Chart of Accounts Flashcards
What is a chart of accounts?
A listing of the names of the accounts that a company has identified for recording transactions in its general ledger.
In what order are accounts typically listed in a chart of accounts?
- Balance sheet accounts
- Income statement accounts
What are the main categories under balance sheet accounts?
- Assets
- Liabilities
- Owner’s (Stockholders’) Equity
What are the main categories under income statement accounts?
- Operating Revenues
- Operating Expenses
- Non-operating Revenues and Gains
- Non-operating Expenses and Losses
How can a company’s organization chart influence its chart of accounts?
It can serve as an outline, with each department accountable for its own expenses.
What is the typical structure of account numbers in a chart of accounts?
Account numbers are often five or more digits, with each digit representing a division, department, or type of account.
If the first digit of an account number is ‘1’, what type of account does it represent?
Asset account
What type of account does a first digit of ‘5’ indicate?
Operating expense account
In a chart of accounts, what is the purpose of leaving gaps between account numbers?
To allow for the addition of accounts in the future.
What are the account numbers for current assets in a sample chart of accounts?
10000 - 16999
What account number range is typically assigned for long-term liabilities?
25000 - 26999
Fill in the blank: The account number range for operating revenues is _______.
30000 - 39999
True or False: A chart of accounts for a small company will generally be as large and complex as that of a large corporation.
False
What is the purpose of the ‘To Increase’ column in a small company’s chart of accounts?
To indicate whether a debit or credit will increase the amount in the account.
What does ‘Accumulated Depreciation’ represent?
The amount of an asset’s cost that has been allocated to Depreciation Expense since acquisition.
What type of account is ‘Unearned Revenues’?
Liability account
How many accounts are needed for every transaction according to the double-entry system?
At least two accounts
What is the general rule for increasing an asset account?
Debit the account
What is the general rule for increasing a liability account?
Credit the account
What is the typical treatment of expense accounts in terms of debits and credits?
Expense accounts are debited and have debit balances.
What happens to the amount in the ‘Mary Smith, Drawing’ account at the end of the year?
It is transferred into the ‘Mary Smith, Capital’ account.
What is the account number for ‘Cash’ in a small company’s chart of accounts?
101
What does the account ‘Interest Payable’ represent?
Amount owed for interest on Notes Payable up until the balance sheet date.
Fill in the blank: ‘Salaries Expense’ is classified as a _______.
Operating Expense
What is the purpose of accounting software regarding the chart of accounts?
To assist in recording transactions and often automatically assigns accounts.
What should you consider when using accounting materials?
They are an introduction and complexities may not be presented.
