ACCOUNT TITLES

ASSETS
CASH
 Currency (bills and coins), checks, postal money orders, and treasury warrants received by the business.
 Current asset

The following are examples of Cash:

1. PETTY CASH FUND
 Cash used to pay petty or small amounts.
 Current asset
2. CASH ON HAND
 Cash in the possession and custody of the business.
 Current asset.
3. CASH IN BANK
 Cash that are deposited in the banks.
 Current Asset

Investment in Trading Securities

This refers to short-term, highly liquid investment in securities such as shares and bonds.
Trade and Other Receivables
This refer to the amount collectible from a person or a company.
The following are examples of Trade and other Receivables:
1. ACCOUNTS RECEIVABLE
 Amount collectible from clients or customers’ services rendered or sale of goods.
 Current asset
In general, this account is not supported by promissory notes so that it is often referred to as arising from
sales “on open account”. (Notes: When a business does not expect to collect all its receivables, bad debts
are provided and the accumulated amount thereof in “allowance for bad debts” is treated as a deduction
from receivables.)
2. ALLOWANCE FOR DOUBTFUL ACCOUNTS
 A contra-asset account that represents the estimated amount of trade receivables that are
doubtful of collection.
3. NOTES RECEIVABLE
 Amounts collectible that are covered by promissory notes.
 Represents the principal amount or the face value of the promissory notes which is held
by the payee.
4. COMMISSION RECEIVABLE
 Represents the amount collectible from the party who is obliged to give a commission.
 Current Asset
 5. INTEREST RECEIVABLE
 Amount collectible in a loan transaction.
 Current asset
6. RENT RECEIVABLE
 Represents the amount collectible from the tenant or the lessee.
 Current Asset
ADVANCE TO EMPLOYEES
 Cash advance to be deducted from the gross salary of the employee.
 Current asset
MERCHANDISE INVENTORY
 Goods acquired for sale and are still unsold.
 Current asset
PREPAID EXPENSES
 Expenses to be incurred yet in the future but are already paid.
 Current asset
Examples: Prepaid Rent, Prepaid Interest, and Prepaid Insurance.
 Expenses of future accounting period(s) that are paid in advance.
Examples: Unexpired portion of insurance premiums (prepaid insurance) and advertisements
paid in advance (prepaid advertising)
The following are the examples of Prepaid Expenses:
1. PREPAID ADVERTISING
 Advance payment of advertising in all media types and promotional campaigns.
 Current Asset
2. PREPAID INSURANCE
 Advance payment of insurance whether it is life insurance or non-life insurance.
 Current Asset
3. PREPAID RENT
 Advance payment of rent by the tenant.
 Current asset
4. PREPAID SUBSCRIPTION
 Advance payment to print materials or non-print materials.
 Current asset
OFFICE SUPPLIES
 Stationery used in the offices.
 Current asset
STORE SUPPLIES
 Stationery or items used directly in selling activities.
 Current asset
UNUSED SUPPLIES
  Supplies that are still unused as of the end of an accounting period.
 Current Asset

PROPERTY, PLANT, AND EQUIPMENT

These refer to items that are useful for more than one year.
The following are the examples of Property, Plant, and Equipment:
1. LAND
 Refers to the surface of the earth that is not covered by a body of water.
 Land acquired by the business for its use.
 Non-current assets
2. BUILDING
 Structures or edifices acquired for use of the business.
 Refers to a structure with roof and walls that is constructed on land. Examples are office
buildings, factory plant, and similar structures.
 Non-current assets
3. MACHINERY
 Refers to an equipment that has power to produce movements or forces.
 Non-current assets
4. MACHINERY AND EQUIPMENT
 Heavy, metallic, and movable items that are capable of performing certain functions or
used to perform certain function.
Examples are sewing machines, lathe machines, cutting machines, and tractors.
 Non-current asset
5. FURNITURES AND FIXTURES
 This account titles is used in referring to movable items of significant value and acquired
to improve the workable condition of a place such as tables, chairs, cabinets, electric fans,
and air-conditioners.
 Furniture refers to movable things that ate result of design.
Examples are sofa, tables, and chairs
 Fixture, on the other hand, refers to something attached to a property such as walls.
Examples are cabinet, lightings, toilet fixtures.
6. OFFICE EQUIPMENT
 Refers to business machines used in workplaces. Examples are computer, copier
machines.
 Heavy, metallic and movable items used in an office to perform certain functions or are
capable of performing certain functions.
Examples are typewriters, posting machines, and computers.
 Non-current assets

7. STORE EQUIPMENT
 Refers to business machines used in point-of-sale transactions. An example is a Cash
Register.
 Non-current assets
 8. DELIVERY EQUIPMET
 Wheeled items used in making deliveries to customers or clients. Examples are vans and
trucks.
 Non-current assets
9. ACCUMULATED DEPRECIATION
 A contra-asset account that represents the cumulative depreciation of a fixed asset from
the date it was purchased up to the date of the financial statements.
10. TOOLS
 Handy, small, and usually metallic items used in performing certain function such as
saws, hammers, pliers, scissors, screw, drivers, and jacks. Tools in general have long
useful life but do not have significant peso value.
NOTE: The cost of assets with relatively permanent life (such as buildings, machinery
and equipment, and furniture) is allocated based on useful (or economic) life. The
allocated portion to each accounting period is charged to Depreciation Expenses. The
reduction in the asset value is accumulated in the Accumulated Depreciation account, a
deduction from the corresponding asset account. In the case of tools, a portion of their
cost may be written off by charges to Tools Expense.
 Non-current assets.

LIABILITIES
Trade and Other Payables
This refer to the amounts payable to a person or a company.

The following are the examples of Trade and Other Payables:

1. ACCOUNTS PAYABLE
 Amount payable to suppliers or creditors for services, supplies, goods, or property.
 Obligations to suppliers for items brought and are not supported by promissory notes. It
is often referred to as arising from purchases “on open account”.
2. NOTES PAYABLE
 Obligations covered by promissory notes.
 Represents the principal amount or the face value of the promissory note which is issued
by the maker.
 Current liability
3. COMMISSION PAYABLE
 Unpaid commissions.
 Current liability

4. UTILITIES PAYABLE
 Unpaid communication, light, and water bills.
 Current liability
5. INTEREST PAYABLE
 Unpaid interest in a loan transaction.
 Current liability
6. RENT PAYABLE
 Unpaid rent
 Current liability
7. SALARIES AND WAGES PAYABLE
  Unpaid salaries and wages of the employees.
 Current liability
8. EXPENSES PAYABLE
 Obligation for expenses already incurred but not yet paid.
Examples are Taxes payable, Salaries and Wages Payable, and Accrued
Advertising
 Advance Current liability
9. UNEARNED INCOME
 receipt of cash representing the payment for future advertising services.
10. UNEARNED COMMISSAION
 Advance receipt of cash representing the payment for future services of an agent.
11. UNEARNED RENT
 Advance receipt of cash representing the payment of future rent.
12. UNEARNED SUBSCRIPTION
 Advance receipt of cash representing the payment for future subscriptions to print
materials and non-print materials.
13. LOANS PAYABLE
 Obligation arising from loans obtained.
 Non-current liability
14. MORTAGE PAYABLE
 This refers to a blank loan with collateral assets such as house and lot or vehicle.
 Non-current liability
15. BONDS PAYABLE
 This refers to a loan that is evidenced by a bond certificate and a bond indenture. Bon
indenture refers to the agreement between the borrower and the lender. The borrower
normally the government and the lender normally the public or a financial institution.
 Non-current liability
 OWNERS EQUITY
OWNER, CAPITAL
 Capital of the sole proprietor in his business. If the owner is Jose P. Golez, the account becomes Jose P.
Golez, Capital. At the end of the accounting period, it is adjusted for withdrawals and net income (net
loss).
OWNER, DRAWING
 This account title is used for withdrawals made by the owner. If the owner’s name is Jose P. Golez, the
account title is Jose P. Golez, Drawing or Jose P. Golez, Personal.

REVENUE/ INCOME
SERVICE INCOME
 This refers to revenue realized by providing services to customers.
 This refers to the income derived from the rendering of services and is the primary income for a service
business.
COMMSSION INCOME
 Income derived by an agent for the performance of service such as product distribution,
disintermediation services, and others.
DIVIDEND INCOME
 Income from share investments.
INTEREST INCOME
 Income from loan transactions.
RENT INCOME
 Income from the use of the land or unit space.
GAIN ON SALE OF FIXED ASSETS
 Excess of the Selling price of a fixed asset over its Net Carrying Value (NCV).
 NCV is the difference between the cost of the asset and its accumulated depreciation.
FEES INCOME
 This refers to revenue realized by providing professional services to clients. Examples are legal, dental
and medical fees.
SALES
 This account title is used to refer to revenue from sale of goods that when previously acquired for sale.

EXPENSES
TAXES AND LICENSES
 Cost of permits and taxes incurred.
ADVERTISING EXPENSES
 Incurred in making the public aware of the goods and services being offered by the business.
 Examples are cost of or rentals for signboards and neon signs and advertisements in the newspapers and
through radio and television.
SALARIES AND WAGES
 The compensation earned by employees for services rendered to the business.
 Examples are the salaries of sales and office employees and wages of employee holding blue collar jobs
(factory and shop workers, maintenance men, drivers and mechanics).
SUPPLIES EXPENSES
 Cost of supplies already used.
 Examples are factory and shop supplies (rags, brooms and lubricants), office supplies (paper, pencils,
adding machine tapes, and erasers) and dental supplies (cotton, dental floss, and facial tissue paper).
LIGHT, POWER, AND WATER
 Cost of light, power, and water consumption as indicated on bills presented by utility companies
(MERALCO and Manila Water Co., Inc.)
TELEPHONE AND TELEGRAM
 Telephone and telegram charges as indicated on bills presented by telecommunication companies
(PLDT, PT&T, RCPE, etc.)
TOOLS EXPENSE
 Cost of tools treated as expense
DEPRECIATION EXPENSE
 The portion of property cost allocated to an accounting period.
 Non-cash expense that represents the total depreciation of the fixed assets for the year.
Example: A machine costing P20,000 has estimated useful life of 5 years. Annual depreciation expense
may be P4,000(or P20,000/5 years).
INSURANCE EXPENSE
 Insurance premiums related to current period
BAD DEBTS
 Provision for uncollectible receivables
RENT EXPENSE
 Payment made by a tenant lessee for the use of the land or unit space.
 The amount of rentals incurred based on occupancy space or usage of property and equipment
UTILITY EXPENSE
 Utilities such as light, water, and communication facilities such as phone, the internet, and others.
INTEREST EXPENSE
 Expense from loan transactions.
ADVERTISING & PROMOTION EXPENSE
 Advertising in all media types and promotional campaigns.
AGENCY SERVICES EXPESNSE
 Payments to the agencies for providing janitorial, messengerial, and securities services.
COMMISSION EXPENSE
 Payments made to agents for the performance of services such as product distribution, intermediation
services, and others.
DONATION EXPENSE
 Charitable contributions to a person, group of persons, or organization.
FRINGE BENEFIT EXPENSE
 Benefits given to supervisory or managerial employees aside from the basic monthly compensation.
FUEL & OIL EXPENSE
 Refers to gasoline, oil, and lubricants used in operating a vehicle.
INSURANCE EXPENSE
 Refers to life insurance and non-life insurance purchased for the purpose of protecting an asset or a
resources.
OFFICE SUPPLIES EXPENSE
 Stationery used in the office.
STORE SUPPLIES EXPENSE
 Stationery of items used directly in selling activities.
PAG-IBIG, PHILHEALTH, AND SSS CONTRIBUTION
 Represents the following contributions of the employer:
1. PAG-IBIG housing benefit contribution
2. Philhealth health benefit contribution
3. SSS health benefit contribution
PROFESSIONAL FEE
 Compensation given to persons rendering professional services to the business.

REPAIR AND MAINTENANCE EXPENSE

 Payments made to fix a broken item or to ensure that an asset is working in good condition.
REPRESENTATION & ENTERTAINMENT EXPENSE
  Expense related to the cost of meetings/events with clients or customers such as meal and other forms of
entertainment. May also include recreational activities of the management and employees.
SALARIES AND WAGES EXPENSE
 Represents the total gross salary or wage of the employees.
SUBSCRIPTION EXPENSE
 Subscriptions to print materials such as newspapers, magazines, and others & non-print materials such
as internet subscription
TAX AND LICENSE EXPENSE
 Licenses or permits issued by a Local Government Unit (LGU) & taxes on real state.
TOLL & PARKING EXPENSE
 Read toll fees and parking fees.
TRAVEL EXPENSE
 Commuting costs of using public transportation including airport fees and other fees.
DOUBTFUL ACCOUNTS EXPENSE
 Non-cash expense that represents the estimated amount of Accounts Receivable (AR) which may be
uncollectable due to the risk of non-payment.
BAD DEBT EXPENSE
 Non-cash expense that represents uncollectible customer accounts that were written-off from the books.
MISCELLANEOUS EXPENSE
 Expense which cannot be classified from the above expenses.
 The different minor expenses incurred and for which no specific account title has been adopted.
 Examples are transportation expenses for P2.00 and bank charges for P10.00.

BUSINESS TRANSACTIONS

MAR 1 Pedro opened a business with a CASH investment of P250,000.00 and SUPPLIES worth

P50,000.00.

MAR 2 Pedro purchased ADDITIONAL SUPPLIES amounting to P12,500.00.

MAR 3 Pedro purchased EQUIPMENT “ON ACCOUNT” amounting to P137,500.00.

MAR 4 Pedro rendered service and received a CASH PAYMENT of P33,750.00

MAR 5 Pedro paid ELECTRICITY AND WATER BIILS worth P21,975.00.

MAR 6 Pedro issued a check for the account of ADVERTISING COMPANY worth P5,250.00.

MAR 7 Pedro returned DEFECTIVE SUPPLIES worth P2,050.

MAR 8 Pedro rendered SERVICE ON ACCOUNT amounting to P 80,250.00

MAR 9 Pedro released EMPLOYEES SALARY, P 38,000.00.

MAR 10 Pedro WITHDREW money for PERSONAL USE, P8,750.00. MAR 11 Pedro paid P1,300.00
MISCELLANEOUS.

MAR 12 Pedro paid half of his debt for the equipment acquired. P68,750.00.

MAR 13 Pedro purchased ADDITIONAL EQUIPMENT worth P262,500.00, P50,000.00 was paid in cash

and the remaining was on account (WITH A WRITTEN PROMISSORY NOTE).

MAR 14 Pedro rendered service and RECEIVED PAYMENT ON ACCOUNT P52,500.00.

MAR 15 Pedro COLLECTED CASH from customers ON ACCOUNT for the Mar 8 transaction.

MAR 16 Pedro returned some defective equipment amounting to P7,500.00.

MAR 17 Pedro paid OFFICE RENT for the month amounting to P17, 750.00.

MAR 18 Paid P66,250.00 cash for the transaction dated Mar 13.

MAR 19 SUPPLIES USED amounting to P35,000.00.

MAR 20 Pedro collected P20,000.00 ON ACCOUNT for Mar 14 transaction.

MAR 21 Pedro released SALARIES of employees P38,000.00.

Prepare the following financial statements:

 Income Statement 
 Balance sheet
 Owner's Equity
 Cash Flow