ACCT 410x Foundations of Accounting List of Terms - ACCT...

ACCT 410 - ACCOUNT LIST
The list of accounts below has been modified to include “classified balance sheet” categories [in red] .
Please also look at the uses and ratios associated with the classified balance sheet.
ASSETS
Current Assets : assets that are cash, will be turned in cash, or will be used up within one year.
 Cash : coins, currency, unrestricted amounts on deposit.
 Short-Term Investments/Marketable Securities: a business will investment excess cash by buying
stocks, bonds, etc. of other companies such as IBM, Microsoft, etc.
 Receivables: are cash amounts due from other parties. The word in front of receivable tells you why
it is owed. Some common examples:
- Accounts Receivable: cash due from customers or clients in very short time period,
generally 30 to 60 days of receiving the bill.
- Loan/Note Receivable: cash due which is evidenced by a formal written promissory note.
The note will specify when the payment is due and the interest rate.
- Interest Receivable: interest due on a loan. [Note: the principal portion is separate from
the interest portion.
- Dividends Receivable: dividends due from stock investments. These amounts are
“receivable” when the board of directors of the other company votes in favor of a dividend.
 Less: Allowance for Doubtful Accounts: portion of accounts receivable that is estimated to be
uncollectible.
 Inventory: items held for sale in the ordinary course of business.
 Prepaid Expenses : items where the service is paid for in advance. These items will be expensed
later during the “adjustment process. Some common examples:
- Prepaid Rent, Prepaid Insurance, Prepaid Salaries, Prepaid Advertising.
Property Plant, & Equipment: the following assets last longer than one year, are tangible, and are used
in operations to generate revenue  all are depreciated [expensed] over the period that they help generate
revenues. The exception is land. No explanations are included for those items that are obvious based on
their title.
 Land
 Buildings
 Furniture & Fixtures
 Machinery/Equipment:
 Capital Leases: Typically a leased items is not included on the balance sheet as it is not owned. If it
meets certain criterion, it is viewed as “an in - substance purchase” and included as an asset. If does
not meet the criterion, it is considered an operating lease and excluded from the balance sheet.
 Accumulated Depreciation : contra-asset [contra means negative balance] is opened for each
corresponding asset account. It reflects the amount of depreciation that has been recognized for each
asset [except land]. The cost allocated to a period is recorded as depreciation expense and the asset
value is reduced using this contra-asset account. This is recorded during the adjustment process.