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denote things of value that are owned and used by
the enterprise in its operations.
refer to all assets that are expected to be realized, sold or consumed within the enterprise normal
operating cycle. Operating cycle is the interval of time from the date of acquisition of merchandise
inventory; sell the inventory to customers and the ultimate collection of cash from the sale.
CASH – the account title to describe money, either ACCRUED INCOME- the amount of income earned
in paper or in coins and money substitutes like but not yet collected
check, postal money orders. When cash is within ADVANCES TO EMPLOYEES – the account title
the premise of the business, the accounts title is for amounts collectible from employees for allowing
Cash on Hand and Cash in Bank if deposited in them to make cash advances which are deductible
bank. against their salaries or wages.
PETTY CASH FUND – the account title for money INVENTORIES – These are assets which are: held
placed and set aside for petty or small expenses. for sale in the ordinary course of the business; in
NOTES RECEIVABLE – a promissory note that is the process of production for such sale. In the for
received by the business from the customer arising materials or supplies to be consumed in the
from rendering of services, sale of merchandise. production process or in the rendering of services
ACCOUNTS RECEIVABLE – the account title for PREPAID EXPENSES – account title for expenses
amounts collectible arising services rendered to a that are paid in advance but are not yet incurred or
customers or client on credit or sale of goods to have not yet expired such as Prepaid Rental,
customers on accounts. This constitutes an oral or Prepaid Insurance, Prepaid Interest, Prepaid
verbal promise to pay by a customer or client. Advertising.
is an assets offset or a contra-assets accounts. It stationery and other supplies purchased for use
provides for possible losses from uncollected but are left on hand and still unused. The account
accounts. Although this is not actually an asset, it is title should be specified as to Unused Office
classified as such because it is shown as a Supplies if intended for the office, Unused Shop
deduction from the Accounts Receivable which is a Supplies if intended for the shop.
Current Asset Account.
all other assets not classified as current should be classified as non- current assets
LAND – account title for the site where the building FURNITURE and FIXTURE – includes chairs,
used as office or store is constructed tables, counters, display cases and the like. If these
BUILDING – account title for a finished construction are used in the office, the account title is Office
owned by the business where operation and Furniture & Fixtures and if these are used in store,
transactions took place the account title is Store Furniture & Fixtures
EQUIPMENT – includes calculator, typewriters, ACCUMULATED DEPRRECIATION - this is an
adding machines, computers, steel filing cabinets asset offset or contra-asset account. Thiscalled a
and the like. If these are used in the office, the Valuation Account which is shown as a deduction
account title is Office Equipment and if used in the from property and equipment. The assets that are
store, Store Equipment. Trucks, jeep, van, claAssified as Property & Equipment or Fixed
automobiles and other kinds of motor vehicles are \Assets are called Depreciable Assets and are
used exclusively for delivering goods; the account subject to depreciation except land
title Delivery equipment.
denote financial obligations of the business to
LIABILITIES its creditors. It represents the claim of the
creditors over the assets of the enterprise.
refer to financial obligation of the enterprise which are: expected to be settled in the normal course of the
operating cycle; due to be settled within one year from the balance sheet date
ACCOUNTS PAYABLE – an account title for financial obligation of the enterprise that constitute an oral or
verbal promise to pay
NOTES PAYABLE (short term) – same accounts payable in nature but only the obligation is evidenced by a
promissory note. The enterprise is the one who issued the note.
ACCRUED EXPENSES - these are expenses incurred by the enterprise but are not yet paid.
PRE-COLLECTED OR UNEARNED INCOME – this is an account title for an income collected or received in
advance and is not yet considered as earned.
refer to financial long term obligations of the enterprise which are due and payable for more than one year.
This usually occurs in a corporate form of business organization.
NOTES PAYABLE (long term) – same nature with that of Notes Payable (short-term) but only, this requires
payment for more than a year.
MORTGAGE PAYABLE – a financial obligation of the enterprise which requires a fixed or tangible property to
be pledged as collateral to ensure payment.

the residual interest in the assets of the enterprise

OWNER’S after deducting all its liabilities. It is expressed in the
EQUITY equation as Assets less Liabilities equals Owners
Equity or Capital.
It increase when there is Profit or additional contributions by the owner and decreased when there is
Loss or withdrawal by the owner. The amount of money or value of property put by the proprietor into
the business to start with the operation which is referred to as “Initial Investment” or “Initial Capital”.
The terms used in reporting the equity of an enterprise depending on what form of enterprise:
• Owner’s Equity for a proprietorship
• Partner’s Equity for a partnership
• Shareholders Equity for a corporation.
CAPITAL – this is the center of the owner’s concern because this may increase or decrease at any time
as a result of business operation.
- in the normal course of operation, Owners Equity will be increased by income and decrease by
expenses. The owner’s capital investment is indicated by the use of the owner’s name with a word
capital written after the name which is separated by a comma. Thus, if the owner’s is Robert Jaworski,
the title for his capital account is, EX: ROBERT JAWORSKI, Capital
WITHDRAWAL - the owner’s withdrawal is likewise indicated by the use of the owner’s name with the
word Drawing or Personal written after the name which is separated by a comma. Thus, if the owner
is Robert Jaworski who made withdrawal, the title for his drawing is, ROBERT JAWORSKI, Personal or
REVENUE & EXPENSES - this is a temporary accounts created at the end of the accounting period
where Revenue and Expenses are temporary closed to this account.
- gross inflow of economic benefits during the period arising
in the course of ordinary activities of an enterprise.
- the amount received by the business as a result of selling
something or rendering a service.
SALES – in general, this represents revenue derived from the sale of merchandise
SERVICE INCOME – in general, this is the account title used for all types of income derived from
rendering of services. Sometimes the account title used is Service Revenue. Other specific income
titles used are:
PROFESSIONAL INCOME – the account title generally used by professionals for income earned from
the practice of their profession or may be specified as Accountin or Auditing Fees Income for
Accountants, Legal Fees Income for Lawyers, Dental Fees Income for Dentists, and Medical Fees
Income for Doctors.
RENTAL INCOME – income earned on buildings, space or other properties owned and rented out by
the business as the main line of its activities.
INTEREST INCOME – income received by the business arising from an amount of money borrowed by
a customer and is usually covered by a promissory note. This is typical in lending institution

- gross outflow of economic benefits during the period arising in the course of
ordinary activities of an enterprise
- the amount consumed by the business to operate
COST OF SALE OR COST OF GOODS SOLD – cost to produce and sell the goods
INTEREST EXPENSE – an expense incurred from borrowed money. This is separately shown as a deduction
from Operating Income before arriving as Net Income
RENT EXPENSE – the amount paid or incurred for use of property, usually premises.
REPAIRS AND MAINTENANCE – expenses incurred in repairing or servicing the buildings, machineries,
vehicles, equipment, etc., which are owned by the business
STATIONERY AND OFFICE SUPPLIES EXPENSE - the incurred in repairing or servicing the buildings,
machineries, vehicles, equipment, etc., which are owned by the business
SALARIES EXPENSE – for compensation given to employees of a business. It may be specified as Office
Salaries, Salesmen’s Salaries, etc.
UNCOLLECTIBLE ACCOUNTS – for the anticipated loss that the business may incur arising from
uncollectible accounts.
DEPRECIATION EXPENSE – for the allocated portion of the cost of property and equipment or fixed assets.
TAXES and LICENSES – for the amount paid for business permits, licenses and other government dues
except the Income Tax paid which is not allowable by law as a deduction
INSURANCE EXPENSE – account title for the expired portion of the insurance premium paid.
UTILITIES EXPENSE – the account title for telephone, light and water bills. Also included is gasoline,
lubricants and oil.