Republic of the Philippines
Department of Education
National Capital Region
DIVISION OF CITY SCHOOLS – MANILA
Manila Education Center Arroceros Forest Park
Antonio J. Villegas St. Ermita, Manila
FUNDAMENTALS OF ACCOUNTANCY,
BUSINESS AND MANAGEMENT1
Let’s Account…
Source: https://www.fool.com/knowledge-center/a-list-of-account-titles-in-accounting.aspx
Quarter 1 Week 4 Module 5
https://www.shutterstock.com/image-illustration/assets-minus-debts-equals-net-worth-179399717
https://www.shutterstock.com/image-illustration/assets-minus-debts-equals-net-worth-179399717
Learning
Competencies:
2
1. discuss the five major accounts; and
2. prepare chart of accounts.
HOW TO USE THIS MODULE?
Before starting the module, I want you to set aside other task/s that may
disturb you while enjoying the lessons. Read the simple instructions below to
have successfully enjoy the objectives of this kit. Have fun!
1. Follow carefully all the contents and instructions indicated in every
page of this module.
2. Write on your notebook the concepts about the lessons. Writing
enhances learning that is important to develop and keep in mind.
3. Perform all provide activities in the module.
4. Let your facilitator/guardian assess your answer using the answer key
card.
5. Analyze conceptually the post-test and apply what you have learned.
6. Enjoy Studying.
PARTS OF THE MODULE
•
Expectations - These are what you will be able to know after
completing the lessons in the module.
•
Pre-test - This will measure your prior knowledge and the concepts
to be mastered throughout the lesson.
•
Looking Back to your Lesson - This section will measure what
learning’s’ and skills did you understand from the previous lesson.
•
Brief Introduction- This section will give you an overview of the
lesson.
•
Activities - This is a set of activities you will perform with a
partner.
•
•
Remember - This section summarizes the concepts and
applications of the lessons.
Check your Understanding - It will verify how you learned from
the lesson.
•
Post-test - This will measure how much you have learned from the
entire module.
1
MODULE
5
Major Accounts in Accounting
EXPECTATIONS
This module was written for you to accomplish at home. It was carefully
designed so that you can work at your own pace and allow self-discovery of the
concept through activities that you will perform. Activities were also selected to
allow independent learning which also aims to develop students’ reading
comprehension skills through understanding written texts.
After going through the module, you are expected to:
1. discuss the five major accounts; and
2. prepare chart of accounts.
PRE-TEST
I. Identification
Directions: Identify the following statements. Write your answer on the blank.
_______________1. It is the basic storage of information in accounting.
_______________2. It arises in the course of the ordinary activities of a business and
is referred to by a variety of different name including sales, fees, interest, dividends,
royalties and rent.
_______________3. It represents other items that meet the definition of income and
may not arise in the course of the ordinary activities of an entity.
_______________4. It arises in the course of the ordinary activities of a business.
_______________5. It represents other items that meet the definition of expenses and
may, or may not, arise in the course of the ordinary activities of the entity.
Source: Ferrer R.C. et.al. (2017). Fundamentals of Accountancy, Business and Management part 1, Bandolin
Enterprise, (Publishing and Printing) Bakakeng Sur, Baguio City
II. TRUE or FALSE
Directions: Before each statement, write TRUE if the statement is correct or FALSE
if it is incorrect. Write your answer on the blank.
______________ 1) The difference between the total debts and credits in the account
represents the balance of the account.
_______________ 2) If total credits exceed total debits, the account has a debit, the
account has a debit balance.
_______________ 3) Revenue is the type of income that arises in the course of the
ordinary activities of the business.
_______________ 4) All income is revenue.
_______________ 5) Losses are expenses that represent other items that meet the
definition of expenses and may or may not arise in the course of the ordinary
activities of the entity.
______________ 6) A Chart of accounts is a list of all the accounts used by the entity.
2
_______________ 7) Debit is the left side of an account while credit is the right side.
_______________ 8) The Income Statement accounts are assets, liabilities and
owner’s equity.
_______________ 9) The Realizable amount is computed as Acquisition cost minus
Accumulated depreciation.
_______________ 10) The Cost of insurance paid on ensuring a business is recorded.
Source: Ferrer R.C. et.al. (2017). Fundamentals of Accountancy, Business and Management part 1, Bandolin
Enterprise, (Publishing and Printing) Bakakeng Sur, Baguio City
LOOKING BACK TO YOUR LESSON
Before we proceed on this module, kindly recall the topics discussed already:
Accounting Definition, Nature and History, Users of Accounting Information, Concepts
and Principles of Accounting and the last was Accounting Equation. Let us
summarize the elements that discussed on last module.
✓ The basic accounting equation is Assets = Liabilities + Equity.
✓ Assets are resources controlled by an entity resulting from past events and are
expected to provide inflows of future economic benefits.
✓ Liabilities are present obligations of an entity resulting from past events and are
expected to cause outflows of future economic benefits.
✓ Equity is assets minus liabilities
✓ The expanded accounting equation is: Assets = Liabilities + Equity + income –
Expenses.
✓ Income is increase in economic benefits during the accounting period in the form
of inflows or enhancements of assets or decreases of liabilities that result in
increases in equity participants.
✓ Expenses are decreases in economic benefits during the accounting period in the
form of outflows or depletions of assets or incurrences of liabilities that result in
decreases in equity, other than those relating to distributions to equity
participants.
If those topics were clear, you may proceed. Enjoy reading and analyzing.
BRIEF INTRODUCTION
An account is the basic storage of information in accounting. It is a record of
the increases and decreases in a specific item of assets, liability, equity, income or
expense.
An account may be depicted through a “T-account.” A “T-account” is called
as such because it resembles the letter “T”. A “T-account” has three parts, namely:
1. Account title – describe is describes the specific item of asset, liability,
equity, income or expense.
2. Debit side – the left side of the account
3. Credit side – the right side of the account
The accounting equation “total assets equals total liabilities plus owner’s
equity” perfectly captures the major accounts. These major accounts, which also
3
happen to the main classification of accounts, are assets, liabilities and owner’s
equity owner’s equity includes revenues and expenses.
The Five Major Accounts
The five major accounts, also called the elements of financial statements, are
the items in the expanded accounting equation discussed on Module 4. Let us
recall the module, by answering the following questions:
__________ 1. What account are we going to use if the businessman purchased
supplies worth ₱5,000 on the new “Food Kiosk” he started?
__________ 2. What account are you going to use if the owner wants to record the
loan payable in schedule?
__________ 3. When you compute a cash investment minus obligation it is describe
as what account?
__________ 4. The company earned ₱50,000 on that deal. What account are we
going to used?
__________ 5. He bought office supplies on account. What account are we going to
use?
Answer: (1) Assets (2) Liabilities
(3) Equity
(4) Income
(5) Expenses
To understand more, Let’s define, again!
1. ASSETS – are the resources you control that have resulted from past
events and can provide you with future economic benefits.
2. LIABILITIES – are your present obligations that have from past events and
can require you to give up resources when settling them.
3. EQUITY – is assets minus liabilities
4. INCOME – is increases in economic benefits during the period in the form
of inflows or enhancements of assets or decreases of liabilities that result in
increases in equity, other than those relating to investments by the business
owners.
Income includes both revenue and gains.
a. Revenue arises in the course of ordinary activities of a business and is
referred to by a variety of different names including sales, fees, interest, dividends,
royalties and rent.
b. Gains represent other items that meet the definition of income and may or
may not arise in the course of the ordinary activities of an entity.
5. EXPENSES – are decreases in economic benefits during the period in the form of
outflows or depletions of assets or increases of liabilities that result in decreases in
equity, other than those relating to distributions to the business owners.
Expenses include both expenses and losses.
a. Expenses arises in the course of the ordinary activities of a business.
b. Losses represent other items that meet the definition of expenses and
may, or may not, arise in the course of the ordinary activities of the entity.
Let us classify transaction according to Financial Statement. In preparing
Financial Statement you are required to remember the balance sheet accounts and
income statement accounts.
4
The balance sheet (or the statement of financial position) is one of the
components of a complete set of financial statements. The balance sheet shows the
financial position of a business.
➢ The income statement (or the statement of profit or loss) is a sub-component of
the statement of comprehensive income, which is also one of the components
of complete set of financial statements. The income statement shows the profit
or loss of a business.
What is chart of account?
Answer: The chart of account is a list of all accounts used by the business.
Are you familiar with this? It is the same as classifying transactions on an
accounting account. Can we check? What are the transactions that can be
posted as Assets? Liabilities? Equity? Income? And Expenses?
Answer: Actually, you may classify transaction on account as presented
below (but remember the account title and number may differ as declared by the
company).
Chart of Accounts
Balance Sheet Accounts
Account
ASSETS
No.
110
Cash
120
Accounts receivable
125
Allowance for bad debts
130
Notes receivable
140
Inventory
150
Prepaid supplies
155
Prepaid rent
160
Prepaid insurance
170
Land
180
Building
185
Accumulated
Depreciation- Bldg.
190
Equipment
195
Accumulated
Depreciation –
equipment
LIABILITIEs
210
Accounts payable
220
Notes payable
230
Interest payable
Income Statement Accounts
Account
INCOME
No.
410
Service Fees
420
Sales
430
Interest income
440
Gains
EXPENSES
510
Cost of sales
515
Freight-out
520
Salaries expense
525
Rent expense
530
Utilities expense
535
Supplies expense
240
250
260
570
575
580
310
320
Salaries payable
Utilities payable
Unearned income
EQUITY
Owner’s capital
Owner’s drawing
540
545
Bad debt expense depreciation
Expense
550
555
560
565
Advertising expense
Insurance expense
Taxes and licenses
Transportation and travel
expense
Interest expense
Miscellaneous expense
Losses
5
But how it was arranged? It was arranged on:
The first digit in the 3 – digit numbering refers to the major types of accounts
Major types of Accounts
Assets
Liabilities
Equity
Income
Expenses
Assigned number
1
2
3
4
5
ACTIVITIES
Independent Activity:
Determine what ACCOUNT TITLE and group according to MAJOR ACCOUNT.
Kindly fill up on the space provided before each number.
Account Title Major Account
____________ ___________ 1. He purchased table napkins worth ₱200 to be used in
your barbecue operations.
____________ ___________2. The customer with the ₱500 uncollected amount is
broke you have estimated that you can only collect ₱420 from him.
____________ ___________3. He hired a helper in a barbecue business. The employee
earns compensation of ₱8,000.
____________ ___________ 4. The cost of barbecue that was sold for ₱500 is ₱300.
____________ ___________5. He paid Justin Bieber ₱5,000, 000 to endorse the
product.
____________ ___________ 6. On your total uncollected amount of ₱500, you expect to
collect only about ₱480.
____________ ___________ 7. The barbeque grill was stolen.
____________ ___________ 8. He received an order of barbecue worth ₱800. The
customer paid the sale price but instructed you to deliver the barbecue next week
____________ ___________ 9. He made a temporary withdrawal of ₱200 from your
barbecue business.
____________ ___________10. He expects to use the barbecue grill for 5 years.
Source: Andres, C.S., et al. (2016)” Teaching Guide for Senior High School Fundamentals of Accountancy, Business
and Management 1” – Published by Commission on Higher Education in collaboration with the Philippine Normal
University
6
REMEMBER
✓ An account is a record of the increases and decreases in specific item of asset,
liability, equity, income or expenses. It has three parts namely: (1) account title,
(2) debit side, and (3) credit side.
✓ Debit is the left side of an account while credit is the right side
✓ The balance of an account is the difference between the total debits and credits
in that account.
✓ The five major accounts are assets, liabilities and equity while the income
statement accounts are income and expenses
✓ A chart of accounts is a list of all the accounts used by the business
✓ Account numbers are assigned to each account to facilitate recording crossreferencing, and retrieval of information
CHECK YOUR UNDERSTANDING
A. Identification
Direction: Identify the following statement.
____________ 1. It is a list of all the account used by a business.
____________ 2. This refers to the left side of the account.
____________ 3. This refers to the right side of the account.
____________ 4. It is one of components of complete set of financial statement. The
balance sheet shows the financial position of a business
____________ 5. It is a sub-component of the statement of comprehensive income,
which is also one of the components of a complete set of financial statements. The
income statement shows the profit or loss of a business.
Source: Ferrer R.C. et.al. (2017). Fundamentals of Accountancy, Business and Management part 1, Bandolin
Enterprise, (Publishing and Printing) Bakakeng Sur, Baguio City
B. TRUE or FALSE
Directions: Before each statement, write TRUE is the statement is correct and
FALSE if it is incorrect.
___________ 1. Accounts receivable is a receivable supported by oral or informal
promises to pay.
___________ 2. Cash includes money or its equivalent that is readily available for
restricted use.
___________ 3. Another term for allowance for bad debts is allowance for sales
accounts.
___________ 4. Notes payable is obligations supported by oral or informal promises
to pay by the debtor.
___________ 5. Accounts payable and accounts receivable are opposites.
7
___________ 6. Accrued income is items related to income that were collected in
advance before they earned. After the earning process is completed, these items are
transferred to income.
___________ 7. Owner’s drawings are an account used to record the temporary
withdrawals of the owner during the period.
___________ 8. Cost of sales (or Cost of goods sold) represents the value of
inventories that have been sold during the accounting period.
___________ 9. Freight – in represents the sellers’ cost of delivering goods to
customers.
___________ 10. Equity is assets minus liabilities.
Source: Ferrer R.C. et.al. (2017). Fundamentals of Accountancy, Business and Management part 1, Bandolin
Enterprise, (Publishing and Printing) Bakakeng Sur, Baguio City
C. Indicate whether it is an increase (+), decrease (-), or no effect on the
asset, liabilities and equity accounts.
Assets Liabilities
Equity
1. Investment of cash in the business
______ _______ _______
2. Purchase of computer equipment for cash
______ _______ _______
3. Billed a customer for services rendered
______ _______ _______
4. Paid salaries
______ _______ _______
5. Purchased office supplies on credit
______ _______ _______
6. Paid advertising expense
______ _______ _______
7. Paid rent in advance for 3 months
______ _______ _______
8. Received cash from customers on account
______ _______ _______
9. Withdrew cash for personal use
______ _______ _______
10. Invested land into the company
______ _______ _______
Source: Andres, C.S., et al. (2016)” Teaching Guide for Senior High School Fundamentals of Accountancy, Business
and Management 1” – Published by Commission on Higher Education in collaboration with the Philippine Normal
University
POST - TEST
I. Collaboration and Communications: If this is a company transactions of
Company “A”. Prepare chart of accounts by completing the box.
Chart of Accounts
Codes
Description
Account Type
Cash
Prepaid Rent
Revenue
Delivery Vehicles
Accounts Payable
Equipment
Inventory
Interest Income
Advertising Expense
Accounts Receivable
Note Payable
8
Financial Statement
Financial Position/
Income Statement
Accrued Expense
Office Supplies
Furniture
Loans Payable
Capital
Withdrawal
Wage Expense
Electricity Expense
Rent Expense
Account Codes
Assets
100-199
Equity
300-399
Expenses
500-599
Liabilities
Revenues
200-299
400-499
Source: Ferrer R.C. et.al. (2017). Fundamentals of Accountancy, Business and Management part 1, Bandolin
Enterprise, (Publishing and Printing) Bakakeng Sur, Baguio City
II. Critical Thinking
Rubrics in Checking Essays: Content = 30%, Understanding/Application = 25%,
Original Thinking = 25%, Structure = 10% and Grammar = 10%.
1. Why do we need to know the importance of chart of accounts? (5 points)
2. Discuss and explain the important things to considered in creating chart
of accounts. (10 points)
REFLECTIVE LEARNING SHEET
Student:
__________________________________________________________________________________
__________________________________________________________________________________
__________________________________________________________________________________
__________________________________________________________________________________
__________________________________________________________________________________
__________________________________________________________________________________
__________________________________________________________________________________
__________________________________________________________________________________
______________
Teacher: Business owners either handle their accounting themselves or they hire
someone else to do it. In general, start-ups and sole proprietors choose the first
options to reduce expenses. Even if you do hire an accountant, it’s important that
you have a basic understanding of what is involved. Start by learning about the five
major accounts, so you know how to read financial reports. –Andra Picincu
.
To further understand the lessons kindly visit:
1. https://bizfluent.com/info-10005386-five-types-accounts-accounting.html
2. https://strategiccfo.com/standard-chart-of-accounts/
3. https://www.fool.com/knowledge-center/a-list-of-account-titles-inaccounting.aspx
4. http://www.netmba.com/accounting/fin/accounts/chart/
5. https://ph.video.search.yahoo.com/yhs/search?fr=yhs-itm-001&hsimp=yhs001&hspart=itm&p=videos+on+major+accounts+in+accounting#id=3&vid=7c1a533
ef9e7ee3dee213ce0b790d4cd&action=click
9
6. https://ph.video.search.yahoo.com/yhs/search?fr=yhs-itm-001&hsimp=yhs001&hspart=itm&p=videos+on+major+accounts+in+accounting#id=27&vid=23e951
df224f8c00ca071735bb848797&action=click.
REFERENCES
A. Books
• Accounting Theory (n.d.) Retrieved from ttp://accountingtheory.weebly.
com/nature-and-scope-of—accounting
• Andres, C.S., et al. (2016)” Teaching Guide for Senior High School Fundamentals of
Accountancy, Business and Management 1” – Published by Commission on Higher
Education in collaboration with the Philippine Normal University
• Ferrer R.C. et.al. (2017). Fundamentals of Accountancy, Business and
Management part 1, Bandolin Enterprise, (Publishing and Printing) Bakakeng Sur,
Baguio City
• Rabo, Joy S. et.al. (2019). Fundamentals of Accountancy, Business and
Management 1 (K to 12 Revised Edition), Vibal Publishing, Manila
• Valencia, E. and Roxas, G. (2009). Basic Accounting, 3rd ed. Valencia Education
Supply
• Valix, Conrado T. et.al. (2015). Financial Accounting, Vol. 1, First part. GIC
Enterprises & Co. Inc • Weygandt, J. et. al. (2012) Accounting Principles 10th ed.
John Wiley & Sons (Asia) Pte. Ltd.
B. E-references
• https://bizfluent.com/info-10005386-five-types-accounts-accounting.html
• https://www.coursehero.com/file/62859141/Accounting-1-WK-5-Types-of-majoraccountspptx/
•. https://www.coursehero.com/file/p143uid8/If-total-assets-is-10000-and-totalliabilities-is-6000-how-much-is-the-total/
•. https://www.wikiaccounting.com/elements-financial-statements
•. https://www.scribd.com/document/473233113/ABM-11-FABM1-Q1-W1-Mod1Mod2
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ABM – GRADE 11
Revised Edition 2022
Management and Development Team
Schools Division Superintendent, Manila: Maria Magdalena M. Lim, CESO V
Chief Education Supervisor: Aida H. Rondilla
CID Education Program Supervisor: Remylinda T. Soriano
CID LR Supervisor: Lucky S. Carpio
CID LRMS Librarian II: Lady Hannah C. Gillo
CID-LRMS PDO II: Albert James P. Macaraeg
Writer/s: Manuel L. Hermosa, Ed.D (Revised, 2022)
Ma. Cristina A. Labay, MM
Ma. Cristina S. Aviňante
Illustrator: Manuel L. Hermosa, Ed.D
Content Validator: Ma. Cristina A. Labay, MM
Language Editor: Ma. Cristina A. Labay, MM
11
ANSWER KEY
Answer Keys: Module 5. Major Accounts in Accounting & Prepare Chart of
Accounts
Pre-test
I. Identification
1. Account
2. Revenue
3. Gains
II.
1.
2.
3.
4.
5.
True or False
True
False
True
False
True
4.
5.
Expenses
Losses
6.
7.
8.
9.
10.
True
True
False
True
True
Activities
Account Title
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
Supplies
Account Receivables
Salaries and Wages
Sales
Advertising
Account Receivables
Equipment
Sales
Owners drawing
Depreciation
Check Your Understanding
A. Identification
1. Chart of Accounts
2. Debit
Major Accounts
Expense
Assets
Expenses/Owner’s Equity
Income
Expenses
Assets
Asset
Income
Owner’s Equity
Owner’s Equity
4.
5.
Balance Sheet of SFP
Income Statement or Statement of
Profit or loss
6.
7.
8.
9.
10.
False
True
True
True
True
3. Credit
B.
1.
2.
3.
4.
5.
True or False
False
True
False
False
True
12
C. (+) Increase
(-) Decrease
Assets
1.
+
2.
NE
3.
+
4.
5.
+
6.
7.
NE
8.
+
9.
10.
+
(NE) No Effect
Liabilities
Owner’s Equity
NE
+
NE
NE
NE
+
NE
+
NE
NE
NE
NE
NE
+
NE
NE
+
Post Test
I. Collaboration and Communications
Chart of Accounts
Codes
Description
Account Type
110
130
410
140
200
150
160
420
500
120
220
510
145
170
210
310
320
520
530
540
Cash
Prepaid Rent
Revenue
Delivery Vehicles
Accounts Payable
Equipment
Inventory
Interest Income
Advertising Expense
Accounts Receivable
Note Payable
Accrued Expense
Office Supplies
Furniture
Loans Payable
Capital
Withdrawal
Wage Expense
Electricity Expense
Rent Expense
Assets
Assets
Income
Assets
Liabilities
Assets
Assets
Income
Expenses
Assets
Liabilities
Expenses
Assets
Assets
Liabilities
Owner’s Equity
Owner’s Equity
Expenses
Expenses
Expenses
13
Financial Statement
Financial Position/
Income Statement
Financial Position
Financial Position
Income Statement
Financial Position
Financial Position
Financial Position
Financial Position
Income Statement
Income Statement
Financial Position
Financial Position
Income Statement
Financial Position
Financial Position
Financial Position
Financial Position
Financial Position
Income Statement
Income Statement
Income Statement
14