FUNDAMENTALS OF ACCOUNTANCY,BUSINESS & MANAGEMENT 1 – GRADE11

Name: ______________________________________ Date: ____________________

Grade: ______________________________________ Section: ___________________

Quarter: 3 Week: 4 SSLM No. 4 MELC(s): Discuss the five major accounts and prepare a
Chart of Accounts.
ABM_FABM11-IIId-e-19; ABM_FABM11-IIId-e-21

Objectives: 1. Explain the five major accounts in accounting,

2. Identify account titles in each major account,
3. Classify account titles according to the five major types; and
4. Prepare a simple Chart of Accounts of simple business.

Title of Textbook/LM to Study: Fundamentals of Accountancy, Business and

Management l
Chapter 6: Pages 45-50 Topic: Five Major Accounts and Chart of Accounts

Let Us Discover

In this lesson, you will learn about the five major accounts classification, the different
account titles and the chart of accounts used in recording business transactions. Have fun
learning as you try doing activity 1.
Activity 1: Match and Catch!
Instruction: Catch the fish in the tank that matches its description and write your answers on
the line provided.

__________1. These are resources owned and controlled by the business.

__________2. These are financial obligations of the business that arise from past
transactions or events.
__________3. This represents assets that can be claimed by the owners of the business.
__________4. These are the earnings of the business arising from its operations.
__________5. These are the costs spent by the business in its operation.

1 GSC-CID-LRMS-ESSLM, v.r. 03.00, Effective June 14, 2021

 Hi! How did you find the first activity? Were you able to catch all the fish that matches its
descriptions correctly? These words that you see in the fish tank are the five major accounts
that consist of all the account titles used in accounting. Below is the summary of the major
accounts, their categories and account titles. Have fun learning!

BALANCE SHEET ACCOUNTS

(Permanent Accounts)
ASSETS Assets are classified only into two, namely: current assets and noncurrent
assets.

Current Assets - refer to all assets that are expected to be realized, sold or consumed
within the enterprise's normal operating cycle. Operating cycle is the interval of time from the
date of acquisition of merchandise inventory, sell the inventory to customers and the ultimate
collection of cash from the sale.
Examples :
Cash - the account title to describe money, either in paper or in coins and money substitutes
like check, postal money orders, bank drafts and treasury warrants. When cash is
within the premise of the business, the account title is "Cash on Hand" and "Cash in
Bank" if deposited in the bank.
Petty Cash Fund - the account title for money placed and set aside for petty or small
expenses.
Cash Equivalents - is defined as short-term, highly liquid instruments that are readily
convertible into cash.
Notes Receivable (short-term) - this is a promissory note that is received by the business
from the customer arising from rendering of service, and sale of
merchandise.
Accounts Receivable - account title for amounts collectible arising from services rendered
to a customer or client on credit. This constitutes an oral or verbal
promise to pay by a customer or client.
Estimated Uncollectible Accounts - It provides for possible losses from uncollected
accounts. Although this is not actually an asset, it is classified as
such because it is shown as a deduction from the Accounts
Receivable which is a Current Asset account.
Inventories - these are assets which are held for sale in the ordinary course of business, in
the process of production for such sale or in the form of materials or supplies
to be consumed in the production process or in the rendering of services.
Prepaid Expenses - account title for expenses that are paid in advance but are not yet
incurred or have not yet expired such as Prepaid Rental, Prepaid
Insurance, Prepaid Interest, and Prepaid Advertising.
Unused Supplies - an account title for cost of stationery and other supplies purchased for
use but are left on hand and still unused. The account title should be
specified as to "Unused Office Supplies" if intended for the office,
"Unused Shop Supplies" if intended for the shop.
Non-Current Assets – “all other assets are not classified as current should be noncurrent
assets"
Property and Equipment - these are "tangible assets which are held by an enterprise for
use in production or supply of goods and services, for rental to others, or
for administrative purposes, and are expected to be used for more than
one year period".

2 GSC-CID-LRMS-ESSLM, v.r. 03.00, Effective June 14, 2021

Land - an account title for the site where the building used as office, store or shop, are
constructed.
Building - account title for a finished construction owned by the business where operations
and transactions took place.
Machinery and Equipment - includes welding machine, compressors, equipment and tools,
which are termed as "Shop equipment". Calculators, adding machines, computers,
cash registers, steel filling cabinets are termed as "office equipment" while trucks,
jeeps, vans and other motor vehicles are called "transportation equipment" or
"delivery equipment" when used in delivering goods.
Furniture & Fixtures - include chairs, tables, counters, display and cases. If these are used
in the office, the account title is "Office Furniture and Fixtures", if these are used in
shop, the account title is "Shop Furniture & Fixtures" and if used in store, the
account title is "Store Furniture & Fixtures”.
Accumulated Depreciation - this is an "asset offset" or "contra-asset" account. This is
called a "Valuation Account which is shown as a deduction from property and
equipment. The assets that are classified as Property and Equipment are called
Depreciable Assets and are subject to depreciation except land. Land is not
depreciated because it is expected to be useful to the business enterprise for an
indefinite period of time.
Intangible Assets - these are identifiable non-monetary assets without physical substance.
Examples are patent, copyrights, franchise, goodwill, etc.

LIABILITIES Liabilities are classified into two, namely: current liabilities and noncurrent
liabilities.
Current Liabilities - are financial obligations of the enterprise which are (a) expected to be
settled in the normal course of the operating cycle; (b) due to be settled within one year from
the balance sheet date.
Examples:
Accounts Payable-an account title for a financial obligation of an enterprise that constitutes
an oral or verbal promise to pay.
Notes Payable (short-term) - same as Accounts Payable in nature but only the obligation is
evidenced by a promissory note. The enterprise is the one who issued the note.
Accrued Expenses - these are expenses incurred by the enterprise but are not yet paid.
Examples are rent, salaries, interest, taxes payable that are not yet paid at the
end of the accounting period.
Unearned Income - this is an account title for an income collected or received in advance
and is not yet considered as "earned".
Non-current Liabilities - are financial long-term obligations of the enterprise which are due
and payable for more than one year. This usually occurs in a corporate form of business
organization.
Notes Payable (long - term) - same nature with that of Notes Payable (shortterm) but only,
this requires payment for more than a year.
Mortgage Payable – a financial obligation of the enterprise which requires a fixed or
tangible property to be pledged as a collateral to ensure payment. This is usually
found in a corporate business organization.

OWNER'S EQUITY

3 GSC-CID-LRMS-ESSLM, v.r. 03.00, Effective June 14, 2021

Capital - This is the center of the owner's concern because this may increase or decrease at
any time as a result of business operation. In the normal course of operation, Owner's
Equity will be increased by "income" and decrease by "expenses". The owner's capital
investment is indicated by the use of the owner's name with a word "capital" written
after the name which is separated by a "comma". Example: "Marfen Tan, Capital"
Withdrawal - The owner's withdrawal is likewise indicated by the use of the owner's name
with the word "Drawing" or "Personal" written after the name which is separated by a
"comma". Example : “Marfen Tan, Drawing".
Income & Expense Summary - this is a temporary account created at the end of the
accounting period where Income and Expenses are temporarily closed to this account

INCOME STATEMENT ACCOUNTS

(Temporary Accounts)
INCOME OR REVENUE

Sales - account title for merchandise sold either in cash or account.

Sales Returns & Allowances - this is a reduction from sales account for goods that were
sold but were returned by the buyer or bad order or not conforming with the order.
Sales Discounts - refers to discounts given to buyers for early payment of merchandise
purchased on account or payment within the discount terms.
Service Income - In general, this is the account title used for all types of income derived
from rendering of services. Sometimes, the account title used is "Service Revenue".
Other specific income account titles used are:
Professional Income - the account title generally used by professionals for income
earned from the practice of their profession or maybe specified as; "Accounting and
Auditing Fees Income" for Accountants, "Legal Fees Income" for Lawyers, “Dental
Fees Income" for Dentists, "Medical Fees Income" for Doctors, etc.
Rental Income - for income earned on buildings, space or other properties owned and
rented out by the business as the main line of its activity.
Shop Income or Income from Repairs - income derived from repair of cars and vehicles.
Interest Income - for income received by the business arising from an amount of money
borrowed by a customer and is usually covered by a promissory note.
Miscellaneous Income - for income earned by the business which is not the main line of its
activity and could not be clearly classified.

COSTS AND EXPENSES

Cost of Sales or Cost of Goods Sold - refers to cost to produce and sell the merchandise.
Freight-In - refers to transportation cost incurred in buying goods.
Purchases - the account title for "merchandise" purchased under the periodic inventory
system. Under perpetual inventory system, the account title is "merchandise
inventory".
Purchase Returns and Allowances - refers to cost of merchandise that were purchased
but returned to the suppliers for bad order or does not conform to the specification.
Purchase Discounts - refers to discount availed for early payment of merchandise
purchased.
Freight-Out - refers to transportation cost of merchandise sold.
Supplies Expense - cost of supplies that were used and consumed that bears specific titles
as office supplies expense, store supplies expense and shop supplies expense.

4 GSC-CID-LRMS-ESSLM, v.r. 03.00, Effective June 14, 2021

Rent Expense - for the amount paid or incurred for the use of property, usually premises.
Repairs and Maintenance - for expenses incurred in repairing or servicing the buildings,
machineries, vehicles and equipment which are owned by the business.
Salaries Expense - for compensation given to employees of a business. It may be specified
as "Office Salaries" or "Salesmen's Salaries”.
Uncollectible Accounts - for the anticipated loss that the business may incur arising from
uncollectible accounts.
Depreciation Expense - for the allocated portion of the cost of property and equipment or
fixed assets.
Taxes and Licenses - for the amount paid for business permits, licenses and other
government dues except the income Tax paid which is not allowable by law as a
deduction.
Insurance Expense - account title for the expired portion of the insurance premium paid.
Utilities Expense – the account title for telephone, light and water bills. Also included is
gasoline, lubricants and oil.
Miscellaneous Expense - any amount paid as expense which is not significant enough to
warrant a particular classification.

CHART OF ACCOUNTS

A chart of accounts is a listing of all the accounts and is usually tailored to the operations of
the business. It functions as a guide to the accountant or the bookkeeper in ensuring
uniformity of and consistency in the use of all accounts in recording business transactions.
Most of the time, it is prepared in a manner such that the five main or major accounts are
grouped and organized. As such, at the earliest possible time, the business should anticipate
all specific accounts it may use in its lifetime that will be included in the list. Moreover,
business also just assign a range of numbers to major accounts to accommodate additional
specific accounts that may be created or might arise in the future. The Illustrative example
below shows all the account titles that the business will use in recording transactions in its
books.

R and J MERCHANDISING
CHART OF ACCOUNTS

5 GSC-CID-LRMS-ESSLM, v.r. 03.00, Effective June 14, 2021

Com Let Us Try

Activity 2: Complete Me
Instruction: Complete the lines below to describe the five major accounts based on your own
understanding.

1. Assets are
_______________________________________________a2_______________
_______________________________________________________________________
2. Liabilities are ____________________________________________________________
_______________________________________________________________________
3. Owner’s Equity is _________________________________________________________
_______________________________________________________________________
4. Revenues are ___________________________________________________________
_______________________________________________________________________
5. Expenses are ___________________________________________________________
_______________________________________________________________________

Activity 3: Who Am I?
Instruction: Identify the account titles described in each statement. Write your answers on
the line provided.

_________1.These are assets which are held for sale in the ordinary course of business.
_________2. An account title used for a finished construction owned by the business where
operations and transactions took place.
_________3. An account title used for cost of stationery and other supplies purchased for
use
but are left on hand and still unused.
_________4. It refers to the site where the building used as office, store or shop is built.
_________5. This refers to the account title for merchandise sold either in cash or account.
_________6. This an account title for amounts collectible arising from services rendered to a
customer on credit and made through a verbal promise to pay.
_________7. This account title includes chairs, tables, counters and display cases.
_________8. These are “tangible assets” which are held by an enterprise for use in
production or supply of goods and services.
_________9. Account title for expenses that are paid in advance but are not yet utilized.
_________10. This is an account title for an income collected or received in advance but not
yet considered as "earned.

Let Us Do

Congratulations! You are now familiar with the different account titles used in
recording business transactions. Now, it is time for you to classify these account titles
according to the 5 major accounts without looking back to the previous pages of this module.

Activity 4: Classify Me!

6 GSC-CID-LRMS-ESSLM, v.r. 03.00, Effective June 14, 2021

Instruction: Classify the account titles according to its major type of account. Write it inside
the correct fish tanks on the next page.

accounts receivable land freight in accrued expenses notes payable

prepaid expenses purchases cash sales salaries expenses building
Rizal, Capital freight out purchase returns accounts payable rent income
Rizal, Drawing accumulated depreciation utilities expenses inventories

Let Us Apply

Great work! Now, it’s time to apply what you have learned in this lesson. Think of a business
that you wish to put up in the future. Give short details of the business you have in mind and
create a chart of accounts that you will use in recording business transactions.
Activity 5: My Business, My Chart of Accounts!
Business Name : ______________________________
Product/Service Offered : ________________________

7 GSC-CID-LRMS-ESSLM, v.r. 03.00, Effective June 14, 2021

 Rubrics

Rubrics for rating Activity 5

Criteria Outstanding (5 ) Very Good (4) Good ( 3 ) Needs Improvement
(2)
Content All the account titles used in Most of the account titles used Some the account titles All account titles used in
the chart of accounts is in the chart of accounts is used in the chart of the chart of accounts is
appropriate for the business appropriate for the business accounts is appropriate not appropriate for the
chosen. chosen. for the business chosen. business chosen.
Organization All the account numbers used Most of the account numbers Some of the account All the account numbers
in the chart reflects clarity and used in the chart reflects clarity numbers used in the chart used in the chart did not
coherence. and coherence. reflects clarity and reflect clarity and
coherence. coherence.

Mechanics There are no errors in spelling There are some errors in There are many errors in There are many errors in
and very neat penmanship. spelling and very neat spelling and penmanship spelling and penmanship
penmanship. is acceptable. is not acceptable.

References

Tugas,F.,Salendrez,H.,Rabo,J.(2016).Fundamentals of Accountancy, Business and

Management l , Quezon City : Vibal Group,Inc.
Lopez Jr., R. (2016). Fundamentals of Accounting (Simplified Procedural Approach).
Pestaño,J.B. ( 2020). Fundamentals of Accountancy, Business and Management 1 Self-
Learning Module 3: The Five Major Accounts and the Chart of Accounts, First Edition 2020

.
SSLM Development Team
Writer: Marjonel B. Vargas
Content Editor:
LR Evaluator: Sally A. Palomo
Illustrator: Marjonel B. Vargas
Creative Arts Designer: Reggie D. Galindez
Education Program Supervisor-SHS Coordinator: Luzviminda R. Loreno, Ed.D.
Education Program Supervisor – Learning Resources: Sally A. Palomo
Curriculum Implementation Division Chief: Juliet F. Lastimosa
Asst. Schools Division Superintendent: Carlos G. Susarno, Ph. D.
Schools Division Superintendent: Romelito G. Flores, CESO V

8 GSC-CID-LRMS-ESSLM, v.r. 03.00, Effective June 14, 2021

 Answer Key

9 GSC-CID-LRMS-ESSLM, v.r. 03.00, Effective June 14, 2021

10 GSC-CID-LRMS-ESSLM, v.r. 03.00, Effective June 14,
2021
GSC-CID-LRMS-ESSLM, v.r. 03.00, Effective June 9, 2021