expense, and Utilities
Expense
 ABSTRACTION

• Using the five major account asset, liabilities, owners equity,

income and expense will help the business to record
efficiently every transaction

• Instead of using decrease and increase we used ACCOUNTS

and its normal balance to record the changes in the
accounting equation.
 PASS THE QUESTION
• The class will be divided into two.
• Each group will classify the following items whether it is an
asset, liabilities, equity, expense or income
• If the account Is asset tell if it is current or noncurrent asset
the same as liability and identify the normal balance of every
account

• Example : cash -> asset -> current -> debit

•ASSESSMENT
Write the correct answer in every statement (1 – 8 )
• _______ 1. It is the obligations of the company payable in money, goods or
services.
• _______ 2. These are non-current tangible assets.
• ________3. These assets are identifiable, non-monetary assets without
physical substance.
• ________ 4. It is the claim of the owner also known as the capital.
• _________5. It is the most liquid asset and is the medium of exchange for
business transactions.
• _________6. It is an expense for leased office space, equipment or assets
rented from others.
• ________7. Examples of this are cash, account receivable and prepaid
expenses.
• ________8. It is a written promise from the customer to pay his receivables
on a certain future date
9 – 10 tell if the account is an asset, liabilities,
equity, expense or income if it is current or non-
current and give its normal balance

• 9. Unearned income

• 10. Notes Receivable

 ANSWERS
• 1. Liabilities
• 2. Property, Plant and Equipment
• 3. Intangible Assets
• 4. Owner’s Equity
• 5. Cash
• 6. Rent Expense
• 7. Assets
• 8. Notes Receivable
• 9. Liabilities – current – credit / current liabilities – credit
• 10. Asset – current – debit / current asset - debit
 AGREEMENT
• Indicate whether it is an increase (+), decrease (-), or no effect on the
asset, liabilities and equity accounts. Assets Liabilities Equity
• 1. Investment of cash in the business _______ _______ _______
• 2. Purchase of computer equipment for cash _______ _______ _______
• 3. Billed a customer for services rendered _______ _______ _______
• 4. Paid salaries _______ _______ _______
• 5. Purchased office supplies on credit _______ _______ _______
THANK YOU !!!!!