People linked to Accounting

• Users of accounting information

• Jobs related to Accountancy
User of accounting information
User of financial information or stakeholders are the person or entities that may have an interest in the business. These
users may be classified as external and internal users.
EXTERNAL INTERNAL
Investors are interested in the Management -is interested in financial
financial reporting that information that will help them
will provide them come up with decisions needed
insights about the for the effective and efficient
investment that they operations of the entity. The
make in the entity. It information provided by
will help them decide accounting may assist them in
whether he should planning, organizing,
invest in business, controlling and directing the
withdraw, or retain his company.
investment in a
company.
Lenders Are interested in Employee are concerned with financial
financial information information that will provide
that will provide them employees insights on the
assurance that the ability of the company to
amount that they lend provide their salaries and
will be paid on time. benefits.
Their concern for
payment is not limited
to the principal
amount alone but of
the interest that goes
along with it as well.

Suppliers are concerned on

whether the goods and
services that they sell
will be paid on time. If
the company is a
significant customer of
the supplier, it is also
important for the
supplier to determine
the stability of the
company as a regular
client.

Customers are connected with the

capacity of the
company to supply
continuously the
goods and services
that they demand.
They are also
concerned with the
cost and pricing of the
products and services
 that they pay.

Government is concerned with

financial information
that pertains to tax
payments and
compliance with
government rules and
regulations.

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Jobs Related to Accountancy
Accountancy is one of the many business programs one could choose after graduating from secondary education. To be a
professional accountant they must take the Certified Public Accountant Licensure Examination.
The following are the jobs related to accounting:
External Auditor examines the financial statements of his client company
and certifies its fair presentation. If you are interested to
be an external auditor, you are required to joined any
auditing firm.

Internal Auditor Is an auditor housed in a certain company. His job is to

improve the internal control of the business enterprise to
protect the interest of the owner/s. His checking focused
on the company’s transactions and not on its financial
statement. He makes sure that all transactions are properly
check and documented before payments are made.

Financial Accountant Prepares the financial statement of the company. He

should be aware that the prepared financial statements will
be the basis of the external auditor in his task of
expressing an opinion to it.
 Cost Accountant Prepares the cost accounting process of a product of the
business enterprise

_____________________________________________ 
Types of Major Accounts 

The Account 
The basic storage of information in accounting. It is a 
record of the increase and decrease in a specific item of 
asset, liability, equity, income or expense. 
 Allowance for bad debts – the aggregate of
T- Account estimated losses from uncollectible accounts
An account may be depicted through a T-account. It is receivable.
called as such because it resembles the letter “T”  Notes receivable – receivables supported by
written or formal promises to pay in the form of
Parts of a T-account promissory note.
 Inventory – represents the goods that are held
for sale by the business.
 Prepaid supplies – represents the cost of unused
1. Account Title – describes the specific item of office and other supplies.
asset, liability, equity, income, or expense.  Prepaid rent – rent paid in advance
2. Debit Side – the left side of the account.
 Prepaid insurance – cost of insurance paid in
3. Credit Side – the right side of the account
advance.
 Land – the lot on which the building of the
The Five Major Accounts
business has been constructed or a vacant lot
1. Assets
which is to be used as future plants site.
2. Liabilities
 Building – the structure owned by a business for
3. Equity
use in its operation.
4. Income
5. Expenses  Accumulated depreciation – the total amount
of depreciation expenses recognized since the
building was acquired and made available for
Also called the elements of the financial statements, are use.
actually the items in the expanded accounting equation.  Equipment – consists of various assets such as:
a. Machineries and other factory
Classification of the Five Accounts
equipment
Balance Sheet Accounts Income Statements b. Transportation equipment
Accounts c. Office equipment
1. Assets 1. Income d. Computer equipment
2.Liability 2. Expenses e. Furniture and fixtures
3. Equity
Liabilities
Assets Are your present obligations that have resulted from
The resources you control that have resulted from past past events and require you to give up resources to
events and can provide you with future economic settling them.
benefits
 Accounts payable – obligations supported
 Cash – includes money or its equivalent that is
by oral or informal promises to pay by the
readily available for unrestricted use.
debtor.
 Accounts receivable – receivable supported by
oral or informal promises to pay.
 • Notes payable – obligations supported by  Service fees – revenues earned from
written or formal promises to pay by the rendering services.
debtor in the form or promissory notes.  Sales – revenues earned from the sales of
• Interest payable – interest incurred but not goods.
yet paid.  Interest income – revenues earned from the
• Salaries payable – salaries already earned issuance of interest-bearing receivables.
by employees but not yet paid by the  Gains – income earned from the sale of
business. assets or from enhancements of assets or
• Utilities payable – utilities already used but decreases in liabilities that are not classified
not yet paid. as revenue.
• Unearned income – items related to income
that were collected in advance before they Expenses
are earned. Decreases in economic benefits during the period in
the form of outflows or depletions of assets or
Equity increases in liabilities that results in decreases in
Ownership interest in a business or simply the value equity, other than those relating to distributions to
after deducting liabilities from assets. the business owners.
Expenses includes:
• Owner’s Equity – the owner’s claim on the 1. Expenses arises in the course of the
assets. ordinary activities of a business.
• Owners drawings – this account is used to 2. Loses represents other items that meet the
record the temporary withdrawals of the definition of expenses and may or may not
owner during the period. arise in the course of the ordinary activities
of the entity.

 Cost of Sales or Cost of Goods Sold –

represents the value of inventories that have
been sold during the accounting period.
 Freight-out – represents the sellers’ costs of
delivering goods to customers.
 Salaries expense – represents the salaries
earned by employees for the service
rendered during the accounting period.
Income  Rent Expense – represents the rentals that
Increases in economic benefits during the period in have been used up during the accounting
the form of inflows or enhancements of assets or period.
decreased of liabilities that result in increases in  Utilities Expense – represents the cost of
equity, other than those relating to investments by utilities that have been used during the
the business owners. accounting period.
Income includes:  Supplies Expense – represents the cost of
a. Revenue arises in the course of the ordinary supplies that have been used during the
activities of the business accounting period.
b. Gains represents other items that meet the  Bad debts expense – the amount of
definition of income and may or may not estimated losses from uncollectible accounts
arise in the course of the ordinary activities receivable during the period.
of an entity
  Depreciation expense – the cost of The account titles in the chart of accounts are
depreciable assets that has been allocated to numbered in the following matter:
the current accounting period. 1. The first digit in the 3-digit number refers to the
major types of accounts
 Advertising expense – represents the cost
of promotional or marketing activities
during the period.
 Insurance Expense – represents the cost of
insurance pertaining to the current
accounting period.
 Taxes and Licenses – represents the cost of
business and local taxes required by the 2. The second digit in the 3-digit numbering refers
government for the conduct of the business. to the account titles and the sequence on how they
are listed in the chart of accounts.
 Transportation and Travel Expenses – 3. The third digit in the 3-digit, if not zero, signifies
that the account is contra account or an adjunct
 Transportation expense represents the
account to the related account.
necessary and ordinary cost of employees
To promote comparability, a business shall use
getting from one workplace to another
account titles that conform to the PFRS (Philippine
which are reimbursable by the business.
Financial Reporting Standards) and industry
 Travel expense represents cost incurred practices.
when travelling away from home on a. The chart of accounts of a bank should
business trips. conform to the chart pf accounts endorsed
by Bangko Sentral ng Pilipinas (BSP).
 Interest Expense – represents the cost of b. The chart of accounts of a cooperative
borrowing money. should conform to the chart of accounts
 Miscellaneous expense – represents various endorsed by the Cooperative Development
small expenditures which do not warrant Authority (CDA)
separate presentation. c. The chart of accounts and account
numbering system of a national government
 Losses– expenses which may or may not agency must conform to the Revised Chart
arise from the ordinary course of the of Accounts (RCA) issued by the
business. Commission on Audit (COA).
 A. Sale of asset, excluding inventory, at a
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price lesser than the carrying amount.
Operating Expenses:
 Decrease in the value of assets due to
destruction, damage, obsolescence, and Administrative/ General expense - expenses necessary
in the management of the office
changes in the market value.
Chart of Accounts Depreciation expense – Office furniture & fixtures
A list of all the accounts used by a business Taxes and Licenses
Account numbers are assigned to the accounts to Doubtful expense/ Bad debts expense/ Uncollectible
accounts expense
facilitate recording, cross-referencing, and retrieval
Office Salaries expense/ Salaries expense – Human
of information.
resource/ Finance/ Public relations
Each business shall formulate a chart of accounts Utilities expense – Office
that best suits their needs. Office Supplies
Rent expense – Office
Miscellaneous expense Freight-out
Insurance expense Rent expense – Store
Commissions expense

Selling expense – expenses incurred in directly selling Other expense – expenses not connected to the mainline
the merchandise of the business (not an operating expense)

Sales Salaries expense Interest expense

Depreciation expense – Store equipment Discount Lost
Utilities Expense – Store Loss on Sale of Equipment
Advertising expense