Asset Accounts
Current Assets
1000 Petty Cash
1010 Cash on Hand (e.g. in cash registers)
1020 Regular Checking Account
1030 Payroll Checking Account
1040 Savings Account
1050 Special Account
1060 Investments - Money Market
1070 Investments - Certificates of Deposit
1100 Accounts Receivable
1140 Other Receivables
1150 Allowance for Doubtful Accounts
1200 Raw Materials Inventory
1205 Supplies Inventory
1210 Work in Progress Inventory
1215 Finished Goods Inventory - Product #1
1220 Finished Goods Inventory - Product #2
1230 Finished Goods Inventory - Product #3
1400 Prepaid Expenses
1410 Employee Advances
1420 Notes Receivable - Current
1430 Prepaid Interest
1470 Other Current Assets
Fixed Assets
1500 Furniture and Fixtures
1510 Equipment
1520 Vehicles
1530 Other Depreciable Property
1540 Leasehold Improvements
1550 Buildings
1560 Building Improvements
1690 Land
1700 Accumulated Depreciation, Furniture and Fixtures
1710 Accumulated Depreciation, Equipment
1720 Accumulated Depreciation, Vehicles
1730 Accumulated Depreciation, Other
1740 Accumulated Depreciation, Leasehold
1750 Accumulated Depreciation, Buildings
1760 Accumulated Depreciation, Building Improvements
Other Assets
1900 Deposits
1910 Organization Costs
1915 Accumulated Amortization, Organization Costs
1920 Notes Receivable, Non-current
1990 Other Non-current Assets
Liability Accounts
Current Liabilities
2000 Accounts Payable
2300 Accrued Expenses
2310 Sales Tax Payable
2320 Wages Payable
2330 401-K Deductions Payable
2335 Health Insurance Payable
2340 Federal Payroll Taxes Payable
2350 FUTA Tax Payable
2360 State Payroll Taxes Payable
2370 SUTA Payable
2380 Local Payroll Taxes Payable
2390 Income Taxes Payable
2400 Other Taxes Payable
2410 Employee Benefits Payable
2420 Current Portion of Long-term Debt
2440 Deposits from Customers
2480 Other Current Liabilities
Long-term Liabilities
2700 Notes Payable
2702 Land Payable
2704 Equipment Payable
2706 Vehicles Payable
2708 Bank Loans Payable
2710 Deferred Revenue
2740 Other Long-term Liabilities
Equity Accounts
3010 Stated Capital
3020 Capital Surplus
3030 Retained Earnings
Revenue Accounts
4000 Product #1 Sales
4020 Product #2 Sales
4040 Product #3 Sales
4060 Interest Income
4080 Other Income
4540 Finance Charge Income
4550 Shipping Charges Reimbursed
4800 Sales Returns and Allowances
4900 Sales Discounts
Cost of Goods Sold
5000 Product #1 Cost
5010 Product #2 Cost
5020 Product #3 Cost
5050 Raw Material Purchases
5100 Direct Labor Costs
5150 Indirect Labor Costs
5200 Heat and Power
5250 Commissions
5300 Miscellaneous Factory Costs
5700 Cost of Goods Sold, Salaries and Wages
5730 Cost of Goods Sold, Contract Labor
5750 Cost of Goods Sold, Freight
5800 Cost of Goods Sold, Other
5850 Inventory Adjustments
5900 Purchase Returns and Allowances
5950 Purchase Discounts
Expenses
6000 Default Purchase Expense
6010 Advertising Expense
6050 Amortization Expense
6100 Auto Expenses
6150 Bad Debt Expense
6200 Bank Fees
6250 Cash Over and Short
6300 Charitable Contributions Expense
6350 Commissions and Fees Expense
6400 Depreciation Expense
6450 Dues and Subscriptions Expense
6500 Employee Benefit Expense, Health Insurance
6510 Employee Benefit Expense, Pension Plans
6520 Employee Benefit Expense, Profit Sharing Plan
6530 Employee Benefit Expense, Other
6550 Freight Expense
6600 Gifts Expense
6650 Income Tax Expense, Federal
6660 Income Tax Expense, State
6670 Income Tax Expense, Local
6700 Insurance Expense, Product Liability
6710 Insurance Expense, Vehicle
6750 Interest Expense
6800 Laundry and Dry Cleaning Expense
6850 Legal and Professional Expense
6900 Licenses Expense
6950 Loss on NSF Checks
7000 Maintenance Expense
7050 Meals and Entertainment Expense
7100 Office Expense
7200 Payroll Tax Expense
7250 Penalties and Fines Expense
7300 Other Taxes
7350 Postage Expense
7400 Rent or Lease Expense
7450 Repair and Maintenance Expense, Office
7460 Repair and Maintenance Expense, Vehicle
7550 Supplies Expense, Office
7600 Telephone Expense
7620 Training Expense
7650 Travel Expense
7700 Salaries Expense, Officers
7750 Wages Expense
7800 Utilities Expense
8900 Other Expense
9000 Gain/Loss on Sale of Assets
Expenses and Losses are Usually Debited
Expenses normally have their account balances on the debit side (left side). A debit increases the
balance in an expense account; a credit decreases the balance. Since expenses are usually
increasing, think "debit" when expenses are incurred. (We credit expenses only to reduce
them, adjust them, or to close the expense accounts.) Examples of expense accounts include
Salaries Expense, Wages Expense, Rent Expense, Supplies Expense, and Interest Expense.
To illustrate an expense let's assume that on June 1 your company paid $800 to the landlord for
the June rent. The debits and credits are shown in the following journal entry:
Since cash was paid out, the asset account Cash is credited and another account needs to be
debited. Because the rent payment will be used up in the current period (the month of June) it is
considered to be an expense, and Rent Expense is debited. If the payment was made on June 1
for a future month (for example, July) the debit would go to the asset account Prepaid Rent.
As a second example of an expense, let's assume that your hourly paid employees work the last
week in the year but will not be paid until the first week of the next year. At the end of the year,
the company makes an entry to record the amount the employees earned but have not been paid.
Assuming the employees earned $1,900 during the last week of the year, the entry in general
journal form is:
As noted above, expenses are almost always debited, so we debit Wages Expense, increasing its account
balance. Since your company did not yet pay its employees, the Cash account is not credited, instead,
the credit is recorded in the liability account Wages Payable. A credit to a liability account increases its
credit balance.
Permanent and Temporary Accounts
Asset, liability, and most owner/stockholder equity accounts are referred to as "permanent
accounts" (or "real accounts"). Permanent accounts are not closed at the end of the accounting
year; their balances are automatically carried forward to the next accounting year.
"Temporary accounts" (or "nominal accounts") include all of the revenue accounts, expense
accounts, the owner drawing account, and the income summary account. Generally speaking, the
balances in temporary accounts increase throughout the accounting year and are "zeroed out" and
closed at the end of the accounting year.
Balances in the revenue and expense accounts are zeroed out by closing/transferring/clearing
their balances to the Income Summary account. The net amount in Income Summary is then
closed/transferred/cleared to an owner equity account, such as Mary Smith, Capital (or to
Retained Earnings if the company is a corporation). The owner drawing account (such as Mary
Smith, Drawing) is a temporary account and it is closed directly to the owner capital account
(such as Mary Smith, Capital) without going through an income summary account.
Because the balances in the temporary accounts are transferred out of their respective accounts at
the end of the accounting year, each temporary account will have a zero balance when the next
accounting year begins. This means that the new accounting year starts with no revenue amounts,
no expense amounts, and no amount in the drawing account.
By using many revenue accounts and a huge number of expense accounts, a company is certain
to have easy access to detailed information on revenues and expenses throughout the year. This
allows the management of the company to monitor the performance of all parts of the company.
Once the accounting year has ended, the need to know the balances in these temporary accounts
has also ended, so the accounts are closed out and reopened for the next accounting year with
zero balances.
