Current Assets
• Cash: Any medium of exchange that a bank will accept for deposit at face value.
Includes coins, currency, checks, money orders, bank deposits, and drafts.
• Cash Equivalents: Per PAS No. 7, short-term, highly liquid investments readily
convertible to known amounts of cash and subject to insignificant risk of changes in
value.
• Notes Receivable: A written pledge that the customer will pay the business a fixed
amount of money on a certain date.
• Accounts Receivable: Claims against customers arising from sale of services or
goods on credit. Offers less security than a promissory note.
• Inventories: Per PAS No. 2, assets held for sale in the ordinary course of business,
in the process of production for such sale, or in the form of materials or supplies to
be consumed in production or rendering of services.
• Prepaid Expenses: Expenses paid in advance by the business. Considered assets
because they represent future economic benefits until they become expenses (e.g.,
insurance, rent).
Non-current Assets
• Property, Plant and Equipment (PPE): Per PAS No. 16, tangible assets held for use
in production, supply of goods or services, rental, or administrative purposes,
expected to be used for more than one period. Examples: land, buildings,
machinery, equipment, furniture, fixtures, motor vehicles.
• Accumulated Depreciation: A contra account containing the sum of periodic
depreciation charges. Deducted from the cost of related assets to obtain book
value.
• Intangible Assets: Per PAS No. 38, identifiable nonmonetary assets without
physical substance, held for use in production, supply of goods or services, rental,
or administrative purposes. Examples: goodwill, patents, copyrights, licenses,
franchises, trademarks, brand names, secret processes, subscription lists, non-
competition agreements.
Current Liabilities
• Accounts Payable – This account represents the reverse relationship of the
accounts receivable.
• Notes Payable – A note payable is like a note receivable but in a reverse sense.
• Accrued Liabilities – Amounts owed to others for unpaid expenses.
• Unearned Revenues – When the business entity receives payment before providing
its customers with goods or services.
• Current Portion of Long-Term Debt – These are portions of mortgage notes, bonds
and other long-term indebtedness which are to be paid within one year from the
balance sheet date.
Non-current Liabilities
• Mortgage Payable – This account records long-term debt of the business entity for
which the business entity has pledged certain assets as security to the creditor.
• Bonds Payable – Business organizations often obtain substantial sums of money
from lenders to finance the acquisition of equipment and other needed assets.
Owner’s Equity
• Capital – This account is used to record the original and additional investments of
the owner of the business entity.
• Withdrawals – When the owner of a business entity withdraws cash or other assets,
such are recorded in the drawing or withdrawal account rather than directly
reducing the owner’s equity account.
• Income Summary – It is a temporary account used at the end of the accounting
period to close income and expenses.
Income Statement
Income
• Service Income – Revenues earned by performing services for a customer or client.
• Sales – Revenues earned as a result of sale of merchandise.
Expenses
• Cost of Sales – The cost incurred to purchase or to produce the products sold to
customers during the period.
• Salaries or Wages Expense – Includes all payments as a result of an employer-
employee relationship.
• Telecommunications, Electricity, Fuel and Water Expenses – Expenses related to
use of telecommunications facilities, consumption of electricity, fuel and water.
• Rent Expense – Expense for space, equipment or other asset rentals.
• Supplies Expense – Expense of using supplies in the conduct of daily business.
• Insurance Expense – Portion of premiums paid on insurance coverage which has
expired.
• Depreciation Expense – The portion of the cost of a tangible asset allocated or
charged as expense during an accounting period.
• Uncollectible Accounts Expense – The amount of receivables estimated to be
doubtful of collection and charged as expense during an accounting period.
• Interest Expense – An expense related to use of borrowed funds.