FABM 1 Major Accounts

QUESTIONS:
1. How do you find the activity?

2. What are your techniques in classifying
these accounts?
3. What are the two classifications of assets?
Liabilities?
THE FIVE (5) MAJOR FABM 1
ACCOUNTS
ACCOUNT
- An account is a detailed record of all the money
that a business or a person receives and spends.
- Accountants, finance experts and bookkeepers can
use accounts to record important financial
information, like reporting daily transactions to
verify the exact amount of money a company has at
any moment.
1. ASSETS
- are resources owned by the business as the
result of company’s transactions. This major
account has two classifications:
A. Current Assets
B. Non-Current Assets
CURRENT ASSETS
- are assets that can be collected, sold, and even used up to
one year after year-end date.
 Cash – includes cash on hand (bills, coins, checks, money
orders or Bank drafts, cash deposited in bank and cash fund
which are unrestricted in use.
 Accounts Receivable – this refers to the amount of money
owed by the customers to the business. This arises from the
business rendering services or selling goods to customers.
 Notes Receivable – this represents the amount of money owed
by the customer or debtor to the business evidenced by a
promissory note.
 Inventories – this represents assets held for sale in
the ordinary course of business. In manufacturing,
these are the materials or supplies to be used in the
production process.
 Prepaid Expenses – advance payment made by the
business to cover for future payments.
 Supplies - are items purchased by an enterprise that
is unused as of the reporting date.
 Short-term Investments - are the investments
made by the company that is intended to be sold
immediately.
NON - CURRENT ASSETS
- assets that cannot be collected, sold, and even used up to one year
after year-end date.
 Equipment – manual or automated machines used in the ordinary
course of business.
 Furniture and Fixtures – assets such as tables, chairs, filing
cabinets and display racks.
 Building – physical structure owned and used by the business to
conduct its business operations.
 Land – physical site owned by the business where the building is
situated.
 Intangible Assets - are non-physical assets in the form of
trademarks and patterns.
2. LIABILITIES
- obligations of the company arising from past
events which are to be settled in the future. This
major account has two classifications:
A. Current Liabilities
B. Non – Current Liabilities
CURRENT LIABILITIES
- liabilities are those that reach its due date for payment
(paid, recognized as revenue) within one year after year-end
date.
 Accounts Payable - are amounts due or debts to the suppliers
for goods purchased or for services received on account.
 Notes Payable - are amounts due to third parties supported
by a written note or promise.
 Accrued Liabilities - are treated as liabilities since these are
the expenses that are incurred but not yet paid (e.g. salaries
payable, taxes payable, SSS Premium payable, and utility
payable)
NON - CURRENT LIABILITIES
- are that do not reach its due date for payment,
(paid, recognized as revenue) within one year
after year-end date.
 Loan Payable – amount of money borrowed by
the business from third party creditor.
 Mortgage Payable – amount of money borrowed
by the business from a bank or a lending institution
which is secured by collateral.
3. CAPITAL/ OWNER’S EQUITY
 Owner’s Equity is described as owner’s capital (sole
proprietorship), partner’s capital (partnership) and
shareholder’s equity (corporation). It is simply the capital
invested by the owners. The account title to be used is
dependent on the form of business.
 Owner’s Drawing is used when withdrawal is made by
the owner to determine total withdrawals for each
accounting period.
4. INCOME
- money that the company earns from its regular sales of
products or services. This is earned by the company through
sales of products or services.
 Service Revenue – earnings made by any business that is into
rendering services.
 Sales – earnings made by any business that into selling goods
or merchandise.
 Interest Income – interest credited by the bank to the account
of business arising from deposits.
 Professional Fees – this represents earnings made by
professionals or experts from rendering services to their
clients. Professionals include lawyers, doctors, and
certified public accountants, among others.
 Rent Income – the income earned from allowing others
to use the property or facility of the business.
 Gain on Sale of Other Assets - the income derived from
the sales of assets used in the business operation. There is
a gain on sale if the proceeds exceed the book value or
cost of the disposed asset. Examples are gain on sale of
equipment, gain on sale of furniture and fixtures.
5. EXPENSE
- money that the company spends to produce the goods or
services it sells.
 Utilities Expense – costs associated with the usage of electricity,
water, and communication for a particular accounting period.
 Salaries Expense – costs incurred associated with the services
rendered normally by permanent and full-time employees who are
paid on a regular basis, usually monthly.
 Wages Expense – costs incurred associated with the services
rendered normally by contractual and temporary employees and
workers who are paid on an hour rate or based on output.
 Taxes And Licenses Expense – costs incurred to register the
business, to acquire the right to operate, and to settle taxes.
 Cost of Sales – cost of merchandise or goods that were sold
during a particular accounting period.
 Supplies Expense – amount of supplies that was used
during a particular accounting period.
 Doubtful Accounts Expense – this refers to the amount of
accounts receivable that is estimated as uncollectible and is
recognized as an expense in the current accounting period.
 Depreciation Expense – this refers to the allocated portion
of the cost of property plant and equipment charged to
expense in the current accounting period.
 Amortization Expense – is a financial concept that
involves spreading the cost of the value of a loan.
CHART OF
ACCOUNTS
CHART OF ACCOUNTS
- A chart of account is referring to a listing of all account
titles used in the business to serve as guide for
uniformity in the use of all accounts in recording
business transactions. The five major accounts and the
account titles under each type are arrange in the order of
assets, liabilities, owner’s equity, revenues/income and
expense.
- Assets are arranged as current assets first followed by
the non-current assets. Liabilities are also positioned in
current liabilities followed by non-current liabilities.
Every account title has its own numerical code
or account number. The assigned code are: 1
for all assets; 2 for all liabilities, 3 for owner’s
equity; 4 for all revenues/income; and 5 for
expenses. The purpose of assigning account
number is for account reference to be used in
the posting process.
PROCEDURES:
1. Analyze the given accounts.
2. Classify the accounts accordingly: assets,
liabilities, equity, revenue, and expense.
3. Arrange each classified account.
4. Assign a reference for each account.
ACTIVITY 1
ACTIVITY 2
ACTIVITY 3
Directions: Prepare a chart of accounts for ABM Enterprises.

FABM 1 Major Accounts

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QUESTIONS:

1. How do you find the activity?

Directions: Prepare a chart of accounts for ABM Enterprises.

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