Account Classification Notes Summary PDF

Account Classification Notes Summary (10.22.24): ================================================ 1. **Asset** -- anything of value a person/company [OWNS] 2. **Liability** -- Something a person/company [OWES] 3. **Owners' Equity (OE)** -- Owner's personal investments in the business & rig...

Account Classification Notes Summary (10.22.24): ================================================ 1. **Asset** -- anything of value a person/company [OWNS] 2. **Liability** -- Something a person/company [OWES] 3. **Owners' Equity (OE)** -- Owner's personal investments in the business & rights to business assets 4. **Revenue/Income** -- The money a person/company makes/earns 5. **Expenses** -- The [cost] of money used to operate a business, and in return make money 6. **Withdrawal** -- Anything of value that is taken out of the business for [personal] use Account Classification Equation A = L + OE (Assets = Liability + Owners Equity) Account Names Notes Summary (10.22.24): ======================================= 1. **Asset** a. Supplies (papers, binders, paper clips, etc.) b. Equipment (Technology/machines & computer) c. Computer Equipment (separate from regular equipment) d. Accounts Receivable (payment later) -- money owed to business by customers e. Cash (payment now, either by checking or savings account) f. Petty Cash (small amounts of cash used to make small purchases for work) g. Building h. Vehicle i. Inventory (products you sell) j. Prepaid rent & insurance 2. **Liability** k. Accounts payable -- money a business owes to suppliers/vendors, short-term l. Notes payable -- a promise to pay a specific amount of money at a specified date/demand m. Car loan payable n. Loan -- money, property, or other material goods given to another party in exchange for future repayment o. Student loan -- loans to finance education p. Mortgage -- loaning money to purchase property q. Credit card r. Dividend payable -- a percentage of company's profits goes to shareholders 3. **Owners' Equity (OE)** s. Capital i. Balance Sheet Report -- financial statements that reports a company's assets, liabilities and shareholder equity at a specific point in time. 4. **Revenue/Income** t. Sales u. Earned (ex; bank interest earned) v. Income (product income) w. Investment revenue x. Services income y. Fees earned z. Product Income vs Services Income ii. Product: blow dryers, shampoo, etc. iii. Service: hair care, waxing, massages, nails, etc. 5. **Expenses** a. Advertising expense b. Rent expense c. Phone expense d. Wages expense e. Repairs/maintenance expense f. Internet expense g. Insurance expense h. Gas expense i. Lease 6. **Withdrawal** j. Withdrawal/withdraw/draw Key Terms ========= 1. **Sole proprietorship --** You (owner) are responsible for all profits and losses. You and your business are legally the same. The business is not a separate entity from you. 2. **LLC** (Limited Liability Corporation) -- workers/members are not personally liable for the company's debts. 3. **Partnership** -- two or more who are in a contract *[\*Contract is a legal agreement/deal between two or more parties\*]* 4. **Corporation** -- Owned by shareholders/stockholders. If you buy a stock from a company, you are a shareholder and an owner of a corporation 5. **IRS (Internal Revenue Service)** -- Federal government responsible for collecting U.S federal taxes 6. **CPA (Certified Public Accountant)** - 7. **Fiscal Year** a. Calendar Year: Jan 1 to Dec 31 b. Oct 1 to Sept 30 (following year) c. July 1 to June 30 (following year) 8. **Certificate of Deposits (CD)** -- A savings account that holds a fixed amount of money for a fixed period of time