Fundamentals of Accountancy

W4 Learning Area
Quarter
Business and Management 1
3rd Quarter
Grade Level
Date
11

I. LESSON TITLE The Chart of Accounts

II. MOST ESSENTIAL The learners:
LEARNING a. discuss the five major accounts (ABM_FABM11-IIId-e-19)
COMPETENCIES (MELCs) b. prepare a Chart of Accounts (ABM_FABM11-IIId-e-21)
III. CONTENT/CORE CONTENT Types of Major Accounts
Ref: Teacher’s Guide FABM1 pages 52-64/ FABM1 Textbook pages 43-56/ QuexhubPERC
Learning Portal
Suggested
IV. LEARNING PHASES Learning Activities
Timeframe
A. Introduction 15 mins DAY 1
Panimula Good day! Welcome to another fun and exciting learning experience. Today, by the end of
our topic you should be able to:
1. define the five different major accounts,
2. prepare a chart of accounts, and
3. display reliability and verifiability of accounting records.

Last time, we studied and used accounting equations in performing operations involving
simple cases. Now, look around where you are right now. Can you enumerate what you see
as assets? How about the things that you need to purchase? As an ABM student, can you
record the possible transactions?

It is hard to record transactions using assets, liabilities, and equity classification. You
should use a device to record the changes in the
accounting equation, and this device is called the Account.

B. Development 45 mins To better meet your expectations and enhance your previous knowledge, let us have your
Pagpapaunlad Pre-test. Choose the letter of the correct answer and write it in your accounting journal.
PRE-TEST
1. Which of the following is one of the major accounts of accounting?
A. Equity account B. Revenue account
C. Expense account D. Options A, B, and C
2. What are asset accounts?
A. Represent the different types of economic resources owned by the business
B. Represent the residual equity of a business after deducting from assets all the
liabilities
C. Represent the different types of economic obligations by a business
D. Represent the company’s gross income before expenses are
deducted
3. This refers to financial assets or the financial value of assets, such as funds held in
deposit accounts, as well as the tangible machinery and production equipment used in
environments such as factories and other manufacturing facilities.
A. Assets B. Liabilities C. Capital D. Income
4. What financial document is involved in the recording phase of accounting?
A. Income statement B. Balance sheet
C. General ledger D. Chart of accounts
5. What is the minimum number of columns to be prepared in making a chart of accounts?
A. 4 B. 3 C. 2 D. 1

Let us move on to our topic.

The five major accounts of accounting:
1. Assets are the resources owned and controlled by the firm. Four categories are:
● Current assets are assets that can be realized (collected, sold, used up) one year
after a year-end date. Examples include Cash, Accounts Receivable, Merchandise
Inventory, Prepaid Expense, etc.
● Non-current assets are assets that cannot be realized (collected, sold, used up) one
year after a year-end date which are more permanent in nature. Examples include
Property, Plant, and Equipment (land, furniture, manufacturing equipment,
buildings owned), long-term investments, etc.
● Tangible assets are physical assets such as cash, supplies, and furniture, and
fixtures.
● Intangible assets are non-physical assets such as patents and trademarks.
2. Liabilities are obligations of the firm arising from past events which are to be settled in
the future.
● Current liabilities are liabilities that fall due (paid, recognized as revenue) within
one year after a year-end date. Examples include Accounts Payable, Utilities
Payable, and Unearned Income.
● Non-current liabilities are liabilities that do not fall due (paid, recognized as
revenue) within one year after a year-end date. Examples include Notes Payable,
Loans Payable, Mortgage Payable, etc.
3. Equity or Owner’s Equity is the owner’s claims in the business. It is the residual
interest in the assets of the enterprise after deducting all its liabilities.
4. Income is the increase in economic benefits during the accounting period in the form
of inflows of cash or other assets or decreases of liabilities that result in increase in
equity. Income includes revenue and gains.
5. Expenses are decreases in economic benefits during the accounting period in the form
of outflows of assets or incidences of liabilities that result in decreases in equity.
For more different classifications and examples of each type of accounts please read
Fundamentals of Accountancy, Business and Management 1 by Tugas et al, pages 47-50.

What is a Chart of Accounts?

Chart of accounts is the financial document that is involved in the accounting process
which is Recording while Journalizing is the process of writing down the business
transaction in it. The following are the documents that would support the reliability and
verifiability of accounting records:
(1) Delivery; (2) Sales invoices; and (3) Official receipts.

A chart of accounts is a listing of a company’s classified transactions based on the accounts

it affects. These transactions are classified into the accounts found in the balance sheet of the
company: (1) Asset account; (2) Liabilities account; (3) Owner’s equity account, and to the
accounts found in the income statement: (1) Operating revenues; (2) Operating expenses; (3)
Non-operating revenues and gains and expenses and losses.

Here are the reasons why do we need to set up a Chart of Accounts:

1. A chart of accounts is a listing of the accounts used by companies in their financial
records.
2. The chart of accounts helps to identify where the money is coming from
and where it is going.
3. The chart of accounts is the foundation of the financial statements.

Here are the steps in the preparation of a basic chart of accounts:

1. Create three columns.
2. Prepare and list all assets, liabilities, equity, revenues and expenses account in the first
column consecutively.
3. On the second column, choose an account code (discretion of the company).
4. On the third column, write the description for each account on when to use it.
So, I hope you find it beneficial as far as the accounting process is concerned.
To further understand its concept, let us try to complete the table. Together with one of your
classmates via online or anyone of the family members that has an accounting or
bookkeeping background, answer the missing information.
Chart of Accounts

Account Account Code Description

(may vary)
100 ASSETS
Cash 100 (1)
Amounts owed to the company for services
(2) 120 performed or products sold but not yet paid for.

Merchandis e Cost of merchandise purchased but has not yet been

(3)
Inventory sold.
Prepaid Cost of expenses that is paid in advance and includes a
(4)
Expense future accounting period.
(5) 160 Cost of equipment that is used in the office.
(6) 170 Cost equipment that is used in the store.
Cost to acquire and prepare the land for use in the
Land (7)
company.
200 LIABILITIES
Accounts
200 (8)
Payable
The amount of principal due on a formal written
(9) 210 promise to pay. Loans from banks are included in this
account.
Salaries
(10) Amount of salaries to be paid in the future.
Payable
300 EQUITY
Amount of the owner invested in the company
Owner's (through cash or other assets)plus
(11)
Capital earnings of the company not withdrawn by the
owner.
Owner's,
310 (12)
Withdrawal
400 REVENUES
Service Amounts earned from providing services to clients,
(13)
Revenue either for cash or on credit.
500 EXPENSES
Amount of salaries incurred, regardless of
(14) 500
payment.
Utilities Cost of electricity, heat, water, and sewer that was used
(15)
Expense during the accounting period.
A. Engagement 30 mins DAY 2
Pakikipagpalihan Good day, and welcome to another exciting task. Let’s start!

ACTIVITY 1 – Where you belong!

Identify if the account is an asset, liabilities, equity, income or expense and indicate its
normal balance. Put a check ( ) in the corresponding box for your answer.
No. Account Asset Liabilities Owner’s Income Expense Balance
Equity
1. Accounts
Receivable
2. Accumulated
Depreciation
3. Bonds Payable
4. Service Revenue
5. Cash
6. De la Cruz, Capital
7. De la Cruz, Drawing
8. Prepaid Expense
9. Rent Expense
10 Inventories
ACTIVITY 2 – I feel you!
Read the question below and briefly explain your answer in your accounting journal.
Why are transactions identified, analyzed, and measured before recording them in the chart
of accounts?

B. Assimilation 15 mins This time you are going to apply what you have learned.
Paglalapat Supposing that you have an online business. In your accounting journal, create your own
chart of accounts using the following account titles.
● Cash
● Accounts Receivable
● Other Expense
● Allowance for doubtful accounts
● Notes Receivable
● Furniture and Fixtures
● Accumulated Depreciation Furniture and Fixture
● Interest Income
● Utilities Expense
● Accounts Payable
● Notes Payable
● Doubtful Accounts Expense
● Income Tax Payable
● Taxes and Licenses Expense
● Capital
● Drawing
● Online Business Revenues

V. ASSESSMENT 15 mins For your assessment, indicate whether it is an increase (+), decrease (-), or no effect on the
(Learning Activity Sheets for assets, liabilities, and equity accounts. Copy and answer in your accounting journal.
Enrichment, Remediation or Assessment
to be given on Weeks 3 and 6)

No. Transaction Assets Liabilities Equity

1. Investment of cash in the business
2. Purchase of computer equipment for cash
3. Billed a customer for services rendered
4. Paid salaries
5. Purchased office supplies on credit
6. Paid advertising expense
7. Paid rent in advance for 3 months
8. Received cash from customers on account
Well
9. done!
Withdrew cash for personal use
10. Invested land into the company

VI. REFLECTION 5 mins ● Communicate the explanation of your personal assessment as indicated in the
Learner’s Assessment Card.
● In your accounting journal, write your personal insights about the lesson using the
prompts below.
I understand that .
I realize that .
I need to learn more about .
Prepared by: Jennifer B. Fernandez, SDO Imus City Checked by: Dr. Josephine Canlas, Adora G. del Mundo, Cherie
L. Logatoc