Fundamentals of Accountancy, Business and Management 1: Quarter 3 - Module 4: Types of Major Accounts

 

Senior High School

Government Property

NOT FOR SALE 

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 Republic Act 8293, Section 176 states that: No copyright shall subsist in any work of the Government of the Philippines. However, prior approval of the government agency or office wherein the work is created shall be necessary for exploitation of such work for profit.ofSuch agency or office may, among other things, impose as a condition on the payment royalties. Borrowed materials materials (i.e., songs, stories, poems, pictures, photos, brand names, trademar names, trademarks, ks, etc.) included included in this book are owned by their their respecti respective ve copyrigh copyrightt holders. Every effort has been exerted to locate and seek permission to use these materials from their respective copyright owners. The publisher and authors do not represent nor claim ownership over them. Published by the Department of Education - Region X - Northern Mindanao Development Team of the Module Writers:

Sweet Francess B. Mabelin Ken Witty V. Sabaldana, MBA Jonarose M. Cagampang Content Editor: Kristine T. Antique Language Editor: Rosela Jane E. Prodenciado, MALE Proofreader: Rosela Jane E. Prodenciado, MALE Illustrator: Eduardo W. Monares Layout Artist: Maricel M. Martir, MBM Cha hair irp per erso son n:

Dr. Dr. A Art rtu uro B. Bayo yoco cot, t, CESO ESO III III Regional Director 

Co-Chairp Co-C hairperso ersons: ns: Dr. Victo Victorr G. De Graci Gracia a Jr. CESO  Assistant Regional Director Jonathan S. dela Peña, PhD, CESO V Schools Division Superintendent Rowena H. Para-on, PhD  Assistant Schools Division Superintendent Mala Epra B. Magnaong, Chief ES, CLMD   Members:

Neil A. Im Improgo, PhD, EPS-LRMS; Bienvenido U. Tagolimot, Jr., PhD, EPS-ADM ; Erlinda G. Dael, PhD, CID Chief ; EPS assign Celieto B. Magsayo, LRMS Manager ; Loucile L. Paclar, Librarian II ; Kim Eric G. Lubguban, PDO II 

Regional Evaluator: ____________  Printed in the Philippines by Departmentt of Education- Alternative Delivery Mode (Deped-ADM) Departmen Office Address: Address: Masterson Avenue, Avenue, Upper Upper Balulang, Balulang, Zone 1, Cagayan Cagayan de Oro City Cagayan de Oro, Lalawigan Lalawigan ng Misamis Oriental Telephone N os.: (088) 881-3094 881-30 94 | Text: 0917-8992245 0917-89 92245 E-mailil Address: E-ma AddrNos.: ess: misamis.o misamis.orien riental@d tal@deped eped.gov. .gov.ph ph

 

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 educa edu cator tors s fro from m pub public lic an and d pri privat vate e sch school ools, s, co colle lleges ges,, an and d uni unive versi rsitie ties. s. We encourage teachers and other education stakeholders to email their feedback, comm co mmen ents ts,, an and d reco recomm mmen enda dati tion ons s [email protected].

to th the e

De Depa part rtme ment nt of Ed Educ ucat atio ion n

We value your feedback and recommendations.

at

 

Department of Education

Republic of the Philippines

 

TableOfContents Intr Intro oduc ucti tio on

---------------------------------------------------------------------------------------------------------

1

Pre-test

----------------------------------------------------------------------

3

Less Le sson on

---------------------------------------------------------------------------------------------------------

4

Post-test

----------------------------------------------------------------------

14

Ans An swe werr K Ke ey

---------------------------------------------------------------------------------------------------------

16

Reference

------------------------------------------------------------------------------------------------------------

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 bu busi sine ness ss an and d an un unde ders rsta tand ndin ing g of ba basi sic c ac acco coun unti ting ng co conc ncep epts ts an and d 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( ABM_FABM11- IIId-e-21)

1

 

General Instructions

To do well in this module, you need to remember the following: 1. Re Read ad ttex exts ts c car aref eful ully. ly. 2. Ans Answer wer q ques uestio tions ns wi with th all h hon onest esty. y. 3. Re Revi view ew y you ourr an answ swer ers. s. 4. Fol Follow low ins instru tructi ctions ons giv given. en. 5. Do the ta tasks sks gi given ven an and d do not d delay elay in s submitt ubmitting ing re require quirements ments.. 6. Feel free to c commu ommunicat nicate e wit with h yo your ur te teache acher. r. 7. Reme Remember mber to rev review iew eve every ry time you a are re done an answeri swering ng the act activitie ivities. s. 8. Ha Have ve ffun un a as s yo you u le lear arn. n.

2

 

What I Know

Let us check your prior knowledge about this module’s coverage. Fill in the blanks with your answer.

1. The ___ _______ ________ ________ ______ __ incl include udes s ever everythi ything ng that you yourr comp company any own owns. s. It is divided into tangible and intangible.

2. Any product or service that your company purchases to generate income or  manufa man ufact cture ure goo goods ds is co consi nside dered red an ___ ______ _____ _____ ______ _____ ___. _. Thi This s may inc includ lude e advertising costs, utilities, rent, salaries and others.

3. ___ ______ ______ ______ ______ _____, __, one of the pri primar mary y typ types es of acc accoun ounts ts in accoun accountin ting, g, includes the money your company earns from selling goods and services. This term ter m is als also o use used d to den denote ote div divide idends nds and intere interest st res result ulting ing from marke marketab table le 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

 

Lesso

Week 4_9 hrs Week 5_9 hrs

TheFiveMajorAccounts& TheChartof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)

4

 

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) ____(YQUITE)

What Is It

There are five main types of accounts in accounting, namely: assets, liabilities, capital capit al / owne owner’s r’s equit equity, y, income, income, and expens expense. e. Conti Continue nue to read below to explo explore re on how each account can be further broken down into several categories. categories .

FIVE TYPES OF MA MAJOR JOR AC ACCOUNTS COUNTS 1. ASSETS 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 Tangible asse assets ts are the phys ph ysic ical al en enti titi ties es th that at th the e bu busi sine ness ss ow owns ns su such ch as it its s la land nd,, bu buil ildi ding ngs, s, ve vehi hicl cles es,, equipm equ ipmen ent, t, and inv invent entory ory.. Whi While le inta intangi ngible ble ass assets ets are the thi things ngs tha thatt rep repres resent ent money or value such as Accounts Receivables, patents, contracts, and certificates 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 inclu includes des coins coins,, curren currencies, cies, chec checks, ks, bank depos deposits, its, and other  cash items readily available for use in the t he operations of the business



Cash equivalents are short-term investments that are

readily

conver conv erti tibl ble e to kn know own n am amou ount nts s of ca cash sh wh whic ich h ar are e su subj bjec ectt to an insignificant risk to changes in value

5

 



Marketable securities securities are stocks and bonds purch purchased ased by the enterprise and are to be held for only a short span of time or duration. They are usually purchas purchased ed when a business h has as excess c cash. ash.

2. Non-Curre Non-Current nt Assets - an asset that is not likely to turn to unrestrict unrestricted ed cash within one year. It is also referred to as a long-term assets. Examples: 

  Lo Long ng-t -term erm inve invest stme ment nts s are are as asse sets ts he held ld by an en ente terp rpri rise se fo forr th the e accret acc retion ion of wea wealth lth thr throug ough h cap capital ital dis distrib tributi ution on suc such h as int intere erests sts,, 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 f iling cabi ca bine net, t, co comp mput uter er,e ,ele lect ctri ric c fa fan, n, tr truc ucks ks,, an and d ca cars rs us used ed by th the e business in its office or factory. Sp Specific ecific acc account ount titles m may ay be used such as: -office equipment, -store equipment, -delivery equipment, -transportation equipment, and -machinery equipment. d. Furniture and and fixtures - include tab tables, les, chairs, carpets, curtains, lamp lamp an and d ligh lightin ting g fi fixt xtur ures es.. Sp Spec ecifi ific c ac acco coun untt tit title les s may may be use used d such as: -office furniture and fixtures - store furniture and fixtures

2. LIABI LIABILITIE LITIES S - These include the debts or obligations payable to creditors and other outsiders to which your compa company ny owes money. Liabil Liabiliti ities es are one of three three ways in which a business can acquire funding.

Two types of Liabilities:

6

 

1. Curren Currentt Liab Liabilities ilities - amou amounts nts due to be paid to creditors creditors within months.

twelv twelve e

Examples: 

 Accounts payable includ includes es deb debts ts a arising rising from the purchase of a an n asse assett 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. 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 re rece ceiv ived ed fr from om th them em.. Ex Exam ampl ples es of th this is ar are e te tele leph phon one e se serv rvic ices es,, 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 liabil liabilities ities 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 OWNER’S ’S EQU EQUIT ITY Y - def define ines s how muc much h you yourr bus busine iness ss is cur curren rently tly wor worth. th. 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.

7

 

Two types of Equity: 1. Contribution (Investments) - may be start-up capital or a later infusion of cash. 2. Dra Drawin wing g (Wi (Withd thdraw rawals als)) - If a bus busine iness ss is pro profit fitabl able, e, the owners owners oft often en wan wantt some of the profit returned to them.

4. INCOME OR REVENUE 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 includ inc lude e pro profit fit,, net pro profit, fit, and the "bo "botto ttom m lin line." e." Inc Income ome acc accou ounts nts are cla classi ssifie fied d as temporary temporary or or nominal nominal accounts. accounts. This is because their balance is reset to zero at the beginning of each new accounting period.

5. EXPENSES  EXPENSES  - the these se are are money  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, account,  Depre Depreciat ciation ion Expen Expense se,, iis s use used d whe when n 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.



In Insu sura ranc nce e ex expe pens nse e is th the e ex expi pire red d po port rtio ion n of pr prem emiu iums ms pa paid id on insurance coverage such as premiums paid for health or life insurance, motor vehicles, or others.

8

 



Depreciation expense is the annual portion of the cost of tangible assets ass ets suc such h as bui buildin ldings, gs, mac machin hinerie eries, s, and equ equipm ipment ent ch charg arged ed 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 is the amount of money charged to the borrower for  the use of borrowed funds.

CHART OF ACCOUNTS

 A chart of accounts is a list of all your company’s accounts used, and is listed together toget her in one place. The main accoun accountt types includ include e Asset Assets, s, Liab Liabilitie ilities, s, Owne Owner’s r’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.

9

 

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 financ fin ancial ial par parts. ts. A wel well-d l-desi esigne gned d cha chart rt of acc accoun ounts ts sho should uld sep separa arate te out all the comp co mpan any’ y’s s mo most st im impo port rtan antt ac acco coun unts ts,, an and d ma mak ke it ea easy sy to fi figu gure re ou outt wh whic ich h transactions get recorded in which account.

What’s More

Activity 3.

10

 

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, Drawing Drawings s  _________________  ___________ ______ 2. Prepaid Ins Insurance urance  _________________  ___________ ______ 3. Reven Revenue ue  _________________  ___________ ______ 4. Salaries  _________________  ___________ ______ 5. Interest Paya Payable ble  _________________  ___________ ______ 6. Land  _________________  ___________ ______ 7. Common S Stock tock  _________________  ___________ ______ 8. Bonds P Payable ayable  _________________  ___________ ______ 9. Unearne Unearned d Revenue  _________________  ___________ ______ 10. Office Equ Equipment ipment  _________________  ___________ ______ 11. Machi Machinery nery Equipment  _________________  ___________ ______ 12. Unco Uncollectible llectible accounts  _________________  ___________ ______ 13. Partner B, Ca Capital pital  _________________  ___________ ______ 14. Wages  _________________  ___________ ______ 15. Cash

What I Have Learned

Discuss the following terms based on your own understanding.

11

 

1. Owner’s Equity-

2. Revenue or Income-

3. Assets-

4. Expenses-

5. Liabilities-

What I Can Do

Activity 4. My Personal Chart of Accounts

12

 

 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 

Account Title

Self-Check! Great job! job! You ha have ve com complete pleted d Module 4 su succes ccessfull sfully! y! Befor Before e goin going g to the n next ext 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. 13

 

I have understood the lesson but there are sll other things that I need to review and relearn.

I need to do addional 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 th the e lessons that y you ou 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

_______________________________  

Assessment

Let us check how much you learned from this module’s coverage.

14

 

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.

15

 

CONGRATULATIONS FOR COMPLETING THIS MODULE!

Answer Key

16

 

Activity 3. 1. Owner’s Equity 2. Asset 3. Income 4. Expense 5. Liability

Activity 2. 1. Assets 2. Liabilities 3. Income 4. Expenses 5. Equity Pre - test 1. Assets 2. Expenses 3. Income 4. Lia Liabili biliti tie es 5. Own Owner’ er’s s Eq Equit uity yo orr Equ Equity ity

References BOOKS

17

6. Asset 7. Owner’s Equity 8. Liability 9. Liability 10. Asset

11. Asset 12. Expense 13. Owner’s Equity 14. Expense 15. Asset

 

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 August 1, 2020. https://bit.ly/303Kp8Y. “Chart of Accounts: A Simple Guide (With ( 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/ac https://www.keynotesup port.com/accounting/accounting-assets-liabilitiescounting-assets-liabilitiesequity-revenue-expenses.shtml.

OTHERS DepEd Curriculum Guide - Fundamentals of Accountancy, Business and Management 1 DepEd Teachers Guide - Fundamentals of Accountancy, Business and Management 1

18

 

For inquiries or feedback, please write or call: Department of Education Masterson Avenue, Upper Balulang, Zone 1,

Office Address: Cagayan de Oro City, Misamis Oriental Telefax:

(088) 881-3094 | Text: 0917-8992245

E-mail Address: [email protected]