Concept explainers
Classification of accounts
Asset: Assets refer to the resources owned by the business, which are utilized in the course of the business to generate revenue. The following belong to the assets account:
Accounts Receivable - Prepaid
- Cash
- Land
- Supplies
Liability: Liabilities include the claims of the creditors on the assets of the business. The liability is the obligation of the business. The following belong to the liabilities account:
- Accounts Payable
- Salaries payable
- Notes payable
- Income tax payable
- Unearned rent
Revenue: Revenue is known as “Top line” because it appears very top on the income statement of the company. It is used to imply profits or net income (bottom line) of the company by subtracting the total expenses from total revenues. The following belong to the revenue account
- Rent revenue
- Fees earned
- Service revenue
Expense: Expense is the cost borne by a company to produce and sell the goods and services to the customers. The following belong to the expense account
- Salaries expense
- Insurance expense
- Supplies expense
- Utilities expense
Depreciation expense
To Identify: Each account would appear as (a) assets, (b) liabilities, (c) revenue or (d) expense.
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Accounting (Text Only)
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