At the end of this session

learners should be able to

 Discover what is asset
 Classify Current and Non-current asset.
 Distinguish accounting elements under
asset.
 Illustrate various account title (Asset) by
citing example.
T - accounts
Left Side Right side
is the is the credit
debit
side
side
 MAJOR ACCOUNTS:
DEFINITION,
CLASSIFICATION AND
EXAMPLES
Asset Accounts

Leftside of the balance

sheet equation

Normal asset balance is a

debit
Assets are Debit Balance
Accounts
 Assetsgo up
with a debit Assets
Debit Credit
 Assetsgo
down with a
credit
What are Assets?
 Resources controlled by the
business as a result of past
transaction and events.
 Anything of value that is
owned by the business.
 Provision of future company
benefits.
Examples of Assets
 Cash
 Receivables
 Supplies
 Machinery
 Land
 And more..
Current Assets

Refer to all assets that

are expected to be
realized, sold or
consumed within the
enterpriser’s normal
operating cycles.
Cash
 The account title to describe money, either
in paper or in coins and money substitutes
like checks
Receivables

1.Receivables – Accounts Receivable (receivable

from customers), Notes Receivable (receivables
supported by promissory notes), Rent Receivable,
Interest Receivable, Due from Employees (or
Advances to Employees), and other claims
 Inventories

1. Assets held for sale in the ordinary

course of business.
2. In the process of production for
such sales.
3. In the form of materials or supplies
to be consumed in the production
process or in rendering the services.
Unused Supplies
 An account title for cost of stationary
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 and “ Unused
shop Supplies” if intended for shop.
Etc.
 Prepaid expenses
Expenses paid in advance but are not
yet incurred or have not yet expired,
such as, Prepaid Rent, Prepaid
Insurance, Prepaid Advertising, and
Office Supplies
Non- current Assets
Assets that do not meet the
criteria to be classified as
current. Hence, they are long-
term in nature – useful for a
period longer that 12 months or
the company's normal operating
cycle
Long-term investments

Investments for long-term

purposes such as investment in
stocks, bonds, and properties; and
funds set up for long-term
purposes
Land

Land area owned for business

operations (not for sale)
 Building

Account title for finished construction

owned by the business where operation and
transaction took place. such as office building,
factory, warehouse, or store
1.Equipment – Office Equipment,
Computer Equipment, Delivery
Equipment, and others
Furniture's and Fixtures

 Includes chairs, tables, counters,

display cases and the like.
Accumulated Depreciation

This is a valuation account which

represents the decrease in value of a
fixed asset due to continued use, wear &
tear, passage of time, and obsolescence.
It is a contra-asset account and is
presented as a deduction to the related
fixed asset.
Intangibles

Long-term assets with no physical

substance, such as goodwill, patent,
copyright, trademark, etc.
The assets that are classified as
property & equipment of Fixed asset
are called “Depreciable Assets” and
are subject to “Depreciation” except
land.
Land is not subject for depreciation
because it is expected to be useful
to the business enterprise for an
indefinite period of time.
Thank you…
At the end of this session
learners should be able to:
 Discover what is liabilities
 Classify Current and Non-current liabilities.
 Distinguish accounting elements under liabilities.
 Illustrate various account title (liabilities) by citing
example.
Liabilities

Right side of the balance

sheet equation

Normal liability balance

is a credit
Liabilities are Credit
Balance Accounts
 Liabilities go
up with a Liabilities
credit Debit Credit

 Liabilities
go
down with a
debit
What are
Liabilities?
 Debts or payables owed by
the business
 Presents obligations of an
entity arising from past
transaction or events.
 A reduction of future assets
of the business
Examples of
Liabilities
Accounts Payable
Notes Payable
Bank Loan Payable
Mortgage Payable
A. Current liabilities
 A liability is considered current if it
is due within 12 months after the
end of the balance sheet date. In
other words, they are expected to
be paid in the next year.
 If the company's normal operating
cycle is longer than 12 months, a
liability is considered current if it is
due within the operating cycle.
Current liabilities include:
 Accounts Payable- this refers to
open accounts which represent the
amount of money owned by the
business to creditors and suppliers.
 Notes Payable ( short-term)- this
represents the amount of money owed
by the business to the suppliers or
creditor evidenced by a promissory
notes.
 Accrued Expenses- these are
expenses incurred by the enterprise
but are not yet paid. This is
normally occurs when the
accounting period ended such as
rent, salaries, interest, taxes
payable.
 SSSpremium payable- refers to
the amount due and payable by
the enterprise to the social
security system.
 Pag-ibig Premium Payable - refers to
the amount due and payable by the
enterprise to the Home
Development mutual Fund.
 PhilhealthPremium Payable-
refers to the amount due and
payable by the enterprise to
the Philippine Health
Insurance Corporation.
 Withholding Tax Payable - refers to
the amount due and payable by the
enterprise to the Bureau of internal
Revenue for the tax withheld from
employees.
 Pre-collected or unearned income –
this is an account title for an
income collected or received in
advance but not yet considered as
“earned”.
B. Non-current liabilities –

 Liabilities are considered non-current if

they are not currently payable, i.e. they
are not due within the next 12 months
after the end of the accounting period or
the company's normal operating cycle,
whichever is shorter.
Non-current liabilities includes:

 Notes Payable – same nature

with that of Notes
Payable(short Term) but only
requires payment for more than
a year.
 Mortgage payable – this
represents the amount of money
borrowed by the business from a
bank or a lending institution
which is secured by a collateral.
 End of liabilities session.
Owner's Equity
 It represents ownership and its terminology
changes depending on the form of business
organization.
 If it is sole proprietorship form of business
organization, owners capital account is used
and this is classified under owner’s equity or
equity.
 Accordingly, partnership capital, and
shareholder’s equity are used when the form of
business organization is partnership and
corporation.
Owner's Equity
 Capital: records the owner’s investment in the business.
 capital is equal to total assets minus total liabilities.
Capital is affected by the following:
 Initial and additional contributions of owner/s
(investments),
 Withdrawals made by owner/s (dividends for
corporations),
 Income, and
 Expenses.
Owner contributions and income increase capital.
Withdrawals and expenses decrease it.
Income

 Income refers to an increase in

economic benefit during the
accounting period in the form of an
increase in asset or a decrease in
liability that results in increase in
equity, other than contribution from
owners.

 Income
encompasses revenues and gains.
Revenues

 Revenues refer to the amounts earned

from the company’s ordinary course of
business such as professional
fees or service revenue for service
companies and sales for merchandising
and manufacturing concerns.
Gains

 Gainscome from other activities, such

as gain on sale of equipment, gain on
sale of short-term investments, and
other gains.
Capital is a Credit
Account M. Reimer,
Capital
 Capital
goes Debit
up with a Credit
credit

 Capital
goes
down with a
debit
Withdrawals is a Contra
Debit Account
M. Reimer,
 Withdrawals Withdrawals
goes up with Debit Credit
a debit

 Withdrawals
goes down
with a credit
Revenues are Credit
Balance Accounts Revenue
 Revenues go Debit Credit
up with a
credit

 Revenuesgo
down with a
debit
Examples of Revenue
Accounts
Sales
Service Income
Professional Income
Rent Revenue
Interest Income
Sales
 Ingeneral, this represents
revenue derived from the
sales of merchandize.
Service Revenue

 Thisrefers to the earnings made by

any business that is into rendering
services. The term “revenue” is used
not “income” to distinguish that such
an earning arises from the main line
of operations of the business.
Professional Income

 The account title generally used by

professionals for income earned from the
practice of their profession.
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.
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
notes. This is typically in a lending
institution.
Expenses
Expenses

 Costsbeing incurred by the

business in generating
revenue. It is the cost of
doing the main line of
operation.
Expenses are Debit
Balance Accounts
 Expenses go
up with a Expenses
debit Debits
Credits
 Expenses
go
down with a
credit
Expenses includes:
 Interest Expense
 Rent expense
 Office Supplies Expense
 Salaries Expense
 Bad Debts
 Depreciation Expense
 Taxes and Licenses
 Insurance Expense
 Utilities Expense
 SSS, Pagibig, Phil health Contribution
Review
Left side Right side
is the is the credit
debit side
side
Accounts that go up with a
debit and down with a credit
 Assets

 Drawing/Withdrawals

 Expenses
Accounts that go up with a
credit and down with a debit

 Liabilities

 Equity/Capital

 Revenues