Fundamentals of Accounting: Module 4 Equation Expanded

A comprehensive set of vocabulary flashcards covering the expanded accounting equation, classifications of accounts, and specific definitions for assets, liabilities, equity, revenues, and expenses based on the BSA01 Module 4 transcript.

The Account

The basic summary device of accounting used to maintain separate records for each type of major account including Assets, Liabilities, and Owner’s Equity.

Real Accounts

Also known as permanent accounts, these comprise the elements of the balance sheet—assets, liabilities, and owner’s equity—and are not closed at the end of the accounting period.

Nominal Accounts

Also known as temporary accounts, these comprise the elements of the income statement—revenues, expenses, and drawing—and are closed or put to zero balance at the end of the accounting period.

Chart of Accounts

A listing of all accounts used in the general ledger of an organization, usually arranged in financial statement order: assets, liabilities, equity, revenues, and expenses.

Current Assets

Resources that a business expects to convert into cash, sell, or consume within one year or one standard operating cycle, whichever is longer.

Cash

Money and any medium of exchange that a bank accepts at face value, including coins, currency, checks, money orders, and bank drafts.

Cash Equivalents

Short-term, highly liquid investments readily convertible to cash, such as $3$-month maturing treasury bills, money market funds, and commercial papers.

Accounts Receivable

Amounts collectible from customers arising from the sale of goods or services on credit.

Notes Receivable

A promissory note received from a customer to pay the business a fixed amount of money on a specified date.

Interest Receivable

Interest earned on a note receivable that has not yet been received in cash.

Inventories

Assets held for sale in the ordinary course of business, or materials and supplies to be consumed in production or rendering services.

Prepaid Expenses

Expenses paid by the business in advance that have not yet been consumed or used, such as prepaid rent or insurance.

Non-current assets

Also called fixed or long-term assets, these are investments and physical resources a business intends to hold and use for longer than one year.

Furniture and Fixtures

Long-lived items used by the business such as counters, scales, display racks, cabinets, desks, and chairs.

Intangible Asset

Non-physical assets with a useful life of greater than $1$ year, including goodwill, trademarks, copyrights, computer software, and patents.

Current liabilities

Financial obligations that a business expects to settle or pay off within one year.

Accounts Payable

Amounts due to vendors who have supplied goods or services to the business.

Accrued Expenses

Amounts owed to others for unpaid expenses, such as wages payable.

SSS Premium Payable

Represents the amount of employee and employer contributions to SSS which are not yet remitted.

Withholding Taxes Payable

The amount of income tax withheld from employee salaries that the employer must remit to the BIR on a specified due date.

Non-current liabilities

Also known as long-term liabilities, these are debts and obligations a business does not expect to settle within the next $12$ months.

Mortgage Payable

Long-term debt for which the business entity has pledged certain assets as security to the creditor.

Bonds Payable

Long-term debt requiring interest and principal payments according to contractual terms, used by corporations to raise additional funds.

Capital

An equity account reflecting the initial money and subsequent contributions the business owner provides to the company.

Drawing

An equity account used to track any money that a business owner takes out of the business for personal use.

Operating revenues

Revenues that originate from the main business operations.

Service Revenue

Revenue earned from performing services for customers, sometimes called Professional Fees or Tuition Fees.

Royalty Income

Revenue earned by the owner of a property, patent, or copyrighted work for allowing others to use it to generate revenue.

Sales

The principal revenue account of merchandising and manufacturing companies representing revenue from selling goods to customers.

Gain on Sale of Assets

Revenue derived from the sale of business assets when the proceeds exceed the book value of the disposed asset.

General and Administrative (G&A) Expenses

The costs required to operate the core infrastructure of a business, such as office rent, office salaries, and utilities.

Depreciation Expense

The recorded wear and tear on office headquarters or office equipment over time.

Selling Expenses

Costs directly tied to marketing, distributing, and selling products or services, including advertising and sales commissions.