Financial Statement Accounts Flashcards
Receivables
Money owed to a business by others. Assets
Accounts Receivables
Money owed to a business by customers for goods and services provided on credit
Notes Receivables
Money owed to business from debtors based on a formal written document stating terms of contract
Fixed Assets
Assets with long term useful life used in business operations. Tangible assets or Property Plant & Equipment
Inventory
Goods and materials held by business that are ready or will be ready for sale
Good will
Intangible asset that arises during acquisition. Amount acquirer pays for the target firm less the target’s fair market value of net assets.
Payables
Money owed by business to others. Liabilities
Accounts Payable
Money owed to suppliers for products or services purchased on credit
Wages Payable/Accrued Payroll
Money owed to employees for hours previously worked.
Notes Payable
Money owed to banks or creditors based on a formal written document stipulating the terms of contract
Common Stock
Shares that represent ownership of a business
Preferred Stock
shares representing ownership of business and rank above common stock. in cases if liquidation, preferred share holders will have claim on earnings before common stock holders
Contributed Capital
Money investor paid to buy stock directly from the company. (Stated value of shares + paid in capital). Amount over and above par value paid to the company
Additional paid-in capital
share holders contribution that exceeds a shares par value
Short-term investment is
an Asset
Accrued Expenses are
Liability
Debit
1) An accounting entry that increases asses, expenses and losses
2) Always on the left-hand side of an account
3) Decreases Liabilities, revenues and owners equity
Expenses and Loss accounts
1) Equity accounts
2) Debit to expense and loss accounts increases these accounts
3) Owner’s equity decreases
Credit
1) Increase liability, equity, revenue, or gain account
2) Right side of the account
3) Decrease assets and expenses
If under Assets, cash increases
it is listed under debit
if under assets, cash decreases
it is listed under credit
If under Liabilities, accounts payable decreases
it is listed under debit
If under liabilities, accounts payable increases
it is listed under credit
If under equity, account decreases
it is listed under debit
Decrease rent expense
Credit decreases expenses
Increase Depreciation
Debit increases expenses
Adding up all debits must
equal sum of all credits to keep the accounting equation balanced.
Journal Entry
A method to record a transaction
What is posting?
Transferring a journal entry to a specific account in ledger is posting to T-Account
T-Accounts show
1) Beginning balance of account
2) Debits and Credits
3) Ending Balance of account
For equipment maintenance expenses
1) Journal Entry ->Debit expense, Credit ->Accounts Payable (recognize expense immediately as it received maintenance service, records a liability to pay within a month or whatever the term is set to.
2) When cash is actually paid, Accounts Payable -> Debit, Cash->Credit
Recording an expense when the inventory is sold
COGS ( Cost Of goods sold) account
Matching Principle
Expenses for transaction are recognized at the same time as revenues are recognized.
Utilities Expense is an
Operating Expense
Owners Equity accounts
Revenue, Expenses, Gains, losses
Impact of crediting revenue on Owner’s equity
increases owners equity
Impact Of debiting expenses on Owner’s equity
reduces owners equity
When a sale is made
1)cash/accts receivable->debit, revenue->credit
2cogs->debit,inventory->credit,
Example of Payments In Advance
Gift Cards
Impact Of Advance payments on Accounting Equation
Assets (Cash increases), Liabilities (obligation to provide goods and services later) increases
Unearned Revenue/Deferred Revenue
Liability Account and not a revenue account
Journal Entry For Gift Card purchase & Redeem
1) Gift Card purchase=>Cash Debit, Deferred revenue Credit
2) Gift Card redeem=>Deferred revenue Debit, Revenue Credit
Revenue Recognition Journal Entries
1) Cash collected from customer (Debit), Revenue (Credit)
2) Cash not collected/accts receivable (debit), revenue earned (credit). When cash is ultimately paid by customer=> accts receivable(credit), cash (debit)
3)Cash collected from customer (debit), revenue was not earned (Deferred revenue) (credit)
After company received good or service
(revenue->credit, deferred revenue->debit)
Prepaid expenses are not expense accounts but they are
Assets. Example prepaid insurance.
Journal Entries for Prepaid Expenses When initially paid
1) Prepaid insurance (Assets) -> Debit
2) Cash ->Credit
Journal Entries to recognize prepaid expense
1) Insurance Expense -> Debit
2) Prepaid insurance ->Credit
Trial Balance is needed to prepare
Balance sheet and Income Statement
Trial balance accounts order
1)Assets 2)Liabilities 3)Equity 4)Revenue and Expense
Impact of interest on Notes Payable on Trial Balance
1)Accrued Interest Liability (credit) 2)Interest Expense (Debit)
