FABM

• Assets


  The value of anything that the business owned. These are the resources controlled by the business as a result of past transactions and provide future economic benefits.
• Liabilities


  Debts, obligations to pay, and claims of the creditors on the assets of the business.
• Owner's Equity


  The interest of the owner on the business such as claims of the owner of the assets and the investment of the plus or minus the results of operations.
• Income


  The proceeds from the sale of merchandise and rendered services.
• Expenses


  The amount spent or cost incurred to generate income.
• Current Assets


  • Cash
  • Accounts Receivable
  • Notes Receivable
  • Interest Receivable
  • Advances to Employees
  • Accrued Income
  • Inventories
  • Supplies Inventory
  • Prepaid Expenses
• Noncurrent Assets


  • Long-term Investments
  • Property, Plant and Equipment (Land, Building, Equipment, Furniture and Fixtures)
  • Intangible Assets
• Contra-Asset Accounts


  • Allowance for Bad Debts
  • Accumulated Depreciation
• Current Liabilities


  • Accounts Payable
  • Notes Payable
  • Accrued Expenses
  • Unearned Income
• Noncurrent Liabilities


  • Loans Payable
  • Mortgage Payable
• Capital


  The value of cash and other assets invested in the business by the owner.
• Drawing


  An account debited for assets withdrawn by the owner for personal use from the business.
• Income


  • Service Income
  • Professional Income
  • Rental Income
  • Sales
  • Interest Income
  • Miscellaneous Income
• Expenses


  • Cost of Sales
  • Depreciation Expense
  • Gas and Oil
  • Interest Expense
  • Repairs and Maintenance
  • Salaries Expense
  • Supplies Expense
  • Taxes and Licenses
  • Utilities Expense
• Sales


  The cost of goods or merchandise sold within the accounting period
• Depreciation Expense


  The portion of the cost of property and equipment or fixed assets that has expired based on rational and systematic allocation procedure
• Gas and Oil


  An account title used for gasoline, diesel, lubricants, grease, etc. used by company vehicle
• Interest Expense


  Interest incurred from borrowed money or issued promissory note made by the company
• Repairs and maintenance


  Expenses incurred in repairing vehicle, building, machineries, vehicles and equipment owned by the business
• Salaries Expense


  Compensation given to the employees of a business
• Supplies Expense


  The cost of supplies that were consumed
• Taxes and Licenses


  The amount paid for the business permit, licenses and other government dues except the Income Tax paid, which is not allowable by the law as a deduction
• Utilities Expense


  The account title used for electricity, water and telephone bills
• Miscellaneous Expense


  Any amount paid as an expense which is not significant to warrant a particular classification
• The assets, liabilities and owner's equity are called nominal accounts which represent the Statement Financial position while income and expenses are also called real accounts represented the Statement of Comprehensive Income or the Income Statement
• Every business must have a chart of account according to their type of business
• Chart of Accounts for a merchandising business

  • Assets: Cash, Accounts Receivable, Inventories, Prepaid Expenses, Land, Building, Accumulated Depreciation: Building, Equipment, Accumulated Depreciation: Equipment, Vehicle, Accumulated Depreciation: Vehicle, Furniture and Fixtures, Accumulated Depreciation: Furniture and Fixtures
  • Liabilities: Accounts Payable, Accrued Expenses, Unearned Revenue, Long-term Notes Payable
  • Owner's Equity: Lopez, Capital, Lopez, Drawing
  • Income: Sales Revenue, Sales Returns and Allowances, Sales Discounts
  • Expenses: Purchases, Purchase Returns and Allowances, Purchase Discounts, Salaries Expense, Utilities Expense, Rent Expense
• A Chart of Accounts is a list of all account titles and is usually tailored to the operations of the business, with their corresponding account numbers
• Account titles are arranged in financial statement order: balance sheet accounts which include assets, liabilities, and owner's equity come first; and Account titles in the income statement which include revenue and expenses follow
• Chart of Accounts


  • Functions as a reference to the accountant or the bookkeepers to ensure the uniformity and consistency in the use of all the accounts in recording business transactions
  • Businesses could assign a range of numbers to major accounts to accommodate additional specific accounts that may arise in the future
  • The accounts are numbered for indexing and cross-referencing purposes; to enable a more efficient posting of the entries or in preparation for the transition to a computerized accounting system
• Steps in preparing the basic chart of accounts

  1. Use the title: Account Code in the first column and Account Title for the second column

  2. Prepare in the order of financial statements: assets, liabilities, equity, revenue, and expenses

  3. On the first column, choose an account code (code must range within the account classification)

  4. On the second column, write the account title corresponding to the account code
• Purpose of a chart of accounts

  • To segregate expenditures, revenues, assets and liabilities so that viewers can quickly get a sense of the financial health of the business
  • Lessens the confusion of the user as to the choice of account titles and permits consistency in recording routine transactions
• The chart of accounts of business is prepared by an accountant who has set up the accounting system
• Cash Disbursements Journal (CDJ)

  Also known as cash payments journal (CPJ), a journal used by businesses to manage and record payments of cash or cash outflows
• Cash Disbursement Journal


  Used for recording transactions credit to cash, such as the purchase of items on a cash basis, buying goods with down payment, paying account with a supplier, payment of expenses, and owner's cash withdrawal
• Typical information in Cash Disbursement Journal

  • The title "Cash Disbursements Journal"
  • Page number
  • Transaction date
  • Check voucher number or reference number of other source documents
  • Column Paid to (Name of the party to whom cash is paid)
  • Ref. (Reference) column
  • Cash credit column
  • Accounts Payable debit column
  • Purchases debit column
  • Purchase Discount credit column
  • Sundry (Other Accounts) debit column
• Special journals


  • Classify transactions of the same nature, provide information that could support in the decision making of the user
• General Journal (GJ)


  The journal used to record all other business transactions which are not recorded in the special journals
• Typical information in General Journal

  • The title "General Journal"
  • Page number
  • Transaction date
  • Account Title and Explanation (Particulars)
  • Reference column
  • Debit money column
  • Credit money column
• Posting


  The process of transferring recorded business transactions from the general journal to the general ledger