Accounting and Finance Foundations

Unit 5

Accounting and Finance Foundations Unit 5: Accounting Terminology 338

Accounting Terminology

Chapter 14

Transaction 8

Accounts receivable is when a customer charges on account with a business. A transaction that says

“sold on account” indicates the use of an accounts receivable account. Accounts Receivable is an asset

account, because money is owed to the company and will be collected at a later date.

Sold Services on account to Lisa Cook, $1,000

When services are sold on account, the two accounts affected are Accounts Receivable, Lisa Cook and

Sales. Accounts Receivable is classified as an asset. Anytime someone buys something and is going to

pay you at a later date, accounts receivable increases. Sales are classified as a revenue. Although revenues

are their own specific classification, they do increase owner’s equity. When sales are made, increase the

revenue account.

Assets = Liabilities + Owner’s Equity

Trans.

No.

Cash + Supplies + Accounts

Receivable,

Lisa Cook

+ Prepaid

Insurance

= Accounts

Payable

Office

Supply

+ Your

Name,

Capital

+ Rev. - Expenses - Drawing

1. 7500 + + + = + 7500 + - -


2. -300
   7200

+ +300 + + = + 7500 + - -

3. -550
   6650

+ 300 + + +550 = + 7500 + - -

4. 6650 + +450
   750

+ + 550 = +450 + 7500 + - -

5. -200
   6450

+ 750 + + 550 = -200

250

+ 7500 + - -

6. +1200
   7650

+ 750 + + 550 = 250 + 7500 + 1200 - -

7. -800
   6850

+ 750 + + 550 = 250 + 7500 + 1200 - 800 -

8. 6850 + 750 + + 1000
   1000

+ 550 = 250 + 7500 + +1000

2200

• 800 -

Student Guide