Notesale: Turn your study into money

Document Preview

Extracts from the notes are below, to see the PDF you'll receive please use the links above

---

Fundamentals of ABM1 | Types of Major Accounts
Philippine Normal University (PNU)
Understanding of the five major accounts
Introduce the types of major accounts:
• Assets are the resources owned and controlled by the firm
...

• Equity or Owner’s Equity are the owner’s claims in the business
...

• 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
...

• 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
Difference between Current vs
...

Intangible Assets
...
Examples include Cash, Accounts
Receivable, Merchandise Inventory, Prepaid Expense, etc
...
Examples include Property, Plant and Equipment
(equipment, furniture, building, land), long term investments, etc
...

• Intangible Assets are non-physical assets such as patents and trademarks
Account titles used for Asset Accounts
...

• Accounts Receivable are amounts due from customers arising from credit sales or
credit services
...

• Inventories are assets held for resale
• Supplies are items purchased by an enterprise which are unused as of the reporting
date
...
They are assets at the time of
payment and become expenses through the passage of time
...

• Long term Investments are the investments made by the company for long-term
purposes
• Intangible Assets are assets without a physical substance
...

2
...

Differences of Current vs
...

Current Liabilities
...
Examples include Accounts Payable, Utilities Payable and
Unearned Income
...
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
...

Accrued Expenses are expenses that are incurred but not yet paid (examples: salaries
payable, taxes payable)l
Unearned Income is cash collected in advance; the liability is the services to be
performed or goods to be delivered in the future
...
Owner’s Equity is the residual interest of the owner from the business
...

Account Titles used for Equity Account
...

Drawing is an account debited for assets withdrawn by the owner for personal use
from the business
...
Income is the Increase in resources resulting from performance of service or selling
of goods
...

Examples of Income Accounts
...
Expense is the decrease in resources resulting from the operations of business
Where Expense increases and decreases in the accounting equation?
Expenses decreases Equity in the accounting equation
Examples of Expense Accounts
Salaries Expense, Interest Expense, Utilities Expense
Setting up a Chart of Accounts:
• A chart of accounts is a listing of the accounts used by companies in their financial
records
...

• The chart of accounts is the foundation of the financial statements
...
Create two columns
...
Prepare the assets first, then liabilities, then equity, then revenue and expenses
...
List all assets, liabilities, equity, revenue and expenses accounts in the first column
...
On the second column, choose an account code (discretion of the company)
...
On the third column, write the description for each account on when to use it

---