Carkod’s workplace

The accounts

Posted on: August 12, 2008

Basically, the accounts of assets are:

  • Cash account: business transactions, flows of money are recorded here.
  • Accounts receivable: a receipt for future payment from the buyer, means that you´ve offered a service but the buyer didn´t paid you, here you account for that debt.
  • Inventory: for merchandise business, this is the most important and complex account, it treats the merchandise stored, which is used to operate the business.
  • Notes receivable: are the same as the accounts receivable but instead using promissory notes to allege the compromise.
  • Prepaid expense account: accounts for expense paid prior to use (car renting). On the contrary accrued expense, paid after received the service (salaries).
  • Plant assets accounts: are recorded separately according to the type of asset. The most used are the building account, which yields the value of the building as well as land account and equipment, furniture accounts.

Following, the liabilities most common accounts:

  • Notes payable: promissory notes for future payment to your lender.
  • Accounts payable: receipt for future payment to your lender.
  • Accrued liability expense: the opposite of prepaid expense.

Finally, the owner´s equity general accounts:

  • Common stock: the paid-in capital to begin the business by the shareholders or owners.
  • Retained earnings: the profit obtained after a period of business operation.
  • Dividends: benefits distributed to the shareholders.
  • Revenues and expenses accounts.

Note: if this is the first time you read about accounting this part maybe a little tricky, so you don´t know how are they classified. Feel free to ask me for further explanations.

source: my notes and “financial accounting by horgren and harrison 6th edition”.

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