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This text gives you more information about different kinds of accounts. Read the text and be ready to speak about each of them. While reading make your own list of business terms.


Assets.Assets are rights to use resources that are expected to result in future economic benefit for the accounting entity.

Cash. The Cash account shows the cash effects of a business's transactions. Cash means money and any medium of exchange that a bank accepts at face value. Cash includes currency, coins, money orders, certificates of deposit, and checks. The Cash account includes these items whether they are kept on hand, in a safe, in a cash register, or in a bank.

Notes Receivable. A business may sell its goods or services in exchange for a promissory note, which is a written pledge that the customer will pay the business a fixed amount of money by a certain date. The Notes Receivable account is a record of the promissory notes that the business expects to collect in cash.

Accounts Receivable. A business may sell its goods or services in exchange for an oral or implied promise for future cash receipt. Such sales are made on credit (on account). The Accounts Receivable account includes these amounts.

Prepaid Expenses. A business often pays certain expenses in advance. Pre­paid Expenses are assets because they will be of future benefit to the business. The ledger holds a separate asset account for each prepaid item. Prepaid Rent and Prepaid Insurance are prepaid expenses that occur often in business. Office Sup­plies are also accounted for as prepaid expenses.

Land. The Land account is a record of the land that a business owns.

Building. A business' buildings — office, warehouse, garage, and the like — appear in the Building account.

Equipment, Furniture and Fixtures. A business has a separate asset account for each type of equipment—Office Equipment and Store Equipment, for exam­ple. The Furniture and Fixtures account shows the cost of this asset.

Liabilities. Recall that a liability is a debt. A business generally has fewer liability accounts than asset accounts because a business' liabilities can be summarized under relatively few categories.

Notes Payable. This account is the opposite of the Notes Receivable account. Notes Payable records the amounts that the business must pay because it signed a promissory note to purchase goods or services.

Accounts Payable. This account is the opposite of the Accounts Receivable account. The oral or implied promise to pay off debts arising from credit pur­chases of goods appears in the Accounts Payable account. Such a purchase is said to be made on account. Other liability categories and accounts are added as needed. Taxes Payable, Wages Payable, and Salary Payable are accounts that appear in many ledgers.

Some other accounts may be as follows:

Owner's Equity. The claim that the owner has on the assets of the business is called owner's equity. In a proprietorship or a partnership, owner's equity is often split into separate accounts for the owner's capital balance and the owner's withdrawals.

Capital. This account shows the owner's claim to the assets of the business. After total liabilities are subtracted from total assets/ the remainder is the owner's capital. The balance of the capital account equals the owner's investments in the business plus its net income and minus net losses and owner withdrawals. In addition to the capital account/ the following accounts also appear in the owner's equity section of the ledger.

Withdrawals. When the owner withdraws cash or other assets from the business for personal use, its assets and its owner's equity both decrease. The amounts taken out of the business appear in a separate account entitled With­drawals, or Drawing. If withdrawals were recorded directly in the capital account, the amount of owner withdrawals would be merged with owner investments. To separate these two amounts for decision making, businesses use a separate ac­count for Withdrawals. This account shows a decrease in owner's equity.

Revenues. The increase in owner's equity from delivering goods or services to customers or clients is called revenue. The ledger contains as many revenue accounts as needed. If the business loans money to an outsider, it will also need an Interest Revenue ac­count. If the business rents a building to a tenant, it will need a Rent Revenue account. Increases in revenue accounts are increases in owner's equity.

Expenses. The cost of operating a business is called expense. Expenses have the opposite effect of revenues, so they decrease owner's equity. A business needs a separate account for each category of its expenses, such as Salary Expense, Rent Expense, Advertising Expense, and Utilities Expense. Expense accounts are de­creases in owner's equity.

Let’s check your list of business terms. Can you find the terms with the following meaning in it?

Капитал, уставной капитал, остаток, чистый доход, снятие со счета, убытки, заем, стоимость, расходы, активы, пассивы, наличные, чек, номинальная стоимость, депозиты, ссуда, платежное поручение, счета дебиторов, векселя к получению, долговое обязательство, в кредит, предоплата, счета к оплате, бухгалтерская книга.


T E X T 9


Read the text and be ready to characterize each group of accounting information users.

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