Entrep

Cards (63)

  • The five major accounts
    • Assets
    • Liabilities
    • Owner's Equity
    • Revenues
    • Expenses
  • Assets
    Resources owned by the business as the result of company's transactions, have normal debit balance
  • Liabilities
    Present obligations of the business arising from past transactions or events, have normal credit balance
  • Owner's Equity
    The difference between total assets and total liabilities, represents ownership, has normal credit balance
  • Revenues
    Earnings arising from the main line of operations of the business, have normal credit balance
  • Expenses
    Costs being incurred by the business in generating revenues, have normal debit balance
  • Classification of accounts in the financial statements
    • Balance sheet accounts (assets, liabilities, owner's equity)
    • Income statement accounts (revenues, expenses)
  • Real accounts (balance sheet accounts)

    Accounts where the balance is not closed at the end of the accounting year and they are carrying forward to the next accounting period
  • Nominal accounts (income statement accounts)

    Accounts where the balance is closed at the end of the accounting period and does not carry forward to the next accounting period
  • Liability accounts
    • Accounts Payable
    • Notes Payable
    • Loan Payable
    • Mortgage Payable
    • Unearned Revenues
    • Accrued Liabilities (Salaries Payable, Utilities Payable, SSS Premium Payable, Withholding Tax Payable)
  • Owner's Equity accounts
    • Owner's Drawing
  • Revenue accounts
    • Sales
    • Service Revenue
    • Professional Fees
    • Interest Income
    • Rent Income
    • Gain on Sale of Other Assets
  • We need to study the five major accounts and its examples to identify the account titles affected in a given business transaction
  • Cash – this includes cash on hand (bill, coins, checks, money orders, or band drafts), cash deposited in bank (savings account or checking account) and cash fund (petty cash or payroll fund) which are unrestricted in use.
  • Accounts Receivable – this refers to the amount of money owed by the customers to the business. This arises from the business rendering services or selling goods to customers.
  • Prepaid Expenses - these refer to expenses that have been paid but not yet used up. Examples include insurance premiums, rent payments, and supplies purchased ahead of time.
  • Allowance for Bad Debts – (or allowance for doubtful accounts) this is a contra-asset or a valuation account which refers to the portion of accounts receivable that is estimated to be uncollectible at the end of a particular accounting period.
  • Notes Receivable – this represents the amount of money owed by the customer or debtor to the business evidenced by a promissory note.
  • Accrued Interest Receivable – the interest earned on note receivable but not yet received in cash.
  • Inventories – this represents assets held for sale in the ordinary course of business. In manufacturing, these are the materials or supplies to be used in the production process.
  • Prepaid Supplies – this represents supplies which remain unused at the end of the accounting period.
  • Land – this refers to real estate property owned by the company
  • Prepaid Rent – this refers to an advance payment made by the business to cover for future rental payments
  • Prepaid Insurance – it refers to the advance payment for the insurance of the business.
  • Land – this refers to the physical site owned by the business where the building is situated. It is not subject to depreciation.
  • Building – this refers to the physical structure owned and used by the business to conduct its business operation
  • Equipment – this refers to the machines used in the business and they include photocopying equipment, computers, laptops, ring binder, laminating machines, delivery vehicles, and vans, among others.
  • Furniture and Fixtures – this represents assets such as tables, chairs, filing cabinets and display racks.
  • Accumulated Depreciation – this is a contra-asset account which refers to the aggregate portion of the total cost of property, plant and equipment that has been charged to depreciation except land.
  • Property, plant and equipment is an account that refers to land, building, equipment and furniture
  • Intangible Assets – are assets that have no physical existence but provides the owner some selling and operational advantage over competitors. Examples of intangible assets are goodwill, patent, franchise, copyright and trademark.
  • Amortization – this is a contra-asset or valuation account which refers to the allocation of the acquisition cost of an intangible asset over its useful legal or accounting estimated life.
  • Accounts Payable – this refers to open accounts which represent the amount of money owed by the business to creditors or suppliers.
  • Notes payable – this represents the amount of money owed by the business to the supplier or creditor evidenced by a promissory note.
  • Loan Payable – this represents the amount of money borrowed by the business from third party creditors.
  • Mortgage Payable – this represents the amount of money borrowed by the business from a bank or a lending institution which is secured by collateral. It is usually payable more than one year.
  • Unearned Revenues – this represents cash collected by the business in advance for a service or good that is yet to be rendered or delivered.
  • Accrued Liabilities – are the amount owed by the business but not yet paid. Examples are Salaries Payable and Utilities Payable, SSs Premiums Payable and other payables incurred but not yet paid.
  • Salaries Payable – the amount of salaries of the employees but not yet paid.
  • Utilities Payable – refers to the costs associated with the usage of electricity, water, and communication of the business but not yet paid