FABM Chapter 6: Types of Major Accounts Flashcards
basic storage of information in accounting
account
three parts of T-Account
- account title
- debit side
- credit side
describes the specific item of asset, liability, equity, income or expense
account title
the left side of the account
debit side
the right side of the account
credit side
it is sometimes referred to as “value parted with”
Credit
it is sometimes referred to as the “value received”
debit
the difference between the total debits and credits
Balance
the five major accounts
1.assets
2.liabilities
3.equity
4.income
5.expenses
economic resources you control that have resulted from past events and can provide you with future economic benefits
assets
your present obligation that have resulted from past events and can require you to give up resources when settling them
liabilities
assets minus liabilities
equity
increases in economic benefits during the period in the form of increases in assets, or decreases in liabilities, that result in increases in equity
income
2 income included
a. revenue
b. gains
arises in the course of the ordinary activities of a business
revenue
represent other items that meet the definition of income and may or may not arise in the course of the ordinary activities of the entity
gains
decrease in economic benefits during the period in the form of decreases in assets, or increases in liabilities , that result in decreases in equity
expenses
2 expenses included
a. expenses
b. losses
represent other items that meet the definition of expenses and may or may not arise in the course of the ordinary activities of the entity
losses
balance sheet accounts
- assets
- liabilities
- equity
income statement accounts
- income
- expenses
it’s the financial statement that presents the assets, liabilities, and equity of a business
balance sheet
it’s the financial statement that presents the income and expenses, and consequently the profit or loss of a business
income statement
is a list of all the accounts used by a business
chart of accounts
first digit signifies that this account is an ____
asset account
second digits refer to ________ and the sequence on how they are listed in the chart of accounts
specific account title
third digit signifies that the account is
contra account
assets account titles
- cash
- accounts receivable
- allowance for bad debts
- notes receivable
- inventory
- prepaid supplies
- prepaid rent
- prepaid insurance
- land
- building
liabilities
1.accounts payable
2. notes payable
3. interest payable
4. salaries payable
5. utilities payable
6. unearned income
equity
- owner’s capital
- owner’s drawings
3.
income
- service fees
- sales
- interest income
- gains
expenses
- cost of sales
- freight-out
- salaries expense
- rent expense
- supplies expense
- losses
includes money or it’s equivalent that is readily available for unrestricted use
cash
receivable supported by oral or informal promises
accounts receivable
the aggregate amount of estimated losses from uncollectible accounts receivable
allowance for bad debts
receivable supported by written or formal promises to pay in the form of promissory notes
notes receivable
It is the obligations of the company payable in money, goods or services.
liabilities
These are non-current tangible assets.
Property, Plant and Equipment
These assets are identifiable, non-monetary assets without physical substance.
Intangible Assets
It is the claim of the owner also known as the capital.
Owner’s Equity
It is the most liquid asset and is the medium of exchange for business transactions.
Cash
. It is an expense for leased office space, equipment or assets rented from others.
Rent Expense
Examples of this are cash, account receivable and prepaid expenses.
Assets
It is a written promise from the customer to pay his receivables on a certain future date.
Notes Receivable
represent the goods that are held for sale by a business
inventory
represent the cost of unused office and other supplies
prepaid supplies
rent paid in advance
prepaid rent
cost of insurance paid in advance
prepaid insurance
total amount of depreciation expenses recognized since the building was acquired and made available for use
accumulated depreciation - building -
total amount of depreciation expenses recognized since the equipment was acquired and made available for use
accumulated depreciation - equipment -
interest incurred but not yet paid
interest payable
salaries already earned by employees but not yet paid by the business
salaries payable
utilities already used but not yet paid
utilities payable
items related to income that were collected in advance before they are earned
unearned income
residual amount after deducting liabilities from assets
owner’s capital
record the temporary withdrawals of the owner during the period
owner’s drawings
revenues earned from rendering services
service fees
revenues earned from the sale of goods
sales
revenues earned from the issuance of interest bearing receivable
interest income
income earned from the sales of assets / enhancement of assets/ decreases in liabilities that are not classified as revenue
gains
latin word of debit
debere
asset of the company
trademark
latin word of credit is
credere
