Account Titles
The Chart of Accounts
The increases and decreases in accounting element as affected by a business transaction are recorded in a device called account name, account title or account. Each accounting element is composed of several accounts which describe the related economic transactions and events. To maintain uniform account name, the business must have a listing of all the accounts it uses to record economic transactions. This listing of all accounts is called “Chart of Accounts.”
The Chart of accounts is usually arranged in the financial statement order - that is, asset accounts first, followed by liability accounts, owner’s equity, revenues and expenses accounts. An example of chart of accounts could be listed as follows:
Description of Account Titles
Accounting uses several account titles to describe economic transactions and events.
The Asset Accounts
Assets are resources or things of value owned by an enterprise. Generally, they are recorded in the books of accounts with a normal debit balance. The asset accounts are classified into two main categories, the current assets and the noncurrent assets.
Current Assets — an asset should be classified as a current asset when any of the following criteria4 are met:
1. It is expected to be realized, or is held for sale or consumption in the normal course of the enterprise’s operating cycle; or
2. It is held primarily for trading purposes or for the short-term and expected to be realized within twelve months of the balance sheet date; or
3. Is cash or a cash equivalent which is not restricted in its use.
It can be inferred that if an asset does not meet any of the criteria above, it shall be classified as noncurrent~asset.
The operating cycle of an enterprise is the time between the acquisition of materials entering into a process and its realization in cash or an instrument that is readily convertible into cash.5
Some of the currents assets that are commonly used are:
o Cash — any item on hand with
The increases and decreases in accounting element as affected by a business transaction are recorded in a device called account name, account title or account. Each accounting element is composed of several accounts which describe the related economic transactions and events. To maintain uniform account name, the business must have a listing of all the accounts it uses to record economic transactions. This listing of all accounts is called “Chart of Accounts.”
The Chart of accounts is usually arranged in the financial statement order - that is, asset accounts first, followed by liability accounts, owner’s equity, revenues and expenses accounts. An example of chart of accounts could be listed as follows:
Description of Account Titles
Accounting uses several account titles to describe economic transactions and events.
The Asset Accounts
Assets are resources or things of value owned by an enterprise. Generally, they are recorded in the books of accounts with a normal debit balance. The asset accounts are classified into two main categories, the current assets and the noncurrent assets.
Current Assets — an asset should be classified as a current asset when any of the following criteria4 are met:
1. It is expected to be realized, or is held for sale or consumption in the normal course of the enterprise’s operating cycle; or
2. It is held primarily for trading purposes or for the short-term and expected to be realized within twelve months of the balance sheet date; or
3. Is cash or a cash equivalent which is not restricted in its use.
It can be inferred that if an asset does not meet any of the criteria above, it shall be classified as noncurrent~asset.
The operating cycle of an enterprise is the time between the acquisition of materials entering into a process and its realization in cash or an instrument that is readily convertible into cash.5
Some of the currents assets that are commonly used are:
o Cash — any item on hand with