ACCOUNT TITLES 2.

Petty Cash Fund - represents money placed

and set aside for "petty" or small expenses.
The different financial statements are composed These are to be used for petty or small payments
of different accounting elements or major that cannot be conveniently made with checks.
accounts which are the broad classifications of 3. Notes Receivable - represents collectibles from
accounting values in which similar business customers or clients arising from sale of goods or
transactions and events are grouped. services which are supported by promissory
notes executed by the customers.
The different accounting elements are: 4. Accounts Receivable - represents collectibles
1. Assets from customers arising from credit sale of goods
2. Liabilities or services, and not supported by promissory
3. Capital or Equity notes.
4. Revenue 5. Allowance for Bad Debts - is an "asset offset"
5. Expenses or "contra-asset" account which provides for
possible losses from uncollected accounts
receivable. This account title is also called
ASSETS – are resources controlled by the Allowance for doubtful accounts.
enterprise as a result of past transactions or 6. Interest Receivable - represents the amount of
events, and from which future economic benefits interest earned on note receivable.
are expected to flow to the enterprise. Assets are 7. Advances to Officers and Employees -
properties or rights to the property owned by the represents the amounts collectible from officers or
business with future economic benefits. employees arising from cash advances.
8. Supplies or Supplies on Hand - represents the
For an item to be classified as asset, it must cost of stationery, paper, pencil, ink and other
satisfy the following requisites: related supplies purchased, and used, but still on
1. Resources of the Business hand at the end of the accounting period. In other
2. Controlled by the Enterprise words, the account refers to Unused Supplies.
3. Result of Past Transactions or Events 9. Prepaid Expenses - represents expenses that
4. Expected to Give Future Benefits are paid in advance but not yet incurred or remain
unexpired at the end of the period.
CLASSIFICATION OF ASSETS 10. Inventories – the unsold goods at the end of
the accounting period. This is applicable only to
CURRENT ASSETS merchandising business.

An asset is classified as current when it NON-CURRENT ASSETS - are properties or

satisfies any of the following criteria: resources, controlled by the business not
a. it is expected to be realized in, or is intended classified as current assets as a result of past
for sale or consumption in the entity's normal events and from which economic benefits are
operating cycle; expected to flow to the entity.
b. it is held primarily for the purpose of being
traded; CLASSIFICATION OF NON-CURRENT ASSETS
c. it is expected to be realized within twelve 1. Property, Plant and Equipment - represents
months after balance sheet date; or tangible assets which are held by an enterprise
d. it is cash or cash equivalent unless it is for use in production or supply of goods and
restricted from being exchanged or used to settle services, for rentals to others or for administrative
liability for at least twelve months after the purposes and are expected to be used during
balance sheet date. more than one period.

The account titles of typical current assets The following accounts are classified as
accounts will include the following: property, plant and equipment:
1. Cash - cash is the account title that describes • Land - the site where the administrative building,
money, either in paper or coins. The cash within the store or the plant is located.
the premises of the business bears the account • Building - physical structure on land. These are
title: used in business.
Cash on Hand - coins, currency, checks, postal • Machinery - machines used by the business in
money orders and express money orders. the production process.
Cash in Bank - cash deposited in savings and/or • Equipment - equipment used by the business for
checking accounts. The payments are made by it to be able to perform its main function or
checks. objective. It includes calculators, typewriters,
adding machines, computers, steel filing cabinet,
cars used by the business in its office, store and c. it is due to be settled within twelve months after
factory. balance sheet date; or
• Furniture and Fixture - this account title will d. the entity does not have an unconditional right
include the chairs, tables, counters, displays to defer settlement of the liability for at least
cases and be like. twelve months after the balance sheet date.
• Accumulated Depreciation - refers to the sum of
depreciation for several years. Depreciation CURRENT LIABILITIES ACCOUNTS
represents the expense portion of the asset 1. Accounts Payable - denotes obligations or
because of the wear and tear. The decrease in debts of the business arising from services
the value of the asset is technically called received, merchandise, supplies or property, plant
depreciation. and equipment acquired on account. It is the
. amounts due to third parties for purchases on
2. Long-term Investments - assets held by credit.
business entities for the purpose of accumulating 2. Notes Payable -includes debts arising from the
wealth through capital distribution such as purchase of an asset or acquisition of services
interest, royalties, dividends or rentals. on account evidenced by a promissory note.
Investments that are not readily marketable and 3. Bank Payable or Loan Payable - financial
intended to be held for more than one year. obligations to banks and other financial
institutions arising from funds borrowed by the
The following accounts are example of business from these institutions; payable within
long-term investments: twelve months or shorter.
1. Investment in stocks 4. Utilities Payable - an obligation to pay utility
2. Investment in bonds companies for services received from them.
3. Investment in subsidiaries 5. Salaries Payable - unpaid salaries of
4. Investment in associated using equity employees and workers for the services rendered
method as a date of the financial statements.
5. Sinking fund 6. Interest Payable - unpaid interest to the bank
6. Plant expansion fund or other financing institutions because of amounts
borrowed.
3. Intangible Assets - identifiable non-monetary 7. SSS Premium Payable/ PhilHealth Premium
assets without physical substances held for use in Payable/PAG-IBIG Premium Payable - the
the production or supply of goods or services, for amount withheld from the salaries of employees
rental to others, or for administrative purposes. and the employer's unremitted share contribution
to the Social Security System (SSS), Philippine
The typical examples of intangible assets are: Health Insurance Corporation (PHIC) and Home
1. Copyright Development Mutual Fund (PAG-IBIG).
2. Patent 8. Unearned Income - income collected or
3. Franchise received in advance, but it’s not yet considered as
4. Trademark earned.
5. Lease right 9. Withholding Tax Payable - amount of income
6. Formula tax withheld from the salaries of employees.
7. Formula
8. Computer software NON-CURRENT LIABILITIES ACCOUNTS
9. Goodwill 1. Mortgage Payable - the amount of long-term
liability that is supported or backed up by
collateral.
LIABILITIES - present obligations of the 2. Long-Term Bank Loan - is used in presenting a
enterprises arising from the past transactions or bank loan with a maturity period or the term is
events, the settlement of which is expected to beyond one year.
result in an outflow from the enterprise of 3. Non-current Portion of Long-term Debt - the
resources embodying economic benefits. portion of a debt or a loan that will not mature
within one year from the date of the statement of
CURRENT LIABILITIES financial position.
4. Finance Lease Liability - the liability portion of
A liability is classified as current liability when the asset acquired through finance lease.
it satisfies any of the following criteria:
a. it is expected to be settled in the entity's normal
operating cycle;
b. it is held primarily for the purpose of being
traded;
EQUITY OR CAPITAL - represents the residual 4. Store Supplies Expense - store related
interest of the owner in the assets of the business materials used by the business in its day-to-day
after all its liabilities. operations.
5. Insurance Expense - the expired portion of
EQUITY ACCOUNTS premiums paid on insurance coverage.
1. Capital - the initial investment of the owner at 6. Interest Expense - the amount of interest paid
the start of the operation or the beginning capital or incurred during the accounting period.
of succeeding years. 7. Taxes and Licenses - the, payments for or
2.Withdrawal or Drawing - represents temporary incurrence of taxes licenses, government fees
withdrawal of capital by the owner from the and other similar fees.
business for his personal use. This account is 8. Utilities Expense - the amount incurred or paid
credited (increased) for business' net profit and for the use of light, water, gas for the business.
debited (decreased) for the net loss. 9. Bad Debts Expense or Doubtful Accounts
Expense - the amount of receivable estimated to
be doubtful of collection.
INCOME - is increases in economic benefits 10. Depreciation Expense - the expired portion of
during the accounting period in the form of inflows the cost of building, machinery, equipment, store
or enhancements of assets or decreases of equipment, and other types of property, plant and
liabilities that result in increases in equity, other equipment, except land.
than those relating to contributions from equity 11. SSS Contribution/PhilHealth Contribution/
participants. PAG-IBIG Contribution - the share of the
employer in SSS, PhilHealth and PAG-IBIG for
INCOME ACCOUNTS the welfare and benefit of the employees as
1. Service or Sales Income - represents the required by law.
income realized for all types of income derived 12. Miscellaneous Expense - used for the amount
from service rendered and from sale of company. paid or incurred where separate account is not
2. Professional Income - represents the amount necessary because the expenses are immaterial,
of income earned by professionals from the uncommon, and infrequent.
practice of their professions. 13. Cost of Sales or Cost of Services - the direct
3. Rental Income - the income earned from cost of the products sold or the services
buildings, space and other properties rented or rendered.
leased out by the business.
4. Interest Income - amount of income realized
arising from lending operations.
5. Miscellaneous Income - income earned that
could not be classified properly on the above
income classifications. It should not represent the
primary source of income of the business.

EXPENSES - decrease in economic benefits

during the accounting period in the form of
outflows or depletions of assets or incurrence of
liabilities that result in decreases in equity, other
than those relating to distributions to equity
participants.

EXPENSE ACCOUNTS (monthly cost)

1. Salaries and Wages - payments of services
rendered by workers and employees.
2. Rent Expense - amount paid for the use of
office space, store space, or factory area.
3. Office Supplies Expense - the different
materials used by the business in its office or
offices,but not limited to coupon bonds, carbon
paper, worksheets, ledgers, ballpens, erasers, or
envelopes. This account title is an expired or
used portion of the office supplies purchased for
office consumption.