Major Accounts

Question 1

Assets

Answer 1

are the resources owned and controlled by the firm.
Liabilities are obligations of the firm arising from past events which are to be settled in the future.

Question 2

Owner’s Equity

Answer 2

Owner’s Equity are the owner’s claims in the business. It is the residual interest in the assets of the enterprise after deducting all its liabilities.

Question 3

Income

Answer 3

Income is the increase in economic benefits during the accounting period in the form of inflows of cash or other assets or decreases of liabilities that result in increase in equity. Income includes revenue and gains.

Question 4

Expenses

Answer 4

Expenses are decreases in economic benefits during the accounting period in the form of outflows of assets or incidences of liabilities that result in decreases in equity.

Question 5

Current Assets

Answer 5

Current Assets are assets that can be realized (collected, sold, used up) one year after year-end date. Examples include Cash, Accounts Receivable, Merchandise Inventory, Prepaid Expense, etc.

Question 6

Non-current Assets

Answer 6

Non-current Assets are assets that cannot be realized (collected, sold, used up) one year after year-end date. Examples include Property, Plant and Equipment (equipment, furniture, building, land), long term investments, etc.

Question 7

Tangible Assets

Answer 7

Tangible Assets are physical assets such as cash, supplies, and furniture and fixtures.

Question 8

Intangible Assets

Answer 8

Intangible Assets are non-physical assets such as patents and trademark

Question 9

Current Assets

Answer 9

• Cash
• Accounts Receivable
• Supplies
• Notes Receivable
• Inventory
• Prepaid Expenses
• Accrued Income

Question 10

Cash

Answer 10

Cash is money on hand, or in banks, and other items considered as medium of exchange in business transactions.

Question 11

Accounts Receivable

Answer 11

Accounts Receivable are amounts due from customers arising from credit sales or credit services.

Question 12

Notes Receivable

Answer 12

Notes Receivable are amounts due from clients supported by promissory notes.

Question 13

Supplies

Answer 13

Supplies are items purchased by an enterprise which are unused as of the reporting date

Question 14

Prepaid Expenses

Answer 14

Prepaid Expenses are expenses paid in advance. They are assets at the time of payment and become expenses through the passage of time.

Question 15

Accrued Income

Answer 15

Accrued Income is revenue earned but not yet collected
Short term investments are the investments made by the company that are intended to be sold immediately

Question 16

Non-Current Assets

Answer 16

Property, Plant and Equipment are long-lived assets which have been acquired for use in operations.
Long term Investments are the investments made by the company for long-term purposes

Question 17

Intangible Assets

Answer 17

Intangible Assets are assets without a physical substance. Examples include franchise and copyright.

Question 18

Liabilities

Answer 18

Liabilities are the debts and obligations of the company to another entity.

Question 19

Current Liabilities

Answer 19

Current Liabilities. Liabilities that fall due (paid, recognized as revenue) within one year after year-end date. Examples include Accounts Payable, Utilities Payable and Unearned Income.

Question 20

Non-current Assets

Answer 20

Non-current Assets are liabilities that do not fall due (paid, recognized as revenue) within one year after year-end date. Examples include Notes Payable, Loans Payable, Mortgage Payable, etc.

Question 21

Accounts Payable

Answer 21

Accounts Payable are amounts due, or payable to, suppliers for goods purchased on account or for services received on account.

Question 22

Notes Payable

Answer 22

Notes Payable are amounts due to third parties supported by promissory notes.

Question 23

Accrued Expenses

Answer 23

Accrued Expenses are expenses that are incurred but not yet paid (examples: salaries payable, taxes payable)

Question 24

Unearned Income

Answer 24

Unearned Income is cash collected in advance; the liability is the services to be performed or goods to be delivered in the future.

Question 25

Owner’s Equity

Answer 25

Owner’s Equity is the residual interest of the owner from the business. It can be derived by deducting liabilities from assets.

Question 26

Capital

Answer 26

Capital is the value of cash and other assets invested in the business by the owner of the business.

Question 27

Drawing

Answer 27

Drawing is an account debited for assets withdrawn by the owner for personal use from the business.

Question 28

Income

Answer 28

• is the Increase in resources resulting from performance of service or selling of goods.
• Income increases equity.

Question 29

Example of Income Account:

Answer 29

Service revenue for service entities, Sales for merchandising and manufacturing companies

Question 30

Expense

Answer 30

• Expense is the decrease in resources resulting from the operations of business
• Expenses decreases Equity in the accounting equation

Question 31

Example of Income Account:

Answer 31

Salaries Expense, Interest Expense, Utilities Expense

Question 32

Chart Of Accounts

Answer 32

• A chart of accounts is a listing of the accounts used by companies in their financial records.
• The chart of accounts helps to identify where the money is coming from and where it is going.
• The chart of accounts is the foundation of the financial statements.

Question 33

Two Major Of Books Of Accounts

Answer 33

• Journal
• General Ledger

Question 34

Journal

Answer 34

Companies initially record transactions and events in chronological order (the order in which they occur). Thus, the journal is referred to as the book of original entry. For each transaction the journal shows the debit and credit effects on specific accounts.

Question 35

General Ledger

Answer 35

The general journal is the most basic journal. Typically, a general journal has spaces for dates, account titles and explanations, references, and two amount columns.

Question 36

The following are the commonly used special journals:

Answer 36

Cash Receipts Journal – used to record all cash that has been received

Cash Disbursements Journal – used to record all transactions involving cash payments

Sales Journal (Sales on Account Journal) – used to record all sales on credit (on account)

Purchase Journal (Purchase on Account Journal) – used to record all purchases of inventory on credit (or on account)

Question 37

General Ledger

Answer 37

The ledger refers to the accounting book in which the accounts and their related amounts as recorded in the journal are posted periodically. The ledger is also called the ‘book of final entry’ because all the balances in the ledger are used in the preparation of financial statements. This is also referred to as the T-Account because the basic form of a ledger is like the letter ‘T’.

Question 38

A subsidiary ledger

Answer 38

is a group of like accounts that contains the independent data of a specific general ledger. A subsidiary ledger is created or maintained if individualized data is needed for a specific general ledger account.

An example of a subsidiary ledger is the individual record of various pa