Types of Major Accounts PDF

CHAPTER 4 TYPES OF MAJOR ACCOUNTS GROUP 1  THE ACCOUNT is the basic storage of information in accounting. It is a record of the increases and decreases in a specific item of asset, liability, equity, income or expense. An account may be depicted through a "T-ac...

CHAPTER 4 TYPES OF MAJOR ACCOUNTS GROUP 1  THE ACCOUNT is the basic storage of information in accounting. It is a record of the increases and decreases in a specific item of asset, liability, equity, income or expense. An account may be depicted through a "T-account." A "T- account" is called as such because it resembles the letter "T." A "T-account" has three parts, namely: 1. Account title - describes the specific item of asset, liability, equity, income or expense. 2. Debit side - the left side of the account. 3. Credit side - the right side of the account. This is the "account title." THE FIVE MAJOR ACCOUNTS ASSETS The five major accounts, also called the elements of the LIABILITIES financial statements, are actually the items in the expanded EQUITY accounting equation discussed in the previous chapter. Let us recall a. revenue INCOME b. Gains these items. a. Expenses EXPENSES b. Losses  are the economic resources you control that have resulted from ASSETS past events and can provide you with future economic benefits. LIABILITIES are your present obligations that have resulted from past events and can require you to give up resources when settling them. EQUITY is assets minus liabilities a. revenue is increases in economic benefits during the period in the form of INCOME b. Gains increases in assets, or decreases in liabilities, that result in increases in equity, excluding those relating to investments by the business owner a. Expenses is increases in economic benefits during the period in the form of EXPENSES b. Losses decreases in assets, or increases in liabilities, that result in decreases in equity, excluding those relating to distributions to the business owner  CLASSIFICATION OF THE FIVE MAJOR ACCOUNTS ➤The balance sheet (or the statement of financial position) is one of the components of The five major accounts are classified according to the finanacial statement where a complete set of financial statements. The they appear as follows: balance sheet shows the financial position of a business. ➤ The income statement (or the statement of profit or loss) is a sub-component of the statement of comprehensive income, which is also one of the components of a complete set of financial statements. The income statement shows the profit or loss of a business.  CHART OF ACCOUNTS BALANCE SHEET ACCOUNTS A balance sheet account represents the things an organization owns, The COA is the detailed directory of accounts that organizes and records a owes, and what value is left for the owners at any point in time. It is a very business's every financial transaction. It is divided into account categories like: important piece in trying to understand a business's financial health. Current Assets: What the company owns might be in the form of cash, Advantage: inventory, and equipment. *Provides an overview of financial health. *Assures investors and lenders with more confidence. Liabilities: Debts that a company owes, such as loans and bills. *Useful for comparing performances over time. Equity: The owner's interest in the business. Disadvantages: Income: Cash inflow that the business generates/receives in, such as sales. *Only will show finances at one specific point in time. Does not denote cash flow, or how much money is actually moving. Expenses: Costs the business incurs (e.g., rent, salaries). Every account has been uniquely coded or numbered, which makes tracking the source and Some of an individual's assets may be undervalued. In other words, a destination of money quite easy. It is one of the major ways of keeping balance sheet is useful as a snapshot of financial status but requires the finances organized, and it helps in making informed financial decisions. support of other financial reports to have its complete representation. CHART OF ACCOUNTS BALANCE SHEET ACCOUNTS  *Refers to the company’s overall profit and expenses over a period of time Revenue Cost of goods sold INCOME STATEMENT Gross Profit ACCOUNTS. Operating Expenses Other Expenses Net Income  This refer to the exercises or practice activities designed to help individuals DRILLS ON ACCOUNT x understand and master the classification of various account titles in accounting. Account TITLES titles are the names of specific accounts used to record transactions in the general ledger. Assets (e.g., Cash, Accounts Receivable, Inventory) Liabilities (e.g., Accounts Payable, Notes Payable) Equity (e.g., Common Stock, Retained Earnings) Revenues (e.g., Sales, Service Revenue) Expenses (e.g., Salaries Expense, Rent Expense) e  EXAMPLES These are the following examples of drills on accounting title. THANK YOU FOR LISTENING.