Types of Major & Classification of Accounts

Comprehensive vocabulary flashcards covering the five major accounts, financial statements, and classification of specific account titles in basic accounting.

Statement of Financial Position (Balance Sheet)

Shows the financial condition/position of a business as of a given period, consisting of Assets, Liabilities, and Capital.

Statement of Comprehensive Income (Income Statement)

Shows the result of operations for a given period, consisting of Revenue, Cost, and Expenses, including components of other comprehensive income like revaluation surplus or gains/losses on benefit plans.

Statement of Changes in Owner’s Equity

Shows the changes in the Capital or Owner’s equity as a result of additional investment or withdrawals by the owner, plus or minus the net income or net loss for the year.

Statement of Cash Flows

Summarizes the cash receipts and cash disbursements for the accounting period, classifying them into operating, investing, and financing activities.

Assets

Economic resources owned by the business expected for future gain; these are property and rights of value owned by the business.

Liabilities

Debts, obligations to pay, and claims of the creditors on the assets of the business.

Owner’s Equity (Capital)

Includes the interest of the owners on the business and the investment of the owner plus or minus the results of operation.

Fundamental Accounting Equation

$$Assets = Liabilities + Owner's Equity$$

Current Assets

Assets expected to be realized, sold, or consumed in the normal operating cycle; held for trading; expected to be realized within twelve months; or cash/cash equivalents.

Cash

Includes coins, currencies, checks, bank deposits, and other cash items readily available for use in the operations of the business.

Cash Equivalent

Short term investments that are readily convertible to known amounts of cash which are subject to an insignificant risk changes in value.

Marketable Securities

Stocks and bonds purchased by the enterprise that are to be held for only a short span of time or short duration.

Accounts Receivable

The amount collectible from the customer to whom sales have been made or services have been rendered on account or credit.

Notes Receivable

A promissory note issued by the client or the customer in exchange for services or goods received as evidence of his/her obligation to pay.

Accrued Income

Income already earned but not yet received.

Prepaid Expenses

Includes supplies bought for use in the business or services and benefits to be received by the business in the future paid in advance.

Contra-Asset Accounts

Accounts deducted from the related asset account, such as Allowance for Bad Debts or Accumulated Depreciation.

Allowance for Bad Debts

Losses due to uncollectable accounts, deducted from accounts receivable to get the net realizable value in line with the characteristic of conservatism.

Accumulated Depreciation

The expired cost of property, plant, and equipment as a result of usage and passage of time, deducted to get the carrying value or book value.

Property, Plant and Equipment

Tangible assets held for use in production, supply of goods/services, or administrative purposes, expected to be used for more than one period.

Intangible Assets

Identifiable, non-monetary assets without physical substance, such as goodwill, patents, copyrights, licenses, and franchises.

Unearned Revenues

Obligations arising from advance payments received before goods or services are provided to the customer.

Accrued Liabilities

Amounts owed to others for expenses already incurred but not yet paid, such as salaries payable or taxes payable.

Mortgage Payable

A long-term debt of the business with security or collateral in the form of real properties.

Bonds Payable

A certificate of indebtedness under the seal of a corporation, specifying terms of repayment and the rate of interest.

Drawing

Represent the withdrawals made by the owner of the business either in cash or other assets.

Income Summary

A temporary account used at the end of the accounting period to close income and expense accounts.

Income

Increases in economic benefits during the period in the form of asset increases or liability decreases that result in increased equity (excluding owner investments).

Expenses

Decreases in economic benefits during the period in the form of asset decreases or liability increases that result in decreased equity (excluding owner distributions).

Account Form

A Balance Sheet layout where assets are listed on the left column and liabilities and owner's equity on the right column.

Report Form

A Balance Sheet layout showing assets, liabilities, and owner's equity in one straight column.

Natural Form

An Income Statement format that presents expenses according to nature; typically used in a service business.

Functional Form

An Income Statement format that presents expenses according to function (e.g., cost of sales); used in merchandising businesses.

Operating Activities

Cash inflows and outflows arising from the normal operations of the business, such as collections from customers and payments to suppliers.

Investing Activities

Cash inflows and outflows from the purchase and sale of property and equipment, or investment in debt or trading securities.

Financing Activities

Cash inflows and outflows from the owners and creditors, such as owner investments, loan proceeds, and owner withdrawals.