Fundamentals of Accountancy: Major Accounts

A record that tracks all changes to a specific asset, liability, or equity.

Assets that are expected to be converted into cash, sold, or disposed of within one year. This includes items like cash, accounts receivable, short-term investments, notes receivable, inventories, and prepayments.

Assets that are expected to be used for more than one year. Examples include equipment, vehicles, machinery, computers, and intangible assets like patents.

Represents the total amount of money customers owe a business for goods and services sold on credit.

A promise from a borrower to pay back a loan with interest. It's a more formal agreement than accounts receivable.

Includes raw materials, work-in-process items, and supplies used in the production process before they're turned into finished goods.

Payments made for goods or services that will be received in the future.

Assets that don't have a physical form but hold value. Examples include goodwill, stock investments, patents, and websites.

Revenue earned from investments in debt securities or receivables.

Liabilities that are due within one year. Example: Accounts Payable, which represents money owed to suppliers for goods or services purchased on credit.

Liabilities that are due after one year. Example: Notes Payable, which represents money borrowed from a lender with a longer repayment period.

Costs incurred to generate revenue. They are classified further as operating or non-operating.

The initial investment made by the owners of a business. It represents the initial capital contributed to start and operate the business.

Costs incurred to generate operating revenues. For example, rent, wages, utilities, and cost of goods sold.

Money withdrawn from the business by the owners. It reduces the equity of the business.

Costs incurred to generate non-operating revenues. These are not directly related to the core business activities. For example, interest expense, loss on sale of assets, or gains on investments.

The cost incurred to produce the goods sold. For example, raw materials, labor, and manufacturing overhead.

The revenue generated from the main business activities of a company. Example: Sales Revenue, which represents the income from selling products.

The revenue generated from activities outside of the company's normal operations. Example: Interest Income, which represents income earned from investments.

A listing of all accounts used by a company. It helps determine where money comes from and goes.

The fundamental accounting equation that states: Assets = Liabilities + Capital

An account with a balance opposite to the normal balance of its category. It's used to reduce the value of a related account. Example: Allowance for Doubtful Accounts, which reduces Accounts Receivable.

A systematic process of organizing financial accounts for record-keeping and reporting.

The accumulated earnings of a company that are not distributed to shareholders. It represents the company's retained profits.