The Account and the Chart of Accounts

THE ACCOUNT

ü  Composed of an account title, a left side (debit), a right side (credit) and an account number.

ü  Account is the certain thing that the business has while an account title is an adjective used to describe such certain thing. (ie. Coins, currencies and checks is the certain thing that the business might have and the account title that would most likely to describe such things is the word CASH)

ü  Reason for the two sides? In order to reflect any increase in one side and any decrease in the other side.

Sample of a three-column account (usually used by businesses) 

Sample of a T-Account (usually used to simplify illustrations) 

Sample of Account Tiles and the items they represents: 

Cash in Bank – Coins and currencies deposited in a banking institution.

Accounts Receivable – the amount collectible to customers pertaining to goods delivered or services rendered.

Notes Receivable – the amount collectible to customers pertaining to goods delivered or services rendered or cash loaned to somebody evidenced by a promissory note issued by the other party to the business.

Office Equipment – refers to electrical appliances like computers, printers, and fax machines. 

Building – a structure with walls and roofs that is being used as an office, warehouse, store, or a factory of the business.

Accounts Payable – the amount payable to suppliers pertaining to goods purchased.

Notes Payable – the amount payable to suppliers pertaining to goods purchased or amounts borrowed evidenced by a promissory note issued by the business.

R. Cruz, Capital – the right of the owner Mr. R. Cruz to the business representing the amount invested, withdrawn, and earned. 

Chart of Accounts – the list of all the account titles and their respective account number that the business is using.