MAJOR ACCOUNTS

• Expenses are the money that the company spends to produce the goods or services it sells
• Revenue or Income is the money that the company earns from its regular sales of products or services
• Allowance for Bad Debts is a contra account against accounts receivable
• Non-Current Assets


  • Property, Plant, and Equipment
  • Land
  • Buildings
  • Machinery and equipment
  • Furniture and fixtures
  • Motor vehicles
• Owner’s Equity


  Owner’s claims in the business, part of the total assets fully owned by the owners of the company
• Current Assets

  • Cash
  • Trading Account Securities
  • Accounts Receivable
  • Notes Receivable
  • Inventories
  • Supplies
  • Prepaid Expenses
  • Accrued Income
  • Short-term Investments
• Assets

  • Cash
  • Accounts receivable
  • Supplies
  • Computer systems
• Liabilities


  Debts owed by the business to persons other than the owner
• 5 Major Accounts

  • Assets
  • Liabilities
  • Owner’s Equity
  • Revenue
  • Expenses
• Expenses

  • Rent expense
  • Supplies expense
  • Salaries expense
• Current Assets


  Assets that can be collected, sold, and used up to one year after year-end date
• Equipment refers to office equipment such as computers, printers, and furniture
• Revenue

  • Sale of building materials
  • Accounting services by a CPA firm
• Classifications of assets

  • Current Assets
  • Non-Current Assets
• Assets


  Resources owned and controlled by the firm or the company
• Non-Current Assets


  Assets that cannot be collected, sold, and used up to one year after year-end date
• Liabilities

  • Notes payable
  • Accounts payable
  • Mortgage payable
• Accounts Receivable – Allowance for bad debts = Net Realized value
• Intangible Assets are non-physical assets in the form of trademarks and patterns
• Deferred Charges result from the prepayment of long-term expenses
• Accumulated Depreciation


  Deduction (except for land) from property, plant, and equipment
• Long-term Investments are investments made by the firm for long-term purposes
• Investment for long-term debit and equity securities - Held to maturity debt securities are reported at amortized cost. Available for sale securities are generally reported at fair value
• Examples of Property, Plant, and Equipment

  • Land
  • Buildings
  • Machinery
  • Equipment
  • Furniture and Fixtures
  • Motor vehicles
• Equipment


  • Refers to office equipment such as computer set, printer, air conditioner, and delivery equipment (vehicles)
• Current Liabilities are those that reach their due date for payment within one year after the year-end date. Examples include Accounts Payable, Notes Payable, Accrued Expenses, Unearned Income
• Intangible Assets


  Identifiable non-monetary asset without physical substance and from which future economic benefits are expected. Examples include computer software, patents, franchise, copyrights
• Non-current Liabilities are those that do not reach their due date for payment within one year after the year-end date. Examples include Loans Payable and Mortgage
• Furniture and Fixtures


  • Pertain to tables, chairs, cabinets, counters, and other types of furniture used in the business
• Tangible Assets are physical assets in the form of cash, furniture and fixtures, and supplies
• Expense is the decrease in resources resulting from the operations of the business
• Deferred Charges


  • Result of prepayment of long term expenses
  • Example: Machinery rearrangement cost, Pension cost pays in advance, insurance prepayments
• General Journal


  • Basic type with spaces for dates, account titles, explanations, references, and two amount columns
  • Significant contributions: Discloses complete effects of a transaction, provides a chronological record of transactions, helps prevent or locate errors
• General Ledger


  • Grouping of all accounts used in the preparation of financial statements, summarizes all activities recorded in its subsidiary ledger
• Intangible Assets


  • Identifiable non-monetary asset without physical substance and from which future economic benefits are expected
  • Examples: Computer software, patents, franchise, copyrights
• Revenue or Income


  • Increase in resources resulting from the performance of service or selling of goods
  • Examples of income accounts: Service revenue for service entities, Sales for merchandising and manufacturing companies, Interest Income
• Ledger


  • Accounting book where accounts and their related amounts from the journal are posted periodically
  • Also known as the 'book of final entry', comes in the form of a T-Account
  • Two kinds of ledgers: General ledger and subsidiary ledgers
• Journal


  • Book of original entry showing the debit and credit effects on specific accounts
  • General Journal and Special Journal are types of journals
• Owner's Equity


  • Comprised of two important elements: Capital (worth of cash and other assets invested in the business) and Drawing (account debited for assets withdrawn by the owner for personal use from the business)
• Special Journals


  • Used for voluminous quantities of similar and recurring transactions to prevent congestion in the general journal
  • Commonly used special journals: Cash Receipts Journal