Accounting Chapters 3 & 4 Flashcards

Study Notes

Types of Accounts

Accounts Payable: Liability account with a credit balance found on the Balance Sheet.
Accounts Receivable: Asset account with a debit balance included in the Balance Sheet.
Capital Stock: Represents owners' equity with a credit balance on the Balance Sheet.
Retained Earnings: Component of owners' equity showing a credit balance on the Balance Sheet.

Financial Statements

Balance Sheet: Displays assets (like Cash, Buildings, Equipment, Accounts Receivable) with debit balances and liabilities (like Accounts Payable, Interest Payable, Rent Payable) with credit balances.
Income Statement: Shows revenues (such as Fees Earned, Interest Income, Sales) with credit balances and expenses (like Advertising Expense, Salaries/Wages Expense) with debit balances.
Statement of Retained Earnings: Reflects dividends as a debit balance.

Types of Assets

Cash: Highly liquid asset with a debit balance; also found in Balance Sheet.
Inventory: Merchandise asset with a debit balance listed on the Balance Sheet.
Prepaid Rent: Asset indicating advance payment with a debit balance on the Balance Sheet.
Unexpired Insurance: Asset representing future insurance benefits and has a debit balance on the Balance Sheet.
Depreciation: While assets depreciate, the Accumulated Depreciation account is a contra-asset with a credit balance.

Types of Expenses

Advertising Expense: Recorded as a debit on the Income Statement.
Rent Expense: Another expense that appears with a debit balance on the Income Statement.
Salaries/Wages Expense: Directly reduces net income with a debit balance noted on the Income Statement.
Cost of Goods Sold: Significant expense for sales operations, presenting with a debit balance on the Income Statement.

Types of Revenues

Fees Earned: Revenue earned that carries a credit balance in the Income Statement.
Interest Income: Revenue generated from interest with a credit balance on the Income Statement.
Rent Revenue: Income from property rental also recorded with a credit balance on the Income Statement.
Unearned Fees: Liability reflecting income received before services are performed, with a credit balance on the Balance Sheet.

Normal Balances

Assets and expenses typically have a debit balance.
Liabilities and owners' equity generally exhibit a credit balance.
Revenue accounts consist of a credit balance as well.

Contra-Assets

Accumulated Depreciation: A contra-asset account that shows accumulated depreciation for fixed assets, noted for its credit balance on the Balance Sheet.

Description

This quiz covers the key terms and concepts from Chapters 3 and 4 of accounting, focusing on types of accounts and their normal balances. Test your knowledge of liability, asset, expense accounts, and how they are represented on financial statements like balance sheets and income statements.