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Principals of Accounting 1 , Week 2 notes

by: Kayla Adams

Principals of Accounting 1 , Week 2 notes ACCT 2003

Kayla Adams
Arkansas Tech University
GPA 2.6
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About this Document

These notes will help with the first exam
Principals of Accounting 1
Laura Griffin
Class Notes




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This 2 page Class Notes was uploaded by Kayla Adams on Monday August 29, 2016. The Class Notes belongs to ACCT 2003 at 1 MDSS-SGSLM-Langley AFB Advanced Education in General Dentistry 12 Months taught by Laura Griffin in Fall 2016. Since its upload, it has received 3 views. For similar materials see Principals of Accounting 1 in Accounting at 1 MDSS-SGSLM-Langley AFB Advanced Education in General Dentistry 12 Months.


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Date Created: 08/29/16
Chapter 2 Accounting principles 1 What is an account? - An account is a detailed record of all increases and decreases that have occurred in an individual asset, liability or equity during a specific period. - Assets are economic resources that are expected to benefit the business in the future; something the business owns or has control of that value. - Liabilities are a debt that is something that a business owes. A business usually has more asset accounts than liability accounts. - A receivable account involves a future receipt of cash. A payable involves a future payment of cash. Assets I. Cash – A business’s money includes bank balances, bills, coins, and checks. II. Accounts receivable – A customer’s promise to pay in the future for goods and services sold. Often described as “on account”. III. Notes receivable – A written promise that a customer will pay a fixed amount of money and interest by a certain date in the future. IV. Prepaid expense- A payment of an expense in advance. It is considered an asset because the prepayment provides a benefit in the future. V. Equipment, furniture and fixtures- the cost of equipment, furniture and fixtures (light fixtures and shelving). VI. Building – The cost of an office building, a store or a warehouse. VII. Land- The cost of land a business uses in operations. Liability I. Accounts payable- A promise made by the business to pay a debt in the future. Arises from a credit purchase. II. Notes payable- A written promise made by the business to pay a debt, usually involving interest, in the future. III. Accrued liability- An amount owed but not paid. A specific type of payable such as Taxes payable, Rent payable, and salaries payable. IV. Unearned revenue- Occurs when a company receives cash from a customer but has not provided the product or service. The promise to provide services or deliver goods in the future. Equity I. Owner, capital – Represents the net contributions of the owner in the business. Increase equity. II. Owner, Withdrawals- Distributions of cash or other assets to the owner. Decreases equity. III. Revenues- Earnings that result from delivering goods or services to customers. Increases equity. Examples include Service revenue and rent revenue. IV. Expenses- The cost of selling goods or services. Decreases equity. Examples include Rent Expense, Salaries expense, and utilities expense. Chart of Accounts A list of all of a company’s accounts with their account numbers. Balance Sheet Accounts Assets Liabilities Equity 101 Cash 201 Accounts Payable 301 Owner, Capital 111 Accounts Receivable 211 Salaries Payable 311 Owner , Withdrawals 121 Notes Receivable 221 Interest Payable 141 Office Supplies 231 Unearned Revenue 151 Furniture 241 Notes Payable 171 Building Income Statement Accounts ( Part of equity) 191 Land Revenues Expenses 401 Service 501 Rent Expense Revenue 511 Salaries 411 Interest Expense Revenue 521 Utilities Expense 531 Advertising Expense Ledger The record holding all the accounts of a business, the changes in those accounts and their balances.


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