Module 2: Recording Transactions Flashcards
What accounts are included in the chart of accounts?
Business can choose what kind of accounts they include in their recording and it will largely depend on the nature of the business and the materiality of the information in question.
Examples include
Assets: cash, accounts receivable, notes receivable, interest receivable, fixed assets, inventory, investments, PPE, prepaid insurance, prepaid rent, prepaid expenses, goodwill, other intangible assets, deferred tax asset.
Liabilities: 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.
Owner’s Equity: Common stock, capital stock, additional paid in capital, preferred stock, treasury stock, retained earnings.
Revenues: sales,
interest revenue, rent revenue, misc revenue.
Expenses: COGS, Interest expense, rent expenses, office supplies expenses, travel expenses, R&D, Depreciation expense, other expenses.
Where do debits and credits go in the accounts?
Debits go in the left column, and credits go in the right column of journal entries, T-accounts, and trial balances.
How do debits impact assets?
Debits increase assets.
How do credits impact assets?
Credits decrease assets.
How do credits impact liabilities/owner’s equity (excluding expenses)?
Credits increase liabilities/owner’s equity.
How do debits impact liabilities/owner’s equity (excluding expenses)?
Debits decrease liabilities/owner’s equity.
How do debits and credits impact revenue?
Revenues form part of owner’s equity and increase it, so theyincreasewith acreditanddecreasewith adebit.
How do debits and credits impact expenses?
Expenses are part of owner’s equity, but they reduce it so expensesincreasewith adebitanddecreasewith acredit, theoppositeof owners’ equity.
