General ledger accounts are used to sort and store a business’s transactions into categories. The general ledger encompasses assets such as cash, accounts receivable, land, investments, and equipment. It includes liabilities such as loans payable, accounts payable, and bonds payable. It also encompasses stockholders’ equity such as common stock and retained earnings. It features operating revenues such as sales […]
As previously discussed, debits and credits make up double-entry accounting, the standard method for recording transactions. Debits make up the left side of an account and credits make up the right side of an account. For each transaction, the amounts of debits and credits must be equal. If debits are greater than credits, an account has a debit […]
Assets are simply economic resources, tangible or intangible, which can be traded. There are a variety of asset accounts which compile to form a balance sheet. Cash asset accounts include currencies, coins, checking account balances, petty cash funds, and checks not yet deposited. Many companies have separate general ledger accounts for each checking account. On the balance sheet, these […]
Liability accounts usually detail a business’s credit balances such as debts in a general ledger. Liability accounts are divided into two groups: current and noncurrent. Current liabilities concern debts due within a year and noncurrent liabilities concern debts due in more than a year. An accounts payable account details credit owed to suppliers for products or services […]
Stockholders’ equity refers to money invested in a business, both at startup and after. Stockholders’ equity accounts are viewable on the business’s balance sheet, chart of accounts, and general ledger, and detail donated capital, paid-in capital, and retained earnings. Paid-in capital, or permanent capital, refers to amounts paid to a corporation when stock shares were issued. Paid-in capital […]
As previously mentioned, income statement accounts form part of the general ledger accounts of a business. These accounts are composed of operating revenues, operating expenses, non-operating revenues and gains, and non-operating expenses and losses. Note that the balances on these accounts are closed at the end of an accounting year. If a corporation, the balances will be transferred […]
The chart of accounts lists all accounts which record financial transactions, in more detail than the general ledger. Included is the name and number of the account and any descriptions which will designate the account. This is intended to improve the recording and reporting of financial transactions. For a chart of accounts to be helpful to a business, […]
A control account is a type of general ledger which provides a summary of the balances within a subsidiary ledger. This account simplifies the financial information contained in the general ledger, yet ensures that the information is accurate for financial statements. So, only the most vital or applicable information is presented, while the details are instead submitted to associated […]
Accounts payable details liabilities which are owed by a business to a supplier for products or services rendered but not yet paid for. Accounts payable deals in credit balances received in the form of invoices, purchase orders, receiving reports, and vendors’ bills, among others. Using the accrual method of accounting, liabilities are reported when goods […]
Accounts receivable is a payment claim held by a company against a customer for either goods or services supplied. Many purchases today are made on credit, where actual payment comes at a later date. Payment information is delivered to the customer by way of invoice, which specifies the date limit by which the payment should […]