Major Accounts Flashcards
Assets
are the resources owned and controlled by the firm.
Liabilities are obligations of the firm arising from past events which are to be settled in the future.
Owner’s Equity
Owner’s Equity are the owner’s claims in the business. It is the residual interest in the assets of the enterprise after deducting all its liabilities.
Income
Income is the increase in economic benefits during the accounting period in the form of inflows of cash or other assets or decreases of liabilities that result in increase in equity. Income includes revenue and gains.
Expenses
Expenses are decreases in economic benefits during the accounting period in the form of outflows of assets or incidences of liabilities that result in decreases in equity.
Current Assets
Current Assets are assets that can be realized (collected, sold, used up) one year after year-end date. Examples include Cash, Accounts Receivable, Merchandise Inventory, Prepaid Expense, etc.
Non-current Assets
Non-current Assets are assets that cannot be realized (collected, sold, used up) one year after year-end date. Examples include Property, Plant and Equipment (equipment, furniture, building, land), long term investments, etc.
Tangible Assets
Tangible Assets are physical assets such as cash, supplies, and furniture and fixtures.
Intangible Assets
Intangible Assets are non-physical assets such as patents and trademark
Current Assets
- Cash
- Accounts Receivable
- Supplies
- Notes Receivable
- Inventory
- Prepaid Expenses
- Accrued Income
Cash
Cash is money on hand, or in banks, and other items considered as medium of exchange in business transactions.
Accounts Receivable
Accounts Receivable are amounts due from customers arising from credit sales or credit services.
Notes Receivable
Notes Receivable are amounts due from clients supported by promissory notes.
Supplies
Supplies are items purchased by an enterprise which are unused as of the reporting date
Prepaid Expenses
Prepaid Expenses are expenses paid in advance. They are assets at the time of payment and become expenses through the passage of time.
Accrued Income
Accrued Income is revenue earned but not yet collected
Short term investments are the investments made by the company that are intended to be sold immediately
Non-Current Assets
Property, Plant and Equipment are long-lived assets which have been acquired for use in operations.
Long term Investments are the investments made by the company for long-term purposes
Intangible Assets
Intangible Assets are assets without a physical substance. Examples include franchise and copyright.
Liabilities
Liabilities are the debts and obligations of the company to another entity.
Current Liabilities
Current Liabilities. Liabilities that fall due (paid, recognized as revenue) within one year after year-end date. Examples include Accounts Payable, Utilities Payable and Unearned Income.
Non-current Assets
Non-current Assets are liabilities that do not fall due (paid, recognized as revenue) within one year after year-end date. Examples include Notes Payable, Loans Payable, Mortgage Payable, etc.
Accounts Payable
Accounts Payable are amounts due, or payable to, suppliers for goods purchased on account or for services received on account.
Notes Payable
Notes Payable are amounts due to third parties supported by promissory notes.
Accrued Expenses
Accrued Expenses are expenses that are incurred but not yet paid (examples: salaries payable, taxes payable)
Unearned Income
Unearned Income is cash collected in advance; the liability is the services to be performed or goods to be delivered in the future.
Owner’s Equity
Owner’s Equity is the residual interest of the owner from the business. It can be derived by deducting liabilities from assets.
Capital
Capital is the value of cash and other assets invested in the business by the owner of the business.
Drawing
Drawing is an account debited for assets withdrawn by the owner for personal use from the business.
Income
- is the Increase in resources resulting from performance of service or selling of goods.
- Income increases equity.
Example of Income Account:
Service revenue for service entities, Sales for merchandising and manufacturing companies
Expense
- Expense is the decrease in resources resulting from the operations of business
- Expenses decreases Equity in the accounting equation
Example of Income Account:
Salaries Expense, Interest Expense, Utilities Expense
Chart Of Accounts
- A chart of accounts is a listing of the accounts used by companies in their financial records.
- The chart of accounts helps to identify where the money is coming from and where it is going.
- The chart of accounts is the foundation of the financial statements.
Two Major Of Books Of Accounts
- Journal
- General Ledger
Journal
Companies initially record transactions and events in chronological order (the order in which they occur). Thus, the journal is referred to as the book of original entry. For each transaction the journal shows the debit and credit effects on specific accounts.
General Ledger
The general journal is the most basic journal. Typically, a general journal has spaces for dates, account titles and explanations, references, and two amount columns.
The following are the commonly used special journals:
Cash Receipts Journal – used to record all cash that has been received
Cash Disbursements Journal – used to record all transactions involving cash payments
Sales Journal (Sales on Account Journal) – used to record all sales on credit (on account)
Purchase Journal (Purchase on Account Journal) – used to record all purchases of inventory on credit (or on account)
General Ledger
The ledger refers to the accounting book in which the accounts and their related amounts as recorded in the journal are posted periodically. The ledger is also called the ‘book of final entry’ because all the balances in the ledger are used in the preparation of financial statements. This is also referred to as the T-Account because the basic form of a ledger is like the letter ‘T’.
A subsidiary ledger
is a group of like accounts that contains the independent data of a specific general ledger. A subsidiary ledger is created or maintained if individualized data is needed for a specific general ledger account.
An example of a subsidiary ledger is the individual record of various pa
