HBX- Accounting 2 Flashcards
What steps are taken before creating financial statements?
- creating journal entries,
- posting to T-accounts
- creating a trial balance
Common Asset Accounts
- Cash
- Accounts Receivable
- Notes Receivable
- Interest Receivable
- Inventory
- Investments
- Fixed Assets
- Property, Plant, & Equipment (P,P,&E)
- Prepaid Insurance
- Prepaid Rent
- Other Prepaid Expenses
- Goodwill
- Other Intangible Assets
- Deferred Tax Asset
- Cash Equivalents
- Accumulated Depreciation (contra-asset- mentioned in module 4- opposite of fixed assets)
- Allowance for Doubtful Accounts (contra-asset - mentioned in module 4- opposite of accounts receivable)
- Reserve for Obsolete Inventory (contra-asset - mentioned in module 4- opposite of inventory)
What Category Does this fall in?
Goodwill
Assets
Goodwill is the excess of the amount paid to acquire a business over the fair market value of the business’ net assets. It is called Goodwill because this excess is often associated with the assumed value of the otherwise undefined intangible aspects of the business. Although a company may feel that it has value in its brands and name, goodwill is only recorded as the result of an acquisition. Self-generated brand value is not recorded as goodwill.
Common Liability Accounts
- Accounts Payable
- Interest Payable
- Notes Payable
- Current Portion of Notes Payable
- Wages Payable
- Taxes Payable
- Accrued Interest
- Accrued Wages
- Accrued Taxes
- Deferred Revenue
- Short Term Debt
- Long Term Debt
- Deferred Tax Liability
- Other Liabilities
What Category do these fall under?
Accrued Expenses, Accrued Wages, & Accrued Taxes
Liabilities!
Accrued Liability
Liability accounts that record expenses that have been recognized on the income statement but have not yet been paid. Similar to accrued expenses.
Accrued Expenses
Liability account used to record amounts at the end of an accounting period to recognize expenses that were incurred in the period but for which no invoice has yet been received nor payment has yet been made. Examples are salaries/wages payable, accrued rent expense, accrued legal fees. When the accrual is made, the debit is to the appropriate expense account (payroll expense, rent expense, legal expense) and the credit is to the accrued expense account, which is a liability because it represents an obligation which will need to be paid in the future. Remember accrued expenses are NOT expenses.
Common Owners Equity Accounts
- Common Stock
- Capital Stock
- Additional Paid-In Capital
- Preferred Stock
- Treasury Stock- contra account mentioned in module 4- opposite of common stock
- Retained Earnings
Common Stock
Common Stock (categorized as owner’s equity)
The most typical stock or share type representing an ownership interest in the business. Although there can be different classes of common shares, owners of these shares usually have certain rights including the right to share proportionately in the profits of the business and the right to elect directors and vote on proposals made by the directors to the shareholders.
Paid-In Capital
Paid-In Capital (Categorized as Owner’s Equity)
Amounts contributed to (invested in) the business by the owners.
Preferred Stock
Preferred Stock (Categorized as Owner’s Equity)
A special class of stock that differs from common stock in some ways. Often, preferred shares may have a preference in their claim on profits of the business which calls for a certain percentage of dividends to be paid to preferred shareholders before any can be paid to common shareholders. Offsetting this preferential treatment, preferred shareholders may sacrifice certain rights, such as the right to vote for directors or other issues raised by the board of directors. The particular benefits and restrictions of any preferred shares can differ from company to company but they are spelled out in detail for any particular class of preferred shares issued by a company.
Common Revenue Accounts
- Sales
- Sales Revenue
- Interest Revenue
- Rent Revenue
- Miscellaneous Revenue
- Other Revenue
- Sales Discounts, Returns, and Allowances- contra account mentioned in module 4 - opposite of sales
Common Expense Accounts
- Cost of Goods Sold
- Interest Expense
- Rent expense
- Office Supplies Expense
- Travel Expense
- Research & Development (R&D) Expense
- Depreciation Expense
- Other Expenses
Revenue & Expenses are….
Considered Owner’s Equity
Debits & Credits
- DEBITS- mean LEFT ½ of the accounting transaction (it increases asset balances)
- CREDITS- mean RIGHT
The terms do not mean increase or decrease, they do not mean good or bad. They simply mean left and right. This is simply an accounting rule based on a historical convention.
What increases and what decreases in the debit / credit model?
ACCOUNTS PAYABLE increases with a
Credit
How to record on a T-ACCOUNT for the purchase of 5 cases of crunchie bars. (for a grocery store)
Suppose on June 30, 2013 Cardullo’s received an electricity bill for $900 and paid it immediately.
How to record accrued expenses.
Ex: Bikram Yoga Recording an Equipment Maintenance Expense.
Record on a Journal Revenue/Expense from this sale.
(This follows the matching principle)
What happens when a customer purchases a $100 gift card from Cardullo’s?
(This is an example of deferred Revenue)
How to record a prepaid expense on a journal entry.
- On January 1, 2013 records a debit to Prepaid Insurance (an asset) and a credit to Cash
- Calculate the usage each month!
How to turn T accounts into a trial balance
