TYPICAL ACCOUNT TITLES USED
STATEMENT OF FINANCIAL POSITION (Balance Sheet)
Assets
Assets are should be classified only into two: current assets and
non-current assets. Per revised Philippine Accounting Standards (PAS) No.
1, an entity shall classify assets as current when:
- it expects to realize the asset, or intends to sell or consume it, in
its normal operating cycle;
- it holds the asset primarily for the purpose of trading;
- it expects to realize the asset within twelve months after the
reporting period; or
- the asset is cash or a cash equivalent (as defined in PAS No. 7)
unless the asset is restricted from being exchanged or used to
settle a liability for at least twelvemonths after the reporting
period.
All other assets should be classified as non-current assets. Operating
cycle is the time between the acquisition of assets for processing and their
realization in cash or cash equivalents. When the entity's normal operating
cycle is not clearly identifiable, it is assumed to be twelve months.
Current Assets
Cash. Cash is any medium of exchange that a bank will accept for
deposit at face value. It includes coins, currency, checks, money orders,
bank deposits and drafts.
Cash Equivalents. Per PAS No. 7,these are short-term, highly liquid
investments that are readily convertible to known amounts of cash and
which are subject to an insignificant risk of changes in value.
Notes Receivable. A note receivable is a written pledge that the
customer will pay the business a fixed amount of money on a certain date.
, Accounts Receivable. These are claims against customers arising
from sale of services or goods on credit. This type of receivable offers less
security than a promissory note.
Inventories. Per PAS No. 2, these are assets which are (a)_held for
sale in the ordinary course of business; (b) in the process of production for
such sale; or (c) in the form of materials or supplies to be consumed in the
production process or in the rendering of services.
Prepaid Expenses. These are expenses paid for by the business in
advance. It is an asset because the business avoids having to pay cash in the
future for a specific expense. These include insurance and rent. These
prepaid items represent future economic benefits-assets-until the time these
start to contribute to the earning process; these, then, become expenses.
Non-current Assets
Property, Plant and Equipment. Per PAS No.16, these are tangible
assets that are held by an enterprise for use in the production or supply of
goods or services, or for rental to others, or for administrative purposes and
which are expected to be used during more than one period. Included are
such items as land, building, machinery and equipment, furniture and
fixtures, motor vehicles and equipment.
Accumulated Depreciation. It is a contra account that contains the
sum of the periodic depreciation charges. The balance in this account is
deducted from the cost of the related asset-equipment or buildings-to obtain
book value.
Intangible Assets. Per PAS No.38, these are identifiable,
nonmonetary assets without physical substance held for use in the
production or supply of goods or services, for rental to others, or for
administrative purposes. These include goodwill, patents, copyrights,
licenses, franchises, trademarks, brand names, secret processes,
subscription lists and non-competition agreements.
STATEMENT OF FINANCIAL POSITION (Balance Sheet)
Assets
Assets are should be classified only into two: current assets and
non-current assets. Per revised Philippine Accounting Standards (PAS) No.
1, an entity shall classify assets as current when:
- it expects to realize the asset, or intends to sell or consume it, in
its normal operating cycle;
- it holds the asset primarily for the purpose of trading;
- it expects to realize the asset within twelve months after the
reporting period; or
- the asset is cash or a cash equivalent (as defined in PAS No. 7)
unless the asset is restricted from being exchanged or used to
settle a liability for at least twelvemonths after the reporting
period.
All other assets should be classified as non-current assets. Operating
cycle is the time between the acquisition of assets for processing and their
realization in cash or cash equivalents. When the entity's normal operating
cycle is not clearly identifiable, it is assumed to be twelve months.
Current Assets
Cash. Cash is any medium of exchange that a bank will accept for
deposit at face value. It includes coins, currency, checks, money orders,
bank deposits and drafts.
Cash Equivalents. Per PAS No. 7,these are short-term, highly liquid
investments that are readily convertible to known amounts of cash and
which are subject to an insignificant risk of changes in value.
Notes Receivable. A note receivable is a written pledge that the
customer will pay the business a fixed amount of money on a certain date.
, Accounts Receivable. These are claims against customers arising
from sale of services or goods on credit. This type of receivable offers less
security than a promissory note.
Inventories. Per PAS No. 2, these are assets which are (a)_held for
sale in the ordinary course of business; (b) in the process of production for
such sale; or (c) in the form of materials or supplies to be consumed in the
production process or in the rendering of services.
Prepaid Expenses. These are expenses paid for by the business in
advance. It is an asset because the business avoids having to pay cash in the
future for a specific expense. These include insurance and rent. These
prepaid items represent future economic benefits-assets-until the time these
start to contribute to the earning process; these, then, become expenses.
Non-current Assets
Property, Plant and Equipment. Per PAS No.16, these are tangible
assets that are held by an enterprise for use in the production or supply of
goods or services, or for rental to others, or for administrative purposes and
which are expected to be used during more than one period. Included are
such items as land, building, machinery and equipment, furniture and
fixtures, motor vehicles and equipment.
Accumulated Depreciation. It is a contra account that contains the
sum of the periodic depreciation charges. The balance in this account is
deducted from the cost of the related asset-equipment or buildings-to obtain
book value.
Intangible Assets. Per PAS No.38, these are identifiable,
nonmonetary assets without physical substance held for use in the
production or supply of goods or services, for rental to others, or for
administrative purposes. These include goodwill, patents, copyrights,
licenses, franchises, trademarks, brand names, secret processes,
subscription lists and non-competition agreements.
