Senior High School
Fundamentals of
Accountancy, Business and
Management 1
Quarter 3 - Module 4:
Types of Major Accounts
Department of Education  Republic of the Philippines
Fundamentals of Accountancy, Business and Management 1 - Senior High School
Alternative Delivery Mode
Quarter 3 - Module 4: Types of Major Accounts
First Edition, 2020
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Published by the Department of Education - Region X - Northern Mindanao
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Senior High School
Fundamentals of
Accountancy, Business
and Management 1
Quarter 3 - Module 4:
Types of Major Accounts
This instructional material was collaboratively developed and reviewed by
educators from public and private schools, colleges, and universities. We
encourage teachers and other education stakeholders to email their feedback,
comments, and recommendations to the Department of Education at
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We value your feedback and recommendations.
Department of Education  Republic of the Philippines
Table of Contents
Introduction
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1
Pre-test
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3
Lesson
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4
Post-test
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14
Answer Key
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16
Reference
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17
What I Need To Know
For the Learners
This is an introductory course in accounting, business and management
data analysis that will develop your appreciation of accounting as language
of business and an understanding of basic accounting concepts and
principles that will help you analyze business transactions.
Good Job! Thank you for completing Module 3. You are now ready for
the next lesson which is the Types of Major Accounts. You need to learn
more effectively. Good luck!
Module Content
This module in Fundamentals of Accountancy, Business and Management 1
for the 21st century learners is designed to make learning more engaging and
meaningful to ABM Senior High School learners in the flexible and blended learning
environments.
After learning about the accounting equation, it is important to understand the
five major accounts in accounting. You will get to apprehend more about Assets,
Liabilities, Owner’s Equity/Capital, Income/Revenue, and Expense. At the end of this
module, not only will you obtain knowledge on the types of accounts but you will also
get to make your own Chart of Accounts.
Learning is fun! So enjoy your journey as you unfold the most interesting and
worthwhile activities in accounting.
These are the competencies included in this module:

Discuss the Five Major Accounts (ABM_FABM11- IIId-e-19)

Prepare a Chart of Accounts (ABM_FABM11- IIId-e-21)
1
General Instructions
To do well in this module, you need to remember the following:
1. Read texts carefully.
2. Answer questions with all honesty.
3. Review your answers.
4. Follow instructions given.
5. Do the tasks given and do not delay in submitting requirements.
6. Feel free to communicate with your teacher.
7. Remember to review every time you are done answering the activities.
8. Have fun as you learn.
2
What I Know
Let us check your prior knowledge about this module’s coverage.
Fill in the blanks with your answer.
1. The _________________ includes everything that your company owns. It is
divided into tangible and intangible.
2. Any product or service that your company purchases to generate income or
manufacture goods is considered an _________________. This may include
advertising costs, utilities, rent, salaries and others.
3. _________________, one of the primary types of accounts in accounting,
includes the money your company earns from selling goods and services. This term
is also used to denote dividends and interest resulting from marketable securities.
4. _________________ include the debts or obligations payable to creditors and
other outsiders to which your company owes money. These can be loans, unpaid
utility bills, bank overdrafts, car loans, mortgages and more.
5. The ________________ defines how much your business is currently worth. It's
the residual interest in your company's assets after deducting liabilities. Common
stock, dividends and retained earnings are all examples of this.
3
The Five Major Accounts &
The Chart of Accounts
Types of mMajor Accounts
What’s In
Activity 1: Review
Complete the statement.
In the previous module, I learned that _____________________________________
__________________________________________________
__________________________________________________
__________________________________________________
__________________________________________________
__________________________________________________
What’s New
Activity 2: Scrambled Words
Directions: Correct the scrambled words below.
1. Tangible and intangible items that the Company owns that have value.
 _______________ (EASSST)
2. Money that the Company owes to others.
 _______________ (ABLITILIESI)
3. Money the company earns from its sales of products or services, and interest and
dividends earned from marketable securities.
 _______________ (CINEMO)
4. Money the company spends to produce the goods or services that it it sells.
 _______________ (PEENSSEX)
5. That portion of the total assets that the owners or stock holders of the company
fully own; have paid for outright.
 _______________(YQUITE)
4
What Is It
There are five main types of accounts in accounting, namely: assets, liabilities,
capital / owner’s equity, income, and expense. Continue to read below to explore
on how each account can be further broken down into several categories.
FIVE TYPES OF MAJOR ACCOUNTS
1. ASSETS - These are all the economic resources owned by the company and are
expected for future gain. They include property and rights of value owned by the
company. Assets refer to items like cash, inventory, accounts receivable, buildings,
land, or equipment.
Assets can be categorized to Tangible and Intangible. Tangible Assets are the
physical entities that the business owns such as its land, buildings, vehicles,
equipment, and inventory. While Intangible Assets are the things that represent
money or value such as Accounts Receivables, Patents, Contracts, and Certificate of
deposit (CDs).
Two types of Assets:
1. Current Assets - cash and other assets that are expected to be converted to
cash within a year.
Examples:
 Cash includes coins, currencies, checks, bank deposits, and other cash
items readily available for use in the operations of the business.
 Cash equivalents are short-term investments that are readily
convertible to known amounts of cash which are subject to an
insignificant risk to changes in value.
 Marketable securities are stocks and bonds purchased by the
enterprise and are to be held for only a short span of time or duration.
They are usually purchased when a business has excess cash.
5
2. Non-Current Assets - an asset that is not likely to turn to unrestricted cash
within one year. It is also referred to as a long-term asset.
Examples:
 Long-term investments are assets held by an enterprise for the
accretion of wealth through capital distribution such as interests,
royalties, dividends and rentals, for capital appreciation or for other
benefits to the investing enterprise such as those obtained through
trading relationships.
 Property, Plant, and Equipment are tangible assets that are held by an
enterprise for use in the production or supply of goods or services, or
for administrative purposes.
a. Land - a piece of lot or real estate
b. Building - structure used to accommodate the office, store, or factory
c. Equipment - includes typewriter, air-conditioner, calculator, filing
cabinet, computer, electric fan, trucks, and cars used by the business
in its office or factory. Specific account titles may be used such as:
-office equipment,
-store equipment,
-delivery equipment,
-transportation equipment, and
-machinery and equipment.
d. Furniture and fixtures - include tables, chairs, carpets, curtains,
lamp and lighting fixtures. Specific account titles may be used
such as:
-office furniture and fixtures
- store furniture and fixtures
2. LIABILITIES - These include the debts or obligations payable to creditors and
other outsiders to which your company owes money. Liabilities are one of three
ways in which a business can acquire funding.
Two types of Liabilities:
1. Current Liabilities - amounts due to be paid to creditors within twelve months.
Examples:
 Accounts payable includes debts arising from the purchase of an asset
or the acquisition of services on account.
 Notes payable includes debts arising from the purchase of an asset or
the acquisition of services on account evidenced by a promissory note.
6
 Loan Payable is a liability to pay the bank or other financing institution
arising from funds borrowed by the business from these institutions
payable within twelve months or shorter.
 Utilities payable is an obligation to pay utility companies for services
received from them. Examples of this are telephone services, electricity,
and water services.
 Unearned revenues represent obligations of the business arising from
advance payments received before goods or services are provided to
the customer. This will be settled when certain goods or services are
delivered or rendered.
 Accrued liabilities include amounts owed to others for expenses already
incurred but are not yet paid. Examples of these are salaries payable,
utilities payable, taxes payable, and interest payable.
2. Non-current Liabilities - are long term liabilities or obligations which are
payable for a period longer than one year.
Examples:
 Mortgage payable is a long-term debt of the business with security or
collateral in the form of real properties.
 Bonds payable is a certificate of indebtedness under the seal of a
corporation, specifying the terms of repayment and the rate of interest
to be charged.
3. OWNER’S EQUITY - defines how much your business is currently worth.
Owner’s Equity or Capital is an account bearing the name of the owner representing
the original and additional investment of the owner of the business. It is increased by
the amount of net income earned during the year and decreased by the cash or other
assets withdrawn by the owner as well as the net loss incurred during the year.
Drawing represents the withdrawals made by the owner of the business in cash or
other assets.
Two types of Equity:
1. Contribution (Investments) - may be start-up capital or a later infusion of cash.
2. Drawing (Withdrawals) - If a business is profitable, the owners often want
some of the profit returned to them.
7
4. INCOME OR REVENUE - is money the business earns from selling a product or
service, or from interest and dividends on marketable securities. Other names for
income are revenue, gross income, turnover, and the "top line."
Net income is computed as revenue less expenses. Other names for net income
include profit, net profit, and the "bottom line." Income accounts are classified
as temporary or nominal accounts. This is because their balance is reset to zero at
the beginning of each new accounting period.
5. EXPENSES - these are money the company spends that allow a company to
operate. This may include advertising costs, utilities, rent, salaries and others. Like
revenue accounts, expense accounts are temporary accounts that collect data for
one accounting period and are reset to zero at the beginning of the next accounting
period.
A unique type of Expense account, Depreciation Expense, is used when
purchasing Fixed Assets. Costly items, such as vehicles, equipment, and computer
systems, are not expensed, but are depreciated over the life expectancy of the item.
A contra-account, Accumulated Depreciation, is used to offset the Asset account for
the item.
Examples:
 Salaries or wages expense include all payments made to employees or
workers for rendering services to a company.
 Utilities expense is an expense related to the use of electricity, fuel,
water, and telecommunication facilities.
 Supplies expense covers office supplies used by a business in the
conduct of its daily operations.
 Insurance expense is the expired portion of premiums paid on
insurance coverage such as premiums paid for health or life insurance,
motor vehicles, or others.
 Depreciation expense is the annual portion of the cost of tangible
assets such as buildings, machineries, and equipment charged as
expense for the year.
 Uncollectible accounts expense/doubtful accounts expense/bad debts
expense means the amount of receivables charged as expense for the
period because they are estimated to be doubtful of collection.
 Interest expenses are the amount of money charged to the borrower for
the use of borrowed funds.
8
CHART OF ACCOUNTS
A chart of accounts is a list of all your company’s accounts used, and is listed
together in one place. The main account types include Assets, Liabilities, Owner’s
Equity, Income, and Expenses.
Here’s a sample chart of accounts list. This is a chart of accounts for a fictional
business: Ewing Cleaning Supply.
Figure 1: Chart of Accounts
Companies in different lines of business will have different looking charts of
accounts. The chart of accounts should give anyone who is looking at it a rough idea
of the nature of your business by listing all the accounts involved in your company’s
day-to-day operations.
The chart of accounts is designed to be a map of your business and its various
financial parts. A well-designed chart of accounts should separate out all the
9
company’s most important accounts, and make it easy to figure out which
transactions get recorded in which account.
What’s More
Activity 3:
Identify each account if it is part of the Asset, Liability, Owner’s Equity, Income, or
Expense. Write your answers on the spaces provided before each number.
_________________ 1. Partner A, Drawings
_________________ 2. Prepaid Insurance
_________________ 3. Revenue
_________________ 4. Salaries
_________________ 5. Interest Payable
_________________ 6. Land
_________________ 7. Common Stock
_________________ 8. Bonds Payable
_________________ 9. Unearned Revenue
_________________ 10. Office Equipment
_________________ 11. Machinery Equipment
_________________ 12. Uncollectible accounts
_________________ 13. Partner B, Capital
_________________ 14. Wages
_________________ 15. Cash
10
What I Have Learned
Discuss the following terms based on your own understanding.
1. Owner’s Equity-
2. Revenue or Income-
3. Assets-
4. Expenses-
5. Liabilities-
11
What I Can Do
Activity 4:
My Personal Chart of Accounts
Applying the lessons you learned on the chart of accounts, create your fictional
business and make your very own chart of accounts. Follow the format below.
CHART OF ACCOUNTS
Account
Number
Account Title
Account
Number
12
Account Title
Self-Check!
Great job! You have completed Module 4 successfully! Before going to the next
lesson, check the icon that best shows your learning experience.
I have understood the lesson well and I can even teach
what I learned to others.
I have understood the lesson but there are still other
things that I need to review and relearn.
I need to do additional work to be able to master the
lesson. I need help in some tasks.
If you checked the first icon, you are ready for module 5. If you have checked the
second icon, you need to review the things that you need to relearn. If you have
checked the third icon, it would be best if you read more and ask help from your
teacher, parents or peers in clarifying the lessons that you find it difficult. Be honest
so that you will truly improve.
Additional Activity
After doing the activities:
I noticed
_______________________________
A question I have is
_______________________________
I’m not sure
_______________________________
I realized
_______________________________
13
Assessment
Let us check how much you have learned from this module’s coverage.
Essay:
1. In your own opinion, why do companies need to create their personalized Chart of
Accounts?
2. In your own opinion, is it better for a company to acquire current or non-current
assets?
3. Differentiate current and non-current liabilities.
14
CONGRATULATIONS
FOR COMPLETING THIS MODULE!
15
Activity 3.
1. Owner’s Equity
2. Asset
3. Income
4. Expense
5. Liability
16
6. Asset
7. Owner’s Equity
8. Liability
9. Liability
10. Asset
11. Asset
12. Expense
13. Owner’s Equity
14. Expense
15. Asset
Activity 2.
1. Assets
2. Liabilities
3. Income
4. Expenses
5. Equity
Pre-test
1. Assets
2. Expenses
3. Income
4. Liabilities
5. Owner’s Equity or Equity
Answer Key
References
BOOKS
Ong, Flocer Lao. 2016. Fundamentals of Accountancy, Business, and Management 1.
Quezon City: C&E Publishing, Inc.
Skousen, K. Fred, Earl Stice, and James Stice. 2000. Intermediate Accounting. 14th
ed. Vol. 1. Singapore: Thomson Learning Asia.
WEBSITES
“Teacher Sheila’s Lessons Portal: FABM-1.” n.d. Teacher Sheila’s Lessons Portal.
Accessed August 1, 2020. https://bit.ly/303Kp8Y.
“Chart of Accounts: A Simple Guide (With Examples) | Bench Accounting.” n.d.
Bench. https://bench.co/blog/accounting/chart-of-accounts/.
Keynote Support Tutorials. 2010. “Accounting Basics: Assets, Liabilities, Equity,
Revenue, and Expenses.” Keynotesupport.Com. 2010.
https://www.keynotesupport.com/accounting/accounting-assets-liabilities-equit
y-revenue-expenses.shtml.
OTHERS
DepEd Curriculum Guide
- Fundamentals of Accountancy, Business and Management 1
DepEd Teachers Guide
- Fundamentals of Accountancy, Business and Management 1
17
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E-mail Address: misamis.oriental@deped.gov.ph