Bea Arellano

FINALS – Accounting

1. Cash - is bills, coins, bank balances, money orders, and checks. Cash is
used to acquire goods and services or to eliminate obligations. Items
that do not fall within the definition of cash are post-dated checks and
notes receivable.
2. Cash Equivalent - are investments that can readily be converted into
cash.
3. Notes Receivable – balance sheet item that records the value of
promissory notes that a business is owed and should receive.
4. Accounts Receivable - refers to money due to a seller from buyers who
have not yet paid for their purchases.
5. Inventories - is the accounting of items, component parts and raw
materials a company uses in production, or sells. The verb “inventory”
refers to the act of counting or listing items.
6. Prepaid Expenses – a type of asset on the balance sheet that results from
a business making advanced payments for goods or services to be
received in the future.
7. Property, Plant, and Equipment – are long-term assets vital to business
operations. Property, plant, and equipment are tangible assets, meaning
they are physical in nature or can be touched; as a result, they are not
easily converted into cash.
8. Accumulated Depreciation - is the cumulative depreciation of an asset
up to a single point in its life. Accumulated depreciation is a contra asset
account, meaning its natural balance is a credit that reduces the overall
asset value.
9. Intangible Assets - is an asset that is not physical in nature. Goodwill,
brand recognition and intellectual property, such as patents, trademarks,
and copyrights, are all intangible assets. Intangible assets exist in
opposition to tangible assets, which include land, vehicles, equipment,
and inventory.
10. Accounts Payable - refers to an account within the general ledger that
represents a company's obligation to pay off a short-term debt to its
creditors or suppliers
11. Notes Payable - is a liability account where a borrower records a written
promise to repay the lender. When carrying out and accounting for notes
payable, "the maker" of the note creates liability by borrowing from
another entity, promising to repay the payee with interest.
12. Accrued Liability - refers to an expense incurred but not yet paid for by a
business. These are costs for goods and services already delivered to a
company for which it must pay in the future.
13. Unearned Revenue - is prepaid revenue. This is money paid to a business in
advance, before it actually provides goods or services to a client.
Unearned revenue is a liability, or money a company owes.
14. Mortgage Payable - contains the principal amount owed on a mortgage
loan. Any principal that is to be paid within 12 months of the balance
sheet date is reported as a current liability. The remaining amount of
principal is reported as a long-term liability
15. Bonds Payable - is a liability account that contains the amount owed to
bond holders by the issuer. This account typically appears within the long-
term liabilities section of the balance sheet, since bonds typically mature
in more than one year.
16. Capital - means the assets and cash in a business. Capital may either be
cash, machinery, receivable accounts, property, or houses. Capital may
also reflect the capital gained in a business or the assets of the owner in a
company.
17. Withdrawal - occurs when funds are removed from an account.
Withdrawals can be triggered for many types of accounts, including
bank accounts and pension accounts.
18. Income Summary - a holding account used to aggregate all income
accounts except for dividend expenses. Income summary is not reported
on any financial statements because it is only used during the closing
process, and at the end of the closing process the account balance is
zero.
19. Sales - refers to the revenues earned when a company sells its goods,
products, merchandise, etc.
20. Cost of Sales - the accumulated total of all costs used to create a product
or service, which has been sold. The cost of sales is a key part of the
performance metrics of a company, since it measures the ability of an
entity to design, source, and manufacture goods at a reasonable cost.
21. Salaries/Wages - a fixed amount of money or compensation paid to an
employee by an employer in return for work performed. Salary is
commonly paid in fixed intervals, for example, monthly payments of one-
twelfth of the annual salary.
22. Rent expense - is the cost incurred by a business to utilize a property or
location for an office, retail space, factory, or storage space. Rent
expense is a type of fixed operating cost or an absorption cost for a
business, as opposed to a variable expense.
23. Supplies Expense - refers to the cost of consumables used during a
reporting period.
24. Depreciation Expense - is the amount deducted from gross profit to allow
for a reduction in the value of something because of its age or how much
it has been used. When you buy and own equipment, your business may
be entitled to deduct a depreciation expense.
25. Doubtful Account Expense - is an account receivable that might become
a bad debt at some point in the future. If customers purchase on credit,
establishing an allowance of doubtful accounts is an important tool for
your balance sheet and income statement.
26. Contract Assets Account - An entity's right to consideration in exchange
for goods or services that the entity has transferred to a customer when
that right is conditioned on something other than the passage of time (for
example, the entity's future performance).
27. Adjunct Account - an account in financial reporting that increases the
book value of a liability account. An adjunct account is a valuation
account from which credit balances are added to another account.
28. Prepaid Expenses – a type of asset on the balance sheet that results from
a business making advanced payments for goods or services to be
received in the future.
29. Rules of Debit and Credit
The following are the rules of debit and credit which guide the system of
accounts, they are known as the Golden Rules of accountancy:
First: Debit what comes in, Credit what goes out.
Second: Debit all expenses and losses, Credit all incomes and gains.
Third: Debit the receiver, Credit the giver.
30. What is Accounting Equation? The accounting equation states that a
company's total assets are equal to the sum of its liabilities and its
shareholders' equity.
This straightforward number on a company balance sheet is considered
to be the foundation of the double-entry accounting system. The
accounting equation ensures that the balance sheet remains balanced.
That is, each entry made on the debit side has a corresponding entry (or
coverage) on the credit side.