ACCOUNTING

What is an account?
It is listing all the entries in the debit and credit in a general ledger/ financial record that is
arranged in chronological order
Different accounts title
ASSET ACCOUNTS
Cash – Cash includes: currency and coins, checks, money orders, bank drafts and demand
deposit accounts.
Held for Trading Securities – Temporary investments of excess cash which are primarily held for
short term gain.
Loans and Receivables – include trade receivables and non trade receivables. Trade
Receivables are claims against others which arise in the ordinary course of doing business.
Examples are: Trade accounts receivable- these are claims against customers arising from the
provision of services or delivery of goods on credit.
Trade Notes Receivable – A note receivables is a written promise from the customer to pay a
fixed amount of money on a certain future date. Being a formal and written document. It offers
more security than accounts receivable.
Non Trade Receivables – represent all other claims which are not trade. They may be non-trade
accounts receivable or non-trade notes receivable.
Inventories – These are assets which are (a) held for sale in the ordinary course of business; (b)
in the process of production for such sale; (c) in the form of materials or supplies to be
consumed in the production process or in the rendering of services.
Prepaid Expenses – These are expenses paid for by the business in advance. Examples are
Prepaid Rent and Prepaid Insurance. Prepaid expenses are assets when they are paid for.
Subsequently, they become expenses.
Long-term Investments – An investment is an asset held by an enterprise for the accretion of
wealth through capital distribution, such as interest, royalties, dividends and rentals, for capital
appreciation or for other benefits to the investing enterprise such as those obtained through
trading relationships. Investments are classified as long term when they are intended to be held
for long periods of time.
Property, Plant and Equipment – These are tangible assets held by an enterprise for use in the
production or supply of goods or services, or for rental to others, or for administrative purposes
and which are expected to be used during more than one accounting period. Examples are
land, building, transportation and delivery vehicles, furniture and fixtures, machinery and
equipment.
Intangible Assets – These assets are identifiable, non monetary assets without physical
substance. These include patents, copyrights, licenses, franchises and trademarks.
LIABILITY ACCOUNTS
Accounts Payable – This account is the opposite of accounts receivable. Examples include
purchasing goods or receiving services for which the buyer agrees to pay in the near future.
Notes Payable – A note payable is like a note receivable, except that this time the enterprise is
the one who promises to pay (not the one who receives the promise)
Accrued Liabilities – These are amounts owed to others for unpaid expenses. They are similar
to accounts payable, except that accounts payable are for items which have already been
consummated (such as the purchase of goods), while accrued expenses are for items which are
continuing in nature (such as utility services like electricity and water). Examples are salaries
payable, interest payable, taxes payable and accruals for utility expenses.
Unearned Revenues – Sometimes the enterprise receives payment before providing its
customers with goods or services. This creates an obligation on the part of the enterprise to
deliver goods or provide services. Once the enterprise complies with what is required of it, the
advance collections from customers are already earned and become part of income.
Mortgage Payable – This account is used for recording long-term debt(s) of an enterprise for
which the company has pledged certain assets as security for the debt (collateral).
Bonds Payable – A bond is a contract between the issuer and the lender specifying the terms of
repayment as well as the interest to be p aid.
EQUITY ACCOUNTS
Equity – or Capital is used to record the original and additional investments of the owner of the
business entity. Capital is increased by net income earned during the year. Conversely, a net
loss decreases capital.
Withdrawals – When the proprietor (or a partner in a partnership) withdraws cash or others
assets for non-business use, such withdrawals are reflected in the “withdrawals” account. Some
accounting references use the term “drawings” or “personal” instead of “withdrawals”
Income Summary – It is temporary account used to summarize all income and expenses for a
given period. If total income is greater than total expenses, a net income results. If the opposite
happens, a net loss was sustained by the business. Some accounting references use the term
“Profit or Loss Summary” instead of “Income Summary”.
INCOME ACCOUNTS
Service Income or Fees Income – Revenues earned by performing services for customers.
Sales – Revenues earned as a result of sale of merchandise.
EXPENSE ACCOUNTS
Cost of Sales – the cost incurred to purchase or to produce the products sold to customers
during the period. For a service business, any expense which could be directly attributed to the
provision of services is called cost of services.
Salaries and Wages Expense – Includes all payments as a result of an employer-employee
relationship such as salaries and wages, 13th mo. pay and other related employee benefits.
Utilities Expense (Telephone, Electricity, Fuel and Water Expenses) – Expenses related to use
of communication facilities, the consumption of electricity and water.
Rent Expense – Expense for leased office space,, equipment, or other assets rented from
others.
Supplies Expense – The account used for recording the usage of supplies (e.g. office supplies)
in the normal course of business.
Insurance Expense – Portions of premiums paid on insurance coverage which has expired.
Depreciation Expense – The portion of the cost of a tangible asset allocated or charged as
expense during the accounting period.
Bad Debts Expense – The amount of receivables estimated to be uncollectible and charged as
expense during an accounting period. Also known as “Uncollectible Accounts Expense”.
Interest Expense – An expense related to use of borrowed funds. Also known as finance cost.