Accounting and Finance Foundations

Unit 5

Accounting and Finance Foundations Unit 5: Accounting Terminology 328

Accounting Terminology

Balance Sheet Accounts Income Statement Accounts

Chart of Accounts

(100) Assets

110 Cash

120 Petty Cash

130 Accounts Receivable—M. Allen

140 Accounts Receivable—J. Jones

150 Supplies

160 Prepaid Insurance

(200) Liabilities

210 Accounts Payable—ABC Corp

220 Accounts Payable—XYX Supply

(300) Owner’s Equity

310 M. Walters, Capital

320 M. Walters, Drawing

330 Income Summary

(400) Revenue

410 Sales

(500) Expenses

510 Advertising Expense

520 Insurance Expense

530 Miscellaneous Expense

540 Rent Expense

550 Supplies Expense

560 Utilities Expense

Chapter 13

Student Guide

Lesson 13.5

Notice on the above chart of accounts all the balance sheet accounts are numerically organized with the

first digit of the account number being 1, 2, or 3. All the income statement accounts begin with a 4 or 5.

Notice also that expense accounts are organized within their category in alphabetical order.

Account numbering in the chart of accounts is based on the following rules:

n Cash is always the first account listed under assets.

n Assets are organized based on liquidity. Liquidity is the ease with which an asset can be converted

to cash.

n Individual expense accounts are listed alphabetically on the chart of accounts within the expense

category.

The organization of the accounts makes it easier to read and understand financial statements.

The Chart of Accounts (cont’d)