Fundamentals of Accountancy

Learning Area Grade Level 11

W4 Quarter
Business and Management 1
3rd Quarter Date

I. LESSON TITLE The Chart of Accounts

II. MOST ESSENTIAL LEARNING The learners:
COMPETENCIES (MELCs) a. discuss the five major accounts (ABM_FABM11-IIId-e-19)
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,
Pagpapaunlad let us have your 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 Cost of merchandise purchased but has not
(3)
e Inventory yet been sold.
Prepaid Cost of expenses that is paid in advance and
(4)
Expense includes a 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
Land (7)
in the company.
200 LIABILITIES
Accounts
200 (8)
Payable
The amount of principal due on a formal
(9) 210 written 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
Owner's company (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
(13)
Revenue clients, 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
(15)
Expense was used 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
(Learning Activity Sheets for effect on the assets, liabilities, and equity accounts. Copy and answer in
Enrichment, Remediation or
Assessment to be given on Weeks
your accounting journal.
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
9. Withdrew cash for personal use
10. Invested land into the company
Well done!
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