TYPES OF MAJOR

ACCOUNTS

11 STEM JANUARY 2023

OBJECTIVES
FINANCIAL STATEMENTS
TYPES OF MAJOR ACCOUNTS
ACCOUNTING EQUATION
T ACCOUNTS

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FINANCIAL
STATEMENTS

11 STEM JANUARY 2023

OBJECTIVES
STATEMENT OF CASH FLOW
INCOME STATEMENT
STATEMENT OF CHANGES IN EQUITY
STATEMENT OF FINANCIAL POSITION

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STATEMENT OF CASH
FLOW
Reports the firm's receipts and disbursements of
cash which are classified according to the
company's major activities namely (1) operating,
(2) investing, and (3) financing.
INCOME STATEMENT

shows the results of business operations whether

net income or net loss for a given period of time.
STATEMENT OF
CHANGES IN EQUITY
presents a summary of the changes that
occurred in the owner's equity of the entity
during a specific time period.
STATEMENT OF
FINANCIAL POSITION
Informs the users of the financial condition of the
business at a given date, usually at the end of an
accounting period.
TYPES OF MAJOR
ACCOUNTS

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5 MAJOR ACCOUNTS
Assets
Liabilities
Equity or Owner’s Equity
Income
Expenses
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ASSETS
This includes anything owned or possessed by the
business which is capable of being expressed in
terms of money or possessing monetary values, and,
which, consequently, is available for the payment of
the debt of the business.
1. Value – the item must have value.
2. Ownership – the business must have a right of
possession to the asset.
3.Measurable cost – the asset must have been
obtained at a measurable cost to the business.

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CURRENT ASSETS
This includes cash and any other assets that are
reasonably expected to be converted into cash.
or consumed during one year or one operating
cycle.
CURRENT ASSETS
CASH
currency, coins, and checks that the business
has received from customers and other sources
that have not yet been deposited in its bank
account, against w/c checks may be drawn in
payment of bills.
CURRENT ASSETS
INVESTMENTS IN TRADING SECURITIES
Short-term investments in stocks of other
businesses (also known as Marketable Securities
NOTES RECEIVABLES
the amount due in the near future from persons
or companies on the basis of their formal, written
promises to pay cash to the business on the date
specified in the promissory note.
CURRENT ASSETS
INTEREST RECEIVABLES
the amount of interest due as of the statement of
financial position date on notes received from
customers.
ACCOUNTS RECEIVABLES
the total amount owed to the business by charge
account customers
CURRENT ASSETS
ADVANCES TO EMPLOYEES
cash advance given to employees to be liquidated in
the form of service.
MERCHANDISE INVENTORY
the purchase price of a particular line of goods the
business expects to sell to is customers for cash or
on a charge account basis. This represents goods on
hand as of the statement of financial position date.
CURRENT ASSETS
ACCRUED INCOME
Income already earned but not yet collected, such as interest
earned on promissory note issued by the customer before the
maturity date of the note.
SUPPLIES ON HAND
The cost value of such things as wrapping paper and
packaging tape and twine (store supplies on hand), computer
ribbons, envelopes, stamps, paper (office supplies on hand),
and other assets of a similar nature that the business will use
up in performing its activities.
CURRENT ASSETS
PREPAID INSURANCE
This is the part of the premium cost of all kinds
of insurance carried by the business after the
statement of financial position date. Prepaid
insurance is always classified as current assets
even if the amount of the unexpired premiums
covers a period longer than one year, the time
limit used in defining current assets.
CURRENT ASSETS
PREPAID RENT
This is the rent paid by the business for facilities
to be used after the statement of financial
position date.
NON-CURRENT ASSETS
According to the definition provided by IAS 16,
property, plant, and equipment (PPE) are
tangible assets that:

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NON-CURRENT ASSETS
are held for use in the production or supply of
goods or services, for rental to others, or for
administrative purposes and
are expected to be used during more than one
period.
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NON-CURRENT ASSETS
(1) the assets must have physical existence;
(2) the assets are expected to be used for more
than one reporting period by the company;
(3) they must not be for sale;

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NON-CURRENT ASSETS
(4) they must be used in business operations;
and
(5) they must undergo depreciation except for
asset "Land".

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NON-CURRENT ASSETS
LAND
This is the cost of land the business uses to carry
on its activities--the lot on which its factory or
office building stands.

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NON-CURRENT ASSETS
BUILDING
Buildings is a fixed asset account that contains the
carrying amount of the buildings owned by an entity.
The carrying amount is the original purchase price,
plus later capitalized additions, minus accumulated
depreciation and any asset impairments. 2
NON-CURRENT ASSETS
BUILDING
This item could be separated into such things as
factory building, office building, warehouse, and any
other type of building the business wishes to show
on its statement of financial position.
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NON-CURRENT ASSETS
EQUIPMENT
The title equipment may also be separated into
whatever special assets of this type the business
cares to identify.

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NON-CURRENT ASSETS
EQUIPMENT
The business may use such titles as Office
Equipment for the value of the adding machines,
c alc ulators, and c omputers the offic e employees
use, and Delivery Equipment, for the value of the
trucks and automobiles the business uses to
deliver its merc handise to c ustomers.
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NON-CURRENT ASSETS
EQUIPMENT
A manufacturing enterprise would probably show
the value of the machines in its factory as Factory
Machinery and Equipment.

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NON-CURRENT ASSETS
FURNITURE AND FIXTURE
The title Furniture and Fixtures almost explains it and
may also be subdivided. Desks and chairs and
c abinets and c ounters used by office employees
might be listed as Office Furniture and Fixtures.
Display cases, chairs used by customers, and
merchandise counters in a department store could
be entitled Store Furniture and Fixtures. 2
NON-CURRENT ASSETS
ACCUMULATED DEPRECIATION
All property and equipment accounts except land
are subject to depreciation. Depreciation is the
allocation of the cost of a property account to its
period of usefulness in order to recognize a decline
in its value because of wear and tear, obsolescence
or inadequacy.
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NON-CURRENT ASSETS
ACCUMULATED DEPRECIATION
The total amount of depreciation accumulated over
a number of years is called Accumulated
Depreciation.

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LIABILITIES
A liability is the enforcement responsibility of a
business to pay a certain amount to someone
(creditor) to whom the business owes money, a
creditor.
If assets can be sub-classified into current and
noncurrent assets, liabilities are also classified in
the same manner.
CURRENT LIABILITIES
Current liabilities are debts or obligations of a
business that are expected to be liquidated by
the use of assets classified as current or by th
creation of another current liability. e
CURRENT LIABILITIES
ACCOUNTS PAYABLE
This is the total amount owed by the business as
of statement of financial position date for
purchases of merchandise, supplies, and services
made on a charge account basis and due within
one year from the statement of financial position
date.
CURRENT LIABILITIES
NOTES PAYABLE
This refers to the amounts owed by the business on
the basis of formal, signed notes such as the thirty-
day or six-month notes signed when borrowing from
a bank. If merchandise is bought and the creditor
requires the business to sign a note for the amount
of the purchase, the title Notes Payable is used.
CURRENT LIABILITIES
NOTES PAYABLE
If the same business borrowed from a bank, the
liability may be shown also as Notes Payable.
This is c lassified as current liability the note is due
if within one year.
CURRENT LIABILITIES
INTEREST PAYABLE
This is the amount of interest owed by the business
as of statement of financial position date for money
borrowed on interest bearing promissory notes
issued by the firm.
This interest debt builds up each day.
CURRENT LIABILITIES
INTEREST PAYABLE
The loan is outstanding the interest accrues- and it is
shown as a separate liability apart from the face
value of the note, which appears in the Notes
Payable account.
CURRENT LIABILITIES
DEFERRED OR UNEARNED INCOME
This is the income already collected but not yet
earned.
TAXES
PAYABLE of taxes owed by the business as
This is of financial position date.
of statement
the amount
NON-CURRENT LIABILITIES
NOTES PAYABLE (LONG TERM)
Amounts on signed formal notes due after one-year
from the date of the statement of financial position
INSTALLMENT CONTRACTS PAYABLE
Amounts payable after one year from the statement
of financial position date on long-term installment
notes,
NON-CURRENT LIABILITIES
MORTGAGE PAYABLE
A debt due after one year from the statement of
financ ial position date that has som e of the
business property, such as land, building s, or
equipment pledged as sec urity.
EQUITY
Owner's equity, or sometimes called capital or
proprietorship, is the excess of assets over
liabilities of a business.
Owner’s equity = Capital + Profit – Drawings.
EQUITY
CAPITAL
The amount invested in the business by the
owner as of the statement of financial position
date.
EQUITY
WITHDRAWAL
When the owner withdraws cash or other assets
from the business for personal use, its assets and
its owner's equity both decrease.
The amounts taken out of the business appear in
a separate account entitled Withdrawals, or
Drawing.
EQUITY
If withdrawals were recorded directly in the
capital account, the amount of owner
withdrawals would be merged with owner
investments.
To separate these two amounts for decision
making, businesses use a separate account for
withdrawals.
EQUITY
This account shows a decrease in owner's equity. There
are two types of withdrawals made by the owner of the
business:
(1) Withdrawals made by the proprietor that is
permanent
in nature, this means that the owner has no intention of
returning the amount to the business fund. Such
withdrawals are treated as permanent drawings and
would directly reduce or decrease the capital account.
EQUITY
(2) Temporary withdrawals, on the other hand, are
drawings made by the owner in future anticipation of
profits.
Thus, this would use a drawing account and will NOT
directly reduce the capital account.
INCOME
The income of a business is the money received
from its normal daily operations. In other words,
the business receives a value in exchange for
goods sold or services rendered.
EXPENSES
An expense is the amount spent by a business
during its normal daily operations.