Study Set Content:
Types of Prepaid Expenses
Prepaid Insurance
○ Prepaid Rent
○ Prepaid Supplies
○ Prepaid Interest
These are investments in stocks of other
companies. can be sold
Trading Securities
These are the unpaid promissory notes
given to creditors for money borrowed,
merchandise, and/or other assets bought on
credit.
Notes Payable
These are the amounts owed to employees
for services they have already rendered.
Salaries Payable
This is the interest incurred in the current
period but is not yet paid.
Interest Payable
These are expenses from the current period
that have yet to be paid as of the balance
sheet date.
Taxes Payable
These are liabilities to pay utility companies
for telephone, electricity, and water services
used by the business.
Utilities Payable
These are amounts of promissory notes that
have not been repaid.
Notes payable
These are amounts borrowed by the
business from banks or financial institutions.
Loans Payable
This is a business’ long—term debt for
which property has been given as security
or collateral. If the business fails to pay the
debt at maturity date, the creditor can take
the necessary legal action to force the sale
of the asset pledged so that said creditor
can be paid from the proceeds.
Mortgage payable
This account includes long—term contracts
of indebtedness payable usually from 5—10
years. When the business issues to the
public a promissory note under seal, the
amount of the issue is recorded in this
account.
Bonds payable
This is the excess of assets over liabilities of
the business, the single owner's total equity
in the firm’s assets.
Owner's Equity
is
synonymous to the terms owner’s capital,
net asset, and net worth. It represents the
claim of the owner over the assets of the
business after the liabilities have been
deducted.
Owner's Equity
This account title is used to record the
investment or share of the owner in a
business.
Owner’s Capital or Capital
This is the account used in
recording the withdrawals of capital by the
owner for personal use. Such withdrawals
are recorded as debits to an account
bearing the owner’s name followed by the
label drawing or personal, and the account
is periodically closed to the capital account.
Drawing or Owner’s Personal
Debits to the account may be considered
either as a decrease in capital
Negative sense
or as an increase in drawing
Positive sense
These accounts represent the inflow of cash
or other assets from clients or customers
for services performed or for goods sold by
the business. They are used to record
transactions involving earnings or income from the services rendered or from sales. It
increases the assets and owner’s equity.
Revenues or Income
This represents the total sales price of the
merchandise sold.
Sales or Merchandise Sales
This is the appropriate title used by doctors,
lawyers, accountants, engineers, and the
like in Practicing their profession. Amounts
earned for professional services rendered
are credited to this account.
Revenue from Fees
