Types of Major Accounts Flashcards

Vocabulary flashcards covering the five major account types, common balance sheet accounts, and income statement accounts from Chapter 4 of Financial Accounting & Reporting.

Account

The basic storage of information in accounting; a record of the increases and decreases in a specific item of asset, liability, equity, income or expense.

Debit (Dr.)

Refers to the left side of an account, derived from the Latin word debere; sometimes referred to as the 'value received'.

Credit (Cr.)

Refers to the right side of an account, derived from the Latin word credere; sometimes referred to as the 'value parted with'.

Debit Balance

The account balance resulting when total debits exceed total credits.

Credit Balance

The account balance resulting when total credits exceed total debits.

Assets

Resources you control that have resulted from past events and can provide you with economic benefits.

Liabilities

Present obligations that have resulted from past events and can require you to give up economic resources when settling them.

Equity

Assets minus liabilities.

Income

Increases in economic benefits during the period in the form of inflows or enhancements of assets or decreases of liabilities that result in increases in equity, other than those relating to investments by the business owners.

Expenses

Decreases in economic benefits during the period in the form of outflows or depletions of assets or increases of liabilities that result in decreases in equity, other than those relating to distributions to the business owners.

Chart of Accounts

A list of all the accounts used by a business.

Balance Sheet Accounts

The classification of major accounts consisting of assets, liabilities, and equity.

Income Statement Accounts

The classification of major accounts consisting of income and expenses.

Cash

Includes money or its equivalent that is readily available for unrestricted use, such as cash on hand and cash in bank.

Accounts Receivable

Receivables supported by oral or informal promises to pay.

Allowance for Bad Debts

The aggregate amount of estimated losses from uncollectible accounts receivable.

Notes Receivable

Receivables supported by written or formal promises to pay in the form of promissory notes.

Prepaid Supplies

Represents the cost of unused office and other supplies.

Prepaid Rent

Rent paid in advance.

Inventory

Represents the goods that are held for sale by a business.

Prepaid Insurance

Cost of insurance paid in advance.

Land

The lot on which the building of the business has been constructed or a vacant lot which is used as a future plant site.

Building

The structure owned by a business for use in its operations.

Accumulated Depreciation-Building

The total amount of depreciation expenses recognized since the building was acquired and made available for use.

Equipment

Various assets such as machineries and other factory equipment, vehicles, delivery trucks, desks, cabinets, chairs, server, personal computer, and laptops.

Accumulated Depreciation-Equipment

The total amount of depreciation expenses recognized since the equipment was acquired and made available for use.

Accounts Payable

Obligations supported by oral or informal promises to pay by the debtor.

Notes Payable

Obligations supported by written or formal promises to pay by the debtor in the form of promissory notes.

Interest Payable

Interest incurred but not yet paid.

Salaries Payable

Salaries already earned by employees but not yet paid by the business.

Utilities Payable

Utilities already used but not yet paid.

Unearned Income

Items related to income that were collected in advance before they are earned.

Owner's Capital

The residual amount after deducting liabilities from assets; represents the owner's investment in the business.

Owner's Drawings

Money or assets withdrawn by the owner from the business for personal use.

Service Fees

Money earned by doing services.

Sales

Money earned by selling goods.

Interest Income

Money earned for letting others use your money.

Gains

Extra money made from something outside the main business operations.

Cost of Sales

The amount spent to buy or make the goods that were sold; also referred to as Cost of Goods Sold.

Freight-out

Cost to deliver goods to a customer.

Salaries Expense

Money paid to employees for their work.

Rent Expense

What is paid to use a space.

Utilities Expense

Represents the cost of utilities that have been used during the accounting period.

Supplies Expense

Represents the cost of supplies that have been used during the period.

Bad Debt Expense

The amount of estimated losses from uncollectible accounts receivable during the period.

Depreciation Expense

The portion of the cost of a depreciable asset that has been allocated to the current accounting period.

Advertising Expense

Represents the cost of promotional or marketing activities during the period.

Insurance Expense

Represents the cost of insurance pertaining to the current accounting period.

Taxes and Licenses

Represents the cost of business and local taxes required by the government for the conduct of business.

Transportation and Travel Expense

Necessary and ordinary cost of employees getting from one workplace to another which are reimbursable by the business.

Interest Expense

Represents the cost of borrowing money.

Miscellaneous Expense

Represents the various small expenditures which do not warrant separate presentation.

Losses

Expenses which may or may not arise from the ordinary course of business activities.