Overview
The lecture covers the most common basic account titles, their descriptions, and their relevance for journal entries and financial statements in basic financial accounting.
Asset Account Titles
- Cash refers to money held in hand or in the bank, including specific funds like petty cash.
- Accounts Receivable are amounts owed to the company from sales made on credit.
- Merchandise Inventory includes goods purchased for resale.
- Prepaid Expenses are payments made in advance for items like rent or insurance to be used over time.
- Supplies are consumable items like paper, pens, or calculators used for business purposes.
- Furniture and Fixtures include movable office items like desks and chairs, classified as property and equipment.
- Computer refers to computers used in business, with naming based on location or use.
- Equipment encompasses non-computer items like printers and fax machines; in manufacturing, may be called machineries.
- Vehicle includes company-owned cars used for business operations.
- Building refers to owned structures like office or store buildings.
- Land is a company-owned plot without buildings, not subject to depreciation.
Liability Account Titles
- Accounts Payable are amounts owed by the company to suppliers for credit purchases.
- Accrued Expenses are expenses incurred but not yet paid, such as utilities not yet billed.
- Unearned Revenue is money received before delivering goods or services; revenue is recognized upon fulfillment.
- Bank Loan refers to funds borrowed from banks, either short-term or long-term.
Equity Account Titles
- Owner’s Capital is the owner’s investment in the business.
- Owner’s Drawing refers to money or assets withdrawn by the owner for personal use.
Income and Expense Account Titles
- Sales/Revenue is the income from regular business operations (selling goods or services).
- Other Income includes earnings not related to main business sales, such as profit from selling used equipment.
- Salaries Expense is for employee wages.
- Utilities Expense covers costs like electricity and water; communication expenses may be included or separated.
- Representation Expense includes business-related meals or entertainment.
- Rent Expense is the cost for leased business premises.
- Depreciation Expense is the yearly allocation of the cost of long-term assets.
- Miscellaneous Expense includes minor costs not categorized elsewhere.
Key Terms & Definitions
- Assets — Resources owned by a business expected to provide future benefits.
- Liabilities — Obligations or debts owed by the business to others.
- Equity — The owner’s claim on business assets after liabilities.
- Accrual Basis — Accounting method where income and expenses are recorded when earned or incurred, not when cash is exchanged.
- Depreciation — Allocation of the cost of a tangible asset over its useful life.
- Prepaid Expenses — Payments made in advance for services or goods yet to be received.
- Unearned Revenue — Cash received before providing goods or services.
Action Items / Next Steps
- Review account titles and their descriptions in your reference books.
- Prepare to classify accounts as current or non-current in future lessons.
- Be ready to ask questions or seek clarification as needed.