Learning Module: Community Colleges of The Philippines

Community Colleges of the Philippines
301 Mabini Street Quezon District, Cabanatuan City, Nueva Ecija

Tel. no. (044) 600-1487 E-mail: ccpcabanatuan@gmail.com
HIGH SCHOOL DEPARTMENT
LEARNING MODULE
FUNDAMENTALS OF
ACCOUNTANCY, BUSINESS, AND
MANAGEMENT 1
SENIOR HIGH SCHOOL- GRADE 11
Prepared by:
Senior High School Teacher
LESSON OVERVIEW:
Accounting involves the processes of identifying, recording, and communicating financial

information to internal and external users like. It helps quantify data for easier interpretation.
Numbers is the language of business. In order to efficiently manage your business. In order to
efficiently manage your business, you need to know numbers. After gathering the data on the
performance of the company, these are summarized and used as a guide for future decision-
making. Accounting is a tool used in achieving all these goals
TITLE
INTRODUCTION TO ACCOUNTING
CHAPTER 1
ABM_FABM11- IIIa-1
OBJECTIVES:
At the end of the lesson, you should be able to:
1. Define accounting
2. Describe the nature of accounting
3. Understand the functions of accounting in business
4. Narrate the history/origin of accounting
5. Define external and internal users
CONTENT STANDARD:
The learners demonstrate an understanding of:
The definition, nature, function, and history of accounting

The external and internal users of financial information.
PERFORMANCE STANDARD:
The learners are able to:
Cite specific examples in which accounting is used in making business decisions and to
solve exercises and problems on the identification of users of information, type of
decisions to be made, and type of information needed by the users.
Cite users of financial information and identify whether they are external or internal users.
LESSON 1: DEFINITION OF ACCOUNTING

ABM_FABM11- IIIa-1
DISCUSSION
ACCOUNTING:
There are 3 accepted definitions of accounting:
1. It is the process of identifying, measuring, and communicating economic information
to permit informed judgement and decisions by users of the information.
2. It is the system of recording, summarizing, and analyzing an economic entity's

financial transactions.
3. It is a service activity. Its function is to provide quantitative information, primarily

financial in nature, about economic entities, that is intended to be useful in making economic
decisions.
LESSON 2: NATURE OF ACCOUNTING

ABM_FABM11- IIIa-2
DISCUSSION:
1. Accounting is a process.
A process is composed of multiple steps that lead to a common end goal.
Example: The enrollment process in a school. It involves reservation of slots,

filling out documents, attending school orientations, and payment of necessary fees.
Like the example above, accounting is a process because it performs the functions of
identifying, recording, and communicating economic events with the end goal of providing
information to internal and external parties.
2. Accounting is an art
Art refers to a way of performing something. It entails creativity and skills to help us attain
some objectives. Accounting is the art of recording, classifying, summarizing, and finalizing
financial data. Accounting is also a combination of techniques and its application requires
applied skill and expertise.
3. Accounting deals with financial information and transactions.
Accounting deals only with quantifiable financial transactions. These are the only
identified by the accountant, recorded in the books and communicated to different parties.
Non-financial transactions are not the focus of the accounting process. However, non-
financial data may be used to interpret and better estimate some financial data.
4. Accounting is a means and not an end.
Accounting is a tool to achieve specific objectives. It is not the objective itself.
Example: Your dream is to go to Korea someday. In order to there, you will need a plane.
Accounting is like a plane because that will bring you to your destination.
5. Accounting is an information system
Accounting is recognized and characterized as a storehouse of information. As a service

function, it collects processes and communicates financial information of any entity.
LESSON 3: FUNCTIONS OF ACCOUNTING IN A BUSINESS
DISCUSSION:
1. Keeping systematic record of business transactions.
Recording transactions does not only involve entering the transactions in the accounting
books. The records should be systematic enough to enable easy understanding of
readers. No matter how comprehensive the records are, if they are not produced
systematically, then they provide to no value.
2. Protecting properties of the business
The accounting records serve as the evidence that properties of a business do exist or
how much of a particular resource does a company have. The accounting system also
helps in preventing employee fraud and misappropriation of company resources.
3. Communicating results to various parties in or connected with the business
The accounting reports produced at the end of each period are not only used by external
parties (Example: Potential investors, government agencies), but also by the management
in their decision-making function.
Communication of the results of operations of a company is essential for all concerned

parties to enable them to take well-informed decisions.
4. Meeting Legal Requirements
Here in the Philippines, the government requires some companies (particularly those with
public accountability) to provide financial reports quarterly (every 4 months), semi-annually
(every 6 months), or annually (every 1 year). This procedure aims to protect the public by
providing them the necessary information to make sound decisions. The government also
requires reports from heavily regulated industries such as the energy and oil industries.
SUMMARY:
Accounting is a system that identifies, records, and communicates relevant

economic events to interested users
Nature of Accounting: Accounting is a process; an art; deals with financial
information and transactions; a means, not an end; and an information system.
Functions of Accounting in a Business: Keeping systematic record of business
transactions; protecting properties of the business; communicating the results to
various parties interested in or connected in the business; and meeting legal
requirements.
REFERENCE:
BOOK:
1. Vibal Group, Inc. and Joy S. Rabo, Florenz C. Tugas and Herminigilda E. Salendez
(2016) Fundamentals of Accountancy, Business, And Management 1. Gregorio
Araneta Avenue, Quezon City, Vibal Group Inc.
2. Joselito G. Florendo (2016) Fundamentals of Accountancy, Business, and

Management 1.Sampaloc, Manila, Rex bookstore, Inc.
INTERNET:
https:// en.wikipedia.org/
EVALUATION
“Great things never come from comfort zones”
NAME: SECTION:
DATE:
Essay (15 points) :
Understand each questions, before you begin writing, read the passage carefully and plan
what will you will say. Your essay should be well organized and as carefully written as you
can make it.
5 points Outstanding context, full of intriguing

details, clear, and focused
4 points Strong content, clear, and focused.
3 points Adequate content, usually clear, focused.

Limited content, somewhat unclear but has
2 points
a discernible focus.
1 point Very limited content and unclear
1. What is Accounting?
2. Identify and explain the nature of accounting

3. Identify and explain the nature of accounting
Prepared by:

LESSON OVER
Accounting involves the processes of identifying, recording, and communicating financial

information to internal and external users like. It helps quantify data for easier interpretation.
Numbers is the language of business. In order to efficiently manage your business. In order to
efficiently manage your business, you need to know numbers. After gathering the data on the
performance of the company, these are summarized and used as a guide for future decision-
making. Accounting is a tool used in achieving all these goals
TITLE
INTRODUCTION TO ACCOUNTING
(CONTINUATION) ABM_FABM11-
IIIa-4
OBJECTIVES:
At the end of the lesson, you should be able to:
1. Understand the uses of accounting in decision making

2. Narrate the history/origin of accounting
3. Define external and internal users
CONTENT STANDARD:
The definition, nature, function, and history of accounting

The external and internal users of financial information.
PERFORMANCE STANDARD:
Cite specific examples in which accounting is used in making business decisions and to
solve exercises and problems on the identification of users of information, type of
decisions to be made, and type of information needed by the users.
Cite users of financial information and identify whether they are external or internal users.
LESSON 4: USES OF ACCOUNTING IN DECISION-MAKING:

DISCUSSION:
1. Managers in planning, controlling, and evaluating their organization’s activities. Owners,

directors, and others
2. In evaluating the performance of the organization and determining operating,
compensation, and other policies.
3. Union, governmental, regulatory, taxing, environmental, and other entities in evaluating
whether the organization. is conforming with applicable contracts, rules, laws, and public
policies and/or whether changes are needed.
4. Existing and potential owners, lenders, employees, customers, and suppliers in evaluating
their current and future commitments to the organization.
5. Accounting researchers, security analysts, security brokers and dealers, mutual-fund
managers, and others in their analyses and evaluations of enterprises, capital markets,
and/or investors.
LESSON 5: THE HISTORY OF ACCOUNTING:
ABM_FABM11- IIIa-4
Portrait of Luca Pacioli
The history of accounting or accountancy can be traced to ancient civilizations. The

early development of accounting dates back to ancient Mesopotamia, and is closely
related to
developments in writing, counting and money and early auditing systems by the
ancient Egyptians and Babylonians. By the time of the Roman Empire, the government
had access to detailed financial information.
In India Chanakya wrote a manuscript similar to a financial management book, during the period
of the Mauryan Empire. His book "Arthashasthra" contains few detailed aspects of maintaining
books of accounts for a Sovereign State.
The Italian Luca Pacioli, recognized as The Father of accounting and bookkeeping was the first
person to publish a work on double-entry bookeeping and introduced the field in Italy.
The modern profession of the chartered accountant originated in Scotland in the nineteenth
century. Accountants often belonged to the same associations as solicitors, who often offered
accounting services to their clients. Early modern accounting had similarities to today's forensic
accounting. Accounting began to transition into an organized profession in the nineteenth
century, with local professional bodies in England merging to form the Institute of Chartered
Accountants in England and Wales in 1880.
LESSON 6: INTERNAL USERS AND EXTERNAL USERS

ABM_FABM11- IIIa-7
ABM_FABM11- IIIa-8
INTERNAL USERS:
Are those who make decisions on behalf of the organization.
TYPES OF INTERNAL USERS:
1. Managers/Management- They plan, organize, and run in a business.

a) Top-level management- Chief Executive Officer (CEO), Chief Financial Officer (CFO),
Chief Operating Officer (COO), among others. They use the information to oversee the
performance of the whole organization and set its strategic direction.
b) Middle-level management- Department heads, branch managers, and junior
executives, among others.
c) Lover-level management- Supervisors and team leaders. They oversee the day-to-
day operations and direct employees in the performance of tasks.
2. Employees/Labor Unions- They assess the company’s profitability and stability, and
their consequence on the future salary and job security.
3. Owners- They provide the capital to the business. Owners need these accounting
information to help them decide whether they should withdraw or increase their
investments. They are interested to know the returns on their investments.
Common information needs of the internal users are shown in the diagram below:
Do we have enough cash to pay How much is the cost of
bills? producing each unit of a
product
Can the company afford to give Which product line is more

salary increase? profitable?
How much is the How much is the tax payable to

company’s? the government?
sales growth for the month?
EXTERNAL USERS:
Are those who make their decisions based on the company’s financial information.
TYPES OF EXTERNAL USERS:

1. Potential and existing investors- They need information to help them decide
whether they should invest or not in the business. Through past performances or
operation results of the company, they would want to know potential returns on their
investment.
2. Creditors and Potential creditors- They assess the credit worthiness and he
capability of the business to pay its obligation including the related interests on maturity
date.
3. Customers- They assess the financial position of their suppliers which is necessary
for them to maintain a stable source of supply in the long term. They are interested to
know whether the business will continue to honor its product warranties.
4. Suppliers- A person or organization that provides something needed such as product

or service. They use the financial statements of their customers to determine whether
the debts owed to them will be paid when due or whether the customer has enough
funds or resources to pay the goods to be delivered or the services to be rendered.
5. Tax authorities- They use financial reports to determine the credibility of the tax
returns filed on behalf of the company. They are interested to know if the business paid
the correct amount of taxes.
6. Regulatory Bodies- They want to ensure that the company’s disclosure of accounting
information is in accordance with the rules and regulations set in order to protect the
interest of the stakeholders who rely on such information.
Example of Regulatory Bodies: Securities and Exchange Commission (SEC) and

the Bangko Sentral ng Pilipinas (BSP)
7. Public- They use the financial information to know how the business affects
the economy possible prospects for employment, and/or for educational and
research purposes.
SUMMARY:
History of accounting: From its early development in Mesopotamia to the modern

accounting system used in the present day.
Internal users are those who make decisions on behalf of the organization.
External users are those who make their decisions based on the company’s financial
information.
REFERENCE:
BOOK:
INTERNET:
https:// en.wikipedia.org

EVALUATION
“Nothing worth having comes easy”
NAME: ___________________________ SECTION: _____________
I. Essay (10 points) :

can make it.


2 points
1. Summarize the history of Accounting.
2. What is the difference between Internal users and External Users?

II. Enumeration (10 points):
1. What are the types of Internal Users?
1. 3.
2.
2. What are the types of External Users?
1. 5.
2. 6.
3. 7.
4.
Prepared by:

LESSON OVERVIEW:
Accounting concepts, principles, and assumptions are essential in the practice of

accountancy. Financial statements become more comparable and more useful to users if these
concepts, principles and assumptions are followed by businesses. We can look at these as a set
of rules that govern the accounting process.
TITLE
ACCOUNTING CONCEPTS AND PRINCIPLES
ABM_FABM11- IIIb-c-15
OBJECTIVES:
At the end of this lesson, you should be able to:
Understand the Generally Accepted Principles
CONTENT STANDARDS:
Accounting concepts and principles
PERFORMANCE STANDARDS:
Identify generally accepted accounting principles

LESSON 7: ACCOUNTING CONCEPTS AND PRINCIPLES

1. The Generally Accepted Accounting Principles (GAAP) consists of accounting principles,

standards, rules, and guidelines that companies follow to achieve consistency and comparability
in their financial statements. Companies that apply the GAAP help not only external users of
accounting information, but also the management as well.
Since the GAAP enhances the consistency and comparability of a company’s financial
statements, it will be easier for external users to examine if the company is doing well currently or
in relation to its past performance. Simultaneously, GAAP also helps the management in
understanding trends persistent in the company. Management can also compare past and current
performance to check the strong and weak points of company operations.
2. Accrual Accounting- An accounting basis wherein income is recognized when earned and
expenses are recognized when incurred irrespective of the timing of cash receipt or payment.
Example: Suppose Andrew, a bussing entrepreneur, established a merchandising

business that sells ready-to-wear clothes to different ukay-ukay stores in the country. The income
from Andrew’s business primarily comes from selling goods to customers. Sales to customers can
be for cash or on credit. If the business was able to sell goods for cash, this will be recorded in
the accounting records of the company. On the other hand, if the goods were sold on credit, the
transaction should still be recorded in the accounting records as accounts receivable.
3. Matching Principle- It is closely related to accrual accounting which states that expenses should
be recorded in the same period as the related revenues.
Example: If they earn $10,000 worth of product sales in November, the company will pay
them $1,000 in commissions in December. The matching principle stipulates that the $1,000 worth
of commissions should be reported on the November statement along with the November product
sales of $10,000.
4. Accounting judgement and estimates- not all items in a company’s accounting records can be
determined precisely. This is the reason why estimates are used. Estimates are determined using
professional judgement, study of historical data, and through research.
Example: Warranty expense is an item in the accounting records that requires the use of
estimates. A warranty is guarantee made by the seller to the buyer promising to repair of replace
the thing sold if necessary within a specified period of time. When a seller sells goods, there are
revenues generated that are recorded in the company’s accounting records. Warranty expense is
related to the revenues generated from the sale of goods. The problem is what amount of warranty
the company should recognize in the accounting records.
A company is not entirely sure when warranties will be performed by the company. It can be in
the same period as the related revenues, one year after the date of sale, or even further into the
future. Because of this, the warranty expense in a company’s accounting records is usually
estimated based on historical data.
5. Prudence- Also called conservatism. It means exercising care in decisions regarding

recognition of items in the accounting records. In case of doubt, recognize liabilities and expenses
and do not recognize assets and income.
Example: checking your bank account before you spend money.
6. Going concern assumption- The assumption that the entity will continue operations
indefinitely into the future. It can be abandoned if there are evidences supporting the contrary.
Example: Company ABC rents a building for 100,000php per month. On January 1, 2016,
the company paid the rent for 2 years in the amount of 2,400,000. Under the going concern
assumption, the company can recognize the part of 2,400,000php that is not yet incurred. On
January 1, 2016, the company has not yet used the building but already paid the rent. In this case,
the accountant can record an asset (as prepaid expense) instead of recognizing an expense
immediately. If the entity is not going concern, there is no point recognizing the payment as an
asset since the company will not derive all benefits form it. A company that is not a going concern
will halt operations in the near future, so the payment of 2,400,000php will be recognized wholly
as an expense instead of recording as an asset.
However, if there is substantial doubt about the ability of a company to continue as a going
concern, the company can abandon this assumption. The following items are evidences that a
company is not a going concern.
1. The results of operations consistently show losses.

2. Inability to pay obligations of the company in time.
3. Loan defaults
4. Suppliers do not sell on credit to the company
5. Legal proceedings against the company
7. Accounting entity assumption- The assumption that the business is an entity separate and
distinct from the owners, managers, and employees. Personal transactions of owners, managers,
and employees should not distort the results of company operations.
Example 1: If a person owns multiple businesses, then each business will keep its own accounting
records. The asset and liabilities of the three businesses should not be mixed with one another.
Personal transactions of an owner should also not affect the financial statements of his or her
businesses.
Example 2: If an owner incurs expenses for the repair of his or her personal vehicle, this should
not be reflected in the financial statements of any of his or her businesses.
The main purpose of the accounting entity assumption is for the fair presentation of the financial
statements of the company. If the personal transactions of owners, managers, and employees are
recognized in the accounting records of the business, the financial statements will not
accurately represent the results of operations of the business.
8.Time Period Assumption- The assumption that the indefinite life of the company can
be divided into multiple time periods with equal lengths. The result of this is the periodic
presentation of a company’s financial statements. A calendar year is a 12-month period that ends
on December
31. A fiscal year is a 12-month periods that ends on any month.
Example: Suppose that Anna’s ice cream shop chose to divide the life of her business monthly.
This means that the transactions that occurred during each month would correctly be assigned
to each financial statements. If Anne did not divide the life of her business in this way, she would
not be able to make timely decisions as her financial information would not be accurate.
SUMMARY:
The Generally Accepted Accounting Principles (GAAP) consists of accounting principles,

standards, rules, and guidelines that companies follow to achieve consistency and
comparability in their financial statements.
Accrual Accounting- An accounting basis wherein income is recognized when earned and
expenses are recognized when incurred irrespective of the timing of cash receipt
or payment.
Matching Principle- It is closely related to accrual accounting which states that expenses
should be recorded in the same period as the related revenues.
Accounting judgement and estimates- not all items in a company’s accounting records can
be determined precisely. This is the reason why estimates are used. Estimates are
determined using professional judgement, study of historical data, and through research.
Prudence- Also called conservatism. It means exercising care in decisions regarding
recognition of items in the accounting records. In case of doubt, recognize liabilities and
expenses and do not recognize assets and income.
Going concern assumption- The assumption that the entity will continue operations
indefinitely into the future. It can be abandoned if there are evidences supporting
the contrary.
Accounting entity assumption- The assumption that the business is an entity separate and
distinct from the owners, managers, and employees. Personal transactions of owners,
managers, and employees should not distort the results of company operations.
Time Period Assumption- The assumption that the indefinite life of the company can be
divided into multiple time periods with equal lengths. The result of this is the periodic
presentation of a company’s financial statements. A calendar year is a 12-month period
that ends on December 31. A fiscal year is a 12-month periods that ends on any month.
REFERENCE:
BOOK:
INTERNET:
https://www.accountingformanagement.org/
EVALUATION
“Obstacles are the cost of greatness”

NAME: SECTION:
DATE:
I. Below are accounting concepts and principles. Match each description to the correct
accounting concept and principle.
ACCRUAL ACCOUNTING TIME PERIOD ASSUMPTION
PRUDENCE USE OF JUDGEMENT

MATCHING PRINCIPLE
GOING CONCERN ASSUMPTION ACCOUNTING ENTITY ASSUMPTION
1. The indefinite life of a company can be divided into periods of equal

length for the preparation of financial reports.
2. Income and assets are not overstated and liabilities and expenses
are not overstated.
3. Income should be recognized in the period when it is earned

regardless of when the payment is received.
4. The business is separate from the owners, managers, and

employees operating in the business.
5. It is assumed that the operations of a business will continue

indefinitely to the future.
II. Essay.
can make it.


Limited content, somewhat unclear but
2 points has a discernible focus.
4. Describe the Generally Accepted Accounting Principles (GAAP). What is its main
function or purpose?
Prepared by:
LESSON OVERVIEW:
The accounting equation is an important tool in double entry accounting. It helps ensure
that debits and credits are recorded accurately. Beyond this, however, it helps to measure how
profitable your business is. The accounting equation is the foundation of your company’s balance
sheet, which expresses your business’s assets, liabilities, and owner’s or shareholder’s equity in
detail.
This lesson will help you to understand and use one of the fundamentals of accounting
which is the accounting equation.
TITLE
ACCOUNTING EQUATION
OBJECTIVES:
Illustrate the accounting equation
CONTENT STANDARDS:
The accounting equation
PERFORMANCE STANDARDS
Solve problems applying the accounting equation

LESSON 8: THE ACCOUNTING EQUATION

DISCUSSION:
The accounting equation is the formula used to capture the effect of the relationship of financial
activities within a business.
The equation is a simplified breakdown of the values entered in the balance sheet. It illustrates
the relationship between a company's assets, liabilities (amounts owed to others), and
shareholder or owner equity.
The equation is typically written as:
Assets = Liabilities + Owner Equity
It can also be structured as:
Liabilities = Assets - Owner Equity Owner Equity = Assets - Liabilities
Assets are everything your business owns. Examples of assets include tangible assets,
such as cash, receivables, inventory, equipment, vehicles, and real estate, and intangible
assets such as intellectual property (patents, copyrights, and trademarks).
Liabilities are payments your company has to make. Examples of liabilities include loan
payments, lease payments, payments on lines of credit or credit cards, and other
payables. There are two types of liabilities: short-term or current liabilities are due within
12 months, and long-term liabilities are due to be paid off more than 12 months after the
current date.
Owner’s Equity or Stockholders’ Equity refers to how much of the business belongs to
you (or, if your business issues stock, to the stockholders). It’s also expressed as assets
minus liabilities, and is not to be confused with the value of the business.
If you’re looking for business financing, the accounting equation can be an important tool
for investors or lenders used to assess your company’s financial situation. Does the company
have much higher liabilities than assets? This could indicate that you’re not managing your money
very well.
Definition of an Account
The accounting equation “assets equal liabilities plus owner’s equity” perfectly captures the major
accounts. These major accounts, which also happen to be the main classification
of accounts are assets, liabilities, and owner’s equity. An account in is an individual
accounting record of the movements (increases and decreases) in specific accounts.

Example: The photocopying business of Jose Mercado, would have specific accounts such
as Cash, Photocopying machine, Loan Payable, Photocopying Revenues, and Utilities
Expense, among others.
ASSETS= LIABILITIES + OWNER’S EQUITY

(OR CAPITAL)
(CASH) $45,000 (LOAN PAYABLE) $50,0000 (MERCADO, CAPITAL)

$10,000
(PHOTOCOPYING (REVENUES) $50,000
EQUIPMENT) $30,000
(EXPENSES) 35,000
TOTAL ASSETS= $75,000 TOTAL LIABILITIES= TOTAL OWNER’S

$50,000 EQUITY= $25,000
Movements in theses specific accounts are recorded in “journals” and “ledgers.” These are the
books of accounts which will be discussed in our future lessons. For now, it will suffice to say that
each specific account (account title) has two sides as illustrated below:
Account title
Left side for debit Right side for credit
Movements in specific accounts are either debit or credit depending upon the account’s
normal balance. Asset accounts have normal balances of debit while liability accounts and
owner’s equity accounts have normal balances of credit.
Debits and credits are equal but

opposite entries in your books. If a debit
increases an account, you will decrease
the opposite account with a credit.
A debit is an entry made on the left

side of an account. It either increases an
asset or expense account or decreases
equity, liability, or revenue accounts. For
example, you would debit the purchase of a
new computer by entering the asset
gained on the left side of your asset
account.
A credit is an entry made on the
right side of an account. It either
increases equity, liability, or revenue
accounts or decreases an asset or
SUMMARY: expense account.

SUMMARY:
The accounting equation is the formula used to capture the effect of the relationship of
financial activities within a business.
Assets = Liabilities + Owner Equity, Liabilities = Assets - Owner Equity, Owner Equity =
Assets – Liabilities are the basic accounting equation.
Assets are everything your business owns.
Liabilities are payments your company has to make.
Owner’s Equity or Stockholders’ Equity refers to how much of the business belongs to you
(or, if your business issues stock, to the stockholders).
REFERENCE:
BOOK:
7. Vibal Group, Inc. and Joy S. Rabo, Florenz C. Tugas and Herminigilda E.
Salendez
INTERNET:
https://www.investopedia.com/terms/a/accounting-equation.asp
https://fundbox.com/blog/what-is-the-accounting-equation/
EVALUATION
NAME: SECTION:
DATE:
I. ESSAY
can make it.


2 points
5. What is the difference between assets and liabilties?
6. What is the difference between debit and credit?
Prepared by:
LESSON OVERVIEW:
Now that we have learned what basic accounting equations is and what accounts are, the next
important thigh that we have to know is the chart of accounts and the definition and
classification of all accounts.
This lesson will guide you on how to ensure uniformity of and consistency in the use of all the
accounts in recording business transactions.
TITLE
MAJOR ACCOUNTS
ABM_FABM11- IIId-e-19
OBJECTIVES:
Discuss the 5 major accounts

Cite examples of each type of account
Prepare a chart of accounts
CONTENT STANDARDS:
The learners demonstrate and understanding of:
The 5 major accounts namely:

1. Asset 4. Income
2. Liabilities 5. Expenses
3. Capital
Define, identify, and classify accounts according to the 5 major types


LESSON 9: DEFINITION AND PREPERATION OF CHART OF ACCOUNTS
DISCUSSION:
A chart of accounts is a listing of all the accounts and is usually tailored to the operations
of the business. Most of the time, it is prepared in a manner such that the five main or major
accounts are grouped and organized.
Accordingly, the specific accounts may also be coded numerically to facilitate a

more efficient posting of the entries to the ledger or in preparation for the transition to a
computerized accounting system once the business decides to acquire a computerized
accounting system in the future.
ILLUSTRATIVE EXAMPLE: CHART OF ACCOUNTS

To illustrate, Jose Mercado’s photocopying business would have the following chart of accounts
which reflects the major accounts:
JM PHOTOCOPYING CENTER
CHART OF ACCOUNTS
ASSETS OWNER’S EQUITY
101 Cash 301 Mercado, Capital
112 Accounts Receivable 302 Mercado, Drawing
113 Allowance for doubtful accounts 399 Income Summary
114 Notes Receivable
115 Interest Receivable
122 Unused Supplies REVENUES
123 Prepaid Rent 401 Photocopying Revenue
151 Photocopying Equipment 402 Interest Income
152 Accumulated Depreciation- 499 Other Income
Photocopying Equipment
153 Furniture and Fixtures
154 Accumulated Depreciation- Furniture
and Fixtures
199 Other assets
LIABILITIES EXPENSES
201 Accounts Payable 501 Taxes and Licenses Expense
202 Notes Payable 502 Salaries Expense
203 Salaries Payable 503 Supplies Expense
204 Income Tax Payable 504 Utilities Expense
205 Interest Payable 505 Rent Expense
208 Unearned Photocopying Revenues 506 Depreciation Expense
212 Mortgage Payable 507 Doubtful Accounts Expense
215 Loan Payable 512 Interest Expense
299 Other Liabilities 599 Other Expense

LESSON 10: MAJOR ACCOUNTS: DEFINITION, CLASSIFICATION, AND EXAMPLES:
The major accounts in accounting are assets, liabilities, owner’s equity, revenues, and expenses.
Through revenues and expenses are under owner’s equity account, they are shown separately
because they are the main income statement accounts. So, effectively, there are five major
accounts.
Assets are resources controlled by the business as a result of past transactions and events and
from which future economic benefits are expected to flow to the business.
Example: The photocopying business of Jose Mercado, assets include cash, unused supplies,
and Photocopying equipment, among others. These are called assets because they are controlled
by the business, are the result of past transactions or events, and provide future economic
benefits.
Assets can be classified further into two. These are current assets and non-current assets.
Current Assets are those reasonably expected to be realized in cash within one year from the
reporting date or the normal operating cycle, whichever is longer. If an asset cannot be classified
as current, then its rightful classification is Non-current assets.
Examples of asset accounts include:
1. Cash- This includes cash on hand (bills, coins, checks, money orders, of bank drafts),
cash deposited in bank (savings account, or checking account), and cash fund (petty cash
fund, or payroll fund) which are unrestricted in use. Cash equivalents are short-term, highly
liquid investments that are acquired three months before maturity or earlier date.
2. Accounts Receivable- This refers to open accounts which represent the amount of
money owned by the customers to the business. This arises from the business rendering
services or selling goods to customers.
3. Notes Receivable- This represents the amount of money owed by the customer of debtor
to the business evidenced by a promissory note. A promissory note is a written and
signed promise to pay by the maker to the payee a sum certain in money on demand at a
specified future date.
4. Inventories- This represents assets held for sale in the ordinary course of business, in
the process of production for sale or in the form of materials or supplies to be consumed
in the production process or in the rendering of services.
5. Unused Supplies- This represents supplies which remain unused at the end of the
accounting period.
6. Prepaid Rent- This refers to an advance payment made by the business to cover for
future rental payments.
7. Equipment- This represents manual or automated machines used in the business and
they include photocopying equipment, computers, laptops, ring binders, laminating
machines, delivery vehicles, and vans, among others.
8. Building- This refers to the physical structure owned and used by the business to
conduct its business operation.
9. Furniture and fixtures- This represents assets such as tables, chairs, filling cabinets,
and display racks
10. Land- This refers to the physical site owned by the business where the building is
situated. It is not subject to depreciation
11. Allowance for doubtful accounts- This is a contra-asset or a valuation account which
refers to the portion of accounts receivable that is estimated to be uncollectible at the
end of a particular accounting period.
12. Accumulated Depreciation- This is a contra-asset or a valuation account which refers to
the aggregate portion of the total cost of property, plant, and equipment that has been
charge to depreciation expense.
Liabilities are present obligations of an entity arising from past transactions or events,
the settlement of which is expected to result in an outflow from the business of resources
embodying economic benefits. Simply put, these represent claims against the assets of the
business. These are what the business owes
Example: The photocopying business of Jose Mercado, liabilities include accounts payable (to his
father) and Utilities Payable to the electricity company, among others.
These are called liabilities because they represent the current obligation of the business. Liabilities
can be classified further into two. These are current liabilities and non-current liabilities.
Current liabilities are those reasonably expected to be settled by payment of cash, delivery of
goods or performance of service within its normal operating cycle or within one year from the
reporting date, whichever is longer. Therefore non-current liabilities are obligations reasonably
expected to be paid in cash beyond one year.
Example of Liability accounts include:
1. Accounts payable- This refers to open accounts which represent the amount of money
owned by the business to creditors or supplies
2. Notes Payable- This represents the amount of money owed by the business to
the supplier or creditor evidenced by a promissory note.
3. Loan Payable- This represents the amount of money borrowed by the business from third
party creditors.
4. Mortgage payable- This represents the amount of money borrowed by the business from
a bank or a lending institution which is secured by collateral.
5. Unearned Revenues- This represents cash collected by the business in advance for a
service or good that is yet to be rendered or delivered.
The Owner’s Equity is different from total assets and total liabilities. It represents ownership and
its terminology changes depending on the form of business organization. If it is a sole
proprietorship form of business organization, owner’s capital account is used and this is classified
under owner’s equity or equity.
Example: In JM photocopying Centre, we used Mercado, Capital account.
The owner’s capital account is increased by additional contribution of the owner and recognition
of business’ net income and decreased by withdrawals of the owner and recognition of business’
net losses.
Revenues are the earnings arising from the main line of operations of the business. Revenues
result from rendering of services or selling of goods.
Example: JM Photocopying centre, photocopying revenues arise from rendering of photocopying

services to its customers.
Examples of revenue accounts include:
1. Service Revenue- This refers to the earnings made by any business that is into rendering
services. The term “revenue” is used and not “income” to distinguish that such an earning
arises from the main line of operations of the business.
2. Interest income- This represents interest credited by the bank to the account of
the business arising from bank deposits. Notice that the term “income” was not used
since earning interests from bank deposits is not the main line of operations of the
business.
3. Sales- This represents the earnings made by any business that is into selling goods or
merchandise.
4. Professional Fees- This represents earnings made by professionals or experts
from rendering services to their clients. Professionals include lawyers, doctors, and
certified public accountants, among others.
Expenses are the costs being incurred by the business in generating revenues.
Example: For JM Photocopying Centre, expenses include payment of taxes and licenses,
salaries and recognition of utilities expense incurred.
Examples of cost and expenses accounts include:
1. Utilities expense- This refers to costs associated with the usage of electricity, water, and
communication for a particular accounting period.
2. Salaries expense- This refers to costs incurred associated with the services rendered
normally by permanent and full-time employees who are pain on a regular basis, usually
monthly.
3. Wages Expense- This refers to costs incurred associated with the services
rendered normally by contractual and temporary employees and workers who are paid
on an hourly rate based on output.
4. Taxes and Licenses expense- This represents costs incurred to register the business,
to acquire the right to operate, and to settle taxes.
5. Cost of sales- This refers to the cost of merchandise or goods that were sold during a
particular accounting period.
6. Supplies Expense- This refers to the amount of supplies that was used during a
7. Depreciation Expense- This refers to the allocated portion of the cost of property plant
and equipment charged to expense in the current accounting period.
SUMMARY:
A chart of accounts is a listing of all the accounts and is usually tailored to the operations
of the business. Most of the time, it is prepared in a manner such that the five main or
major accounts are grouped and organized.

Assets are resources controlled by the business as a result of past transactions and
events and from which future economic benefits are expected to flow to the business.
Current Assets are those reasonably expected to be realized in cash within one year from
the reporting date or the normal operating cycle, whichever is longer. If an asset cannot
be classified as current, then its rightful classification is Non-current assets.
Liabilities are present obligations of an entity arising from past transactions or events, the
settlement of which is expected to result in an outflow from the business of resources
embodying economic benefits.
The Owner’s Equity represents ownership and its terminology changes depending on the
form of business organization.
Revenues are the earnings arising from the main line of operations of the business.
Expenses are the costs being incurred by the business in generating revenues.
REFERENCE:
BOOK:

EVALUATION
NAME: SECTION:
DATE:
I. True or false
If the statement is correct, write true. If the statement is incorrect, write the correct
answer on the space provided.
1. Current assets are the present obligations of an entity arising from

past transactions or events, the settlement of which is expected to result in an outflow from
the business of resources embodying economic benefits.
2. Income are the earnings arising from the main line of operations of
business.
3. Income interest represents interest credited by the bank to the account of the
business arising from bank deposits.
4. Cost of sales are the costs being incurred by the business in generating
revenues.
5. Supplies expense refers to the amount of supplies that was used during a
6. Stocks represents ownership and its terminology changes depending on the

form of business organization.
7. Accounts payable refers to open accounts which represent the amount of

money owned by the customers to the business.
8. Non- current Assets are those reasonably expected to be realized in cash

within one year from the reporting date or the normal operating cycle, whichever is longer.
9. Sales are under Assets
10. Depreciation is a contra-asset or a valuation account which refers to the

aggregate portion of the total cost of property, plant, and equipment that has been charge
to depreciation expense.
Prepared by:
LESSON OVERVIEW:
Books of accounts are records in which all accounts and transactions of a business are
maintained on a regular basis. These books of accounts are typically a journal and a ledger or
their equivalents such as subsidiary ledgers and simplified books of accounts.
This chapter discusses the major types of books of accounts which are journals and ledgers.
TITLE:
BOOKS OF ACCOUNTS
ABM_FABM11- IIIf-23
OBJECTIVES:
Identify the uses of the two books of accounts;
Illustrate the format of general and special journals; and
Illustrate the format of general and subsidiary ledgers.
CONTENT STANDARDS:
The two major types of books of accounts, namely, journal and ledger
Differentiate a journal from a ledger and identify the types of journals and ledgers
Lesson 11: Journal
Discussion:
A journal functions as a financial diary. It is used to record chronologically all transactions of a

business as they occur. Since it provides the first evidence of a formally-recorded transaction, it
is commonly referred to as the book of original entry.
2 types of journals:
1. The Special Journals

2. The General Journal
Special Journals
Special journals are specialized lists of financial transaction records which accountants
call journal entries. Special journals are journals used to record recurring transactions. These are
four common types of special journals, namely:
1. Sales Journal
2. Purchase Journal
3. Cash Receipts Journal
4. Cash Disbursements journal
1. Sales journal
The sales journal (also known as sales book and sales day book) is a special journal that
is used to record all credit sales. Every transaction that is entered in sales journal essentially
results in a debit to accounts receivable account and a credit to sales account. All cash sales
are recorded in another special journal known as cash receipts journal.
Here, the term sales refers to the sale of only those goods or merchandise in which the
business normally deals. The sale of used or outdated assets (such as old plant, machinery,
equipment and newspapers etc.) are not recorded in sales journal. These transactions are
entered in general journal (also known as journal proper).
Example of Sales Journal:

Sales Journal
Date Invoice Customer Name Reference Dr: Accounts receivables
No. no. Cr: Sales
2. Purchase Journal
Purchases journal (also known as purchases book and purchases day book) is a special
journal used by businesses to record all credit purchases. All cash purchases are recorded in
another special journal known as cash payment journal or cash disbursements journal.
The purchase journal typically includes the following information: (a) the title “purchases
Journal”, (b) page number; (c) Date of transaction; (d) name of the supplier; € reference
number for posting purposes; (f) a special money column for purchases debit/ accounts
payable credit.
Similar to a sales journal, the credit purchase of items other than merchandise is
not recorded in this journal, unless the business sets up a special money column for these
types of purchases. A sample format of a PJ is shown below:
Purchase Journal
Date Supplier Name Reference Dr: Accounts receivables
no. Cr: Sales
3. Cash Receipt Journal
The Cash Receipt Journal is a journal used to record receipts of cash from whatever
source. All business transactions which include a debit to Cash are recorded in this journal.
For merchandising business, these include the sale of merchandise on cash basis, the
sale of merchandise with down payment, collection of customer account, and even cash
investment made by the owner. For a service business, these include the receipt cash for
service rendered, collection of customer account, and cash investment made by owner.
A sample format of CRJ is shown below:
For the “Other Accounts”, the business may set up columns for commonly used account
titles to maximize the benefits received from the use of special journals
Cash Receipt Journal
Date Official Receive Reference Cash Sales Accounts Sales Other
receipt from no. Debit Discount Receivable Credit Accounts
No. Debit (Debit)
(Credit)
4. Cash Disbursement Journal
The cash disbursements journal (also known as cash payments journal) is

a special journal that is used by a business to manage all cash outflows.
In other words, a cash disbursements journal is used to record any transaction
that includes a credit to cash.
A sample format of CDJ is shown below:
Cash Disbursement Journal
Date Check Paid Reference Accounts Purchase Other Purchase Cash
Voucher to no. Payable Debit Accounts Discount Credit
No. (debit) Debit Credit
Credit
General Journal
A general journal refers to a book of original entry in which accountants and bookkeepers
record business transactions, in order, according to the date events occur. The general ledger
tracks five prominent accounting items: assets, liabilities, owner's capital, revenues, and
expenses.
Examples of these transactions are the purchase and sale of equipment on account,
owner’s withdrawal and investment of non-cash assets, and the inurrence of expenses. Adjusting
entries, correcting entries, and closing entries are also recorded in this journal.
The General Journal which looks like a two-column columnar notebook, is the journal used
to record all other business transactions not recorded in the special journals.
A sample of General Journal is shown below:
Special Journal
Date Particulars Reference Debit Credit
The particulars column is used to record the journal entry itself which includes the
account/s debited, the account/s credited, and the explanation for the journal entry. The amounts
written in the debit and credit money columns should be aligned with the accounts debited and
credited. This means that the amount for account debited is written in the debit money column,
while the amount for account credited is written in the credit money column.
Lesson 12: Ledger
A ledger is a collective record of individual accounts used by a business. It is used to sort

all entries made in the journal in chronological order and to group all transactions that affect
individual accounts in order to facilitate the preparation of financial statements. Since the basis of
information in the ledger comes from the journal, the ledger is commonly referred to as the book
of final entry as it is where the recorded transactions can be seen next after going through the
journal. It provides the last record of financial information before financial reports are prepared.
THE ADVANTAGES OF USING LEDGER:
1. It provides detailed information about revenues and expenses in one place.

2. It provides detailed information about assets, liabilities, and owner’s equity of the
business.
3. It assists management in monitoring business performance through information in
individual ledger accounts.
4. It serves tool for auditors to track the flow of business transactions for a given period of
time.
2 common types of ledgers:
1. General Ledger
2. Subsidiary Ledger
1. General Ledger
The general ledger is used to accumulate and classify individual transactions from the
journal. It divides the account into two sides: Debit information is listed on the left side, while credit
information is listed on the right side.
A sample of general ledger is presented below:

Account Title
Date Items Reference Debit Date Items Reference Credit
no. No.
The account number is based from the chart of accounts of the business which is a listing
of all account titles used in the business together with the related account numbers. The item
column includes details of the transaction which may be in the form of explanation or
customer/supplier name. The reference column refers to the reference number of the source of
information.
2. Subsidiary Ledger
The subledger, or subsidiary ledger, provides details behind entries in the general ledger
used in accounting. The subledger shows detail for part of the accounting records such as
property and equipment, prepaid expenses, etc.
It follows a running-balance type of ledger because it adds a column to determine the

account balance after posting each transaction. This means that just by looking at the
subsidiary ledger, the business knows at a glance how much it owes others and how much
others owe to it.
A sample of subsidiary ledger is presented below:

Accounts Payable
Date Items Reference Debit Credit Balance
No.
The items column refers to the explanation of the transaction.
SUMMARY:
Special journals are specialized lists of financial transaction records which accountants
call journal entries
The sales journal (also known as sales book and sales day book) is a special journal that
is used to record all credit sales.
Purchases journal (also known as purchases book and purchases day book) is a special
journal used by businesses to record all credit purchases.
The Cash Receipt Journal is a journal used to record receipts of cash from
whatever source.
The cash disbursements journal (also known as cash payments journal) is
a special journal that is used by a business to manage all cash outflows.
A general journal refers to a book of original entry in which accountants and bookkeepers
record business transactions, in order, according to the date events occur.
A ledger is a collective record of individual accounts used by a business.
The general ledger is used to accumulate and classify individual transactions from the
journal.
The subledger, or subsidiary ledger, provides details behind entries in the general ledger
used in accounting.
REFERENCE:
BOOK:
EVALUATION
NAME: SECTION:
DATE:
I. ESSAY
Understand each question, before you begin writing, read the passage carefully and
plan what you will say. Your essay should be well organized and as carefully written
as you can make it.
5 points Outstanding context, full of intriguing details, clear,

and focused

Limited content, somewhat unclear but has a
2 points
discernible focus.
1. What is the Difference between Journal and Ledger?
2. What is the importance of using the journal and ledger?
Prepared by:

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HIGH SCHOOL DEPARTMENT

SENIOR HIGH SCHOOL- GRADE 11

HIGH SCHOOL DEPARTMENT

Accounting involves the processes of identifying, recording, and communicating financial

The definition, nature, function, and history of accounting

HIGH SCHOOL DEPARTMENT

LESSON 1: DEFINITION OF ACCOUNTING

2. It is the system of recording, summarizing, and analyzing an economic entity's

3. It is a service activity. Its function is to provide quantitative information, primarily

LESSON 2: NATURE OF ACCOUNTING

A process is composed of multiple steps that lead to a common end goal.

Example: The enrollment process in a school. It involves reservation of slots,

HIGH SCHOOL DEPARTMENT

3. Accounting deals with financial information and transactions.

4. Accounting is a means and not an end.

Accounting is a tool to achieve specific objectives. It is not the objective itself.

5. Accounting is an information system

Accounting is recognized and characterized as a storehouse of information. As a service

LESSON 3: FUNCTIONS OF ACCOUNTING IN A BUSINESS

1. Keeping systematic record of business transactions.

HIGH SCHOOL DEPARTMENT

2. Protecting properties of the business

3. Communicating results to various parties in or connected with the business

Communication of the results of operations of a company is essential for all concerned

4. Meeting Legal Requirements

Accounting is a system that identifies, records, and communicates relevant

HIGH SCHOOL DEPARTMENT

2. Joselito G. Florendo (2016) Fundamentals of Accountancy, Business, and

HIGH SCHOOL DEPARTMENT

5 points Outstanding context, full of intriguing

3 points Adequate content, usually clear, focused.

1 point Very limited content and unclear

2. Identify and explain the nature of accounting

HIGH SCHOOL DEPARTMENT

3. Identify and explain the nature of accounting

HIGH SCHOOL DEPARTMENT

Accounting involves the processes of identifying, recording, and communicating financial

1. Understand the uses of accounting in decision making

The definition, nature, function, and history of accounting

LESSON 4: USES OF ACCOUNTING IN DECISION-MAKING:

HIGH SCHOOL DEPARTMENT

1. Managers in planning, controlling, and evaluating their organization’s activities. Owners,

Portrait of Luca Pacioli

The history of accounting or accountancy can be traced to ancient civilizations. The

HIGH SCHOOL DEPARTMENT

LESSON 6: INTERNAL USERS AND EXTERNAL USERS

TYPES OF INTERNAL USERS:

1. Managers/Management- They plan, organize, and run in a business.

HIGH SCHOOL DEPARTMENT

Can the company afford to give Which product line is more

How much is the How much is the tax payable to

TYPES OF EXTERNAL USERS:

HIGH SCHOOL DEPARTMENT

4. Suppliers- A person or organization that provides something needed such as product

Example of Regulatory Bodies: Securities and Exchange Commission (SEC) and

HIGH SCHOOL DEPARTMENT

History of accounting: From its early development in Mesopotamia to the modern

HIGH SCHOOL DEPARTMENT

HIGH SCHOOL DEPARTMENT

NAME: ___________________________ SECTION: _____________

I. Essay (10 points) :

NAME: _______________ SECTION: _