Activity 6.

The study of the elements of the financial statements and its accounts is a
requisite in the next step of the accounting process. You are now ready to develop your
own chart of accounts for a business engage in providing services to customers or
clients. You have the freedom to choose the nature of business provided they are engage
in providing services as their source of revenue. The chart of accounts must be arranged
from Assets, Liabilities, Equity, Revenue and Expenses account titles. Give a brief
description of the nature of business. Briefly described the usage of each account. You
may add line when necessary.

YOUR TURN

DESCRIPTION OF THE BUSINESS

Mad Brownies Corporation is a food business that sells sweet treats as stated on
it’s name. Mad Brownies came from the word “mad” which means “strong” and it best
describes the strong flavor of it which is the dark chocolate ingredient but it also has a
sweet aroma and sweet taste.

The Mad Brownies Corporation is a start-up small corporation. It is a form of corporation

due to it has several numbers of shareholders or owners. This made the business easily
established because an enough money formed by the owners are put in also with the borrowed
money.

CHART OF ACCOUNTS
MAD BROWNIES CORPORATION

ASSET ACCOUNTS:

ACCOUNT ACCOUNT TITLE DEBIT/CREDIT DESCRIPTION OF

NUMBER ACCOUNT
1000 Cash Debit Checking account
balance, currency,
coins, checks
received from
customers but not
yet deposited
1010 Accounts Debit Amounts owed to
Receivable the company for
products sold
1020 Merchandise Debit Cost of
Inventory merchandise
purchased but has
 not yet been sold
1030 Supplies Debit Cost of supplies
that have not yet
been used
1040 Building/Rented Debit Cost to acquire and
Space prepare
building/rented
(wala na dapat ni space use by the
labot kung mag company
rent ra)
1050 Equipments/Machi Debit Cost to acquire and
neries prepare equipment
for use by the
company
1060 Furnitures & Debit Cost to acquire and
Fixtures prepare for the
furnitures &
fixtures use by the
company
1070 Accumulated Credit Amount of the
Depreciation- buildings’/rented
Building/Rented space cost that has
Space been allocated to
Depreciation
(Wala na dapat ni Expense since the
labot kung mag time the
rent lang ug space) building/rented
space was acquired
1080 Accumulated Credit Amount of the
Depreciation- equipments/machi
Equipments/Machi neries cost that has
neries been allocated to
Depreciation
Expense since the
time the
equipments/machi
neries was acquired
1090 Accumulated Credit Amount of the
Depreciation- furnitures and
Furnitures & fixtures cost that
Fixtures has been allocated
to Depreciation
Expense since the
time the furnitures
and fixtures was
acquired
LIABILITIES ACCOUNTS:

ACCOUNT ACCOUNT DEBIT/CREDIT DESCRIPTION

NUMBER TITLE OF ACCOUNT
2000 Accounts Payable Credit Amount owed to
suppliers who
provided goods and
services to the
company but did
not require
immediate payment
in cash
2010 Notes Payable Credit The amount of
principal due on a
formal written
promise to pay.
Loans from banks
are included in this
account
2020 Interest Payable Credit Amount owed for
interest on Notes
Payable up until the
date of the balance
sheet. This is
computed by
multiplying the
amount of the note
times the effective
interest rate times
the time period
2030 Unearned Credit Amounts received
Revenues in advance of
delivering goods or
providing services.
When goods are
delivered or
services are
provided, this
liability amount
decreases
Accrued Expense-
Utilities
OWNER’S EQUIITY ACCOUNTS:

ACCOUNT ACCOUNT DEBIT/CREDIT DESCRIPTION

NUMBER TITLE OF ACCOUNT
3000 D. Marimon, and Credit Amount the owner
other owners invested in the
Capital company (through
cash or other
assets) plus
earnings of the
company not
withdrawn by the
owner
3010 D. Marimon, and Debit Amount that the
other owners owner has
Drawing withdrawn for
personal use during
the current
accounting year.
Income Sumarry

REVENUE ACCOUNTS:

ACCOUNT ACCOUNT DEBIT/CREDIT DESCRIPTION

NUMBER TITLE OF ACCOUNT
4000 Sales Credit Amounts earned
from goods sold to
clients, either for
cash or on credit.
When goods
provided are on
credit, both this
account and
accounts receivable
increase. When
goods provided are
for immediate cash,
both this account
and cash will
increase
Fees
EXPENSE ACCOUNTS:

ACCOUNT ACCOUNT DEBIT/CREDIT DESCRIPTION

NUMBER TITLE OF ACCOUNT
5000 Salaries Expense Debit Expenses incurred
for the work
performed by
salaried employees
during the
accounting period.
These employees
normally receive a
fixed amount on
weekly, monthly, or
annual basis
5010 Supplies Expense Debit Cost of supplies
used up during the
accounting period
5020 Rent Expense Debit Cost of occupying
rental facilities
during the
accounting period
5030 Utilities Expense Debit Costs of electricity,
heat, water, and
sewer that were
used during the
accounting period
5040 Telephone Expense Debit Cost of telephone
used during the
current accounting
period
5050 Internet Expense Debit Cost of internet
used during the
current accounting
period
5060 Advertising Debit Cost incurred by
Expense the company
during the
accounting period
for ads and
promotions.
5070 Depreciation Debit Cost of long-term
Expense assets allocated to
expense during the
current accounting
period
Taxes and Licenses