ACCOUNT TITLES

Account titles are the term used to identify the specific elements of accounting to be used in the recording process.

ASSETS:
1. Cash currency (bills or coins), checks, postal money, orders, and treasury warrants received by the business 2. Accounts Receivable amounts collectible from customers, or clients (for goods sold and services rendered). 3. Merchandise Inventory goods acquire for sale and are still unsold. 4. Notes Receivable amounts collectible that are covered by promissory notes. 5. Interest Receivable interest earned on notes receivable but not yet received in cash. 6. Prepaid Expense expenses to be incurred yet in the future but already paid. 7. Unused Supplies supplies that are still unused as of the end of the accounting period. 8. Land land acquired by the business for its use. 9. Building structure or edifices acquired for use of the business. 10. Machinery and Equipment heavy, metallic and movable items that are capable of performing certain functions or used to perform certain functions. 11. Delivery Equipment wheeled items used in making deliveries to customers or clients. 12. Furniture and Fixtures refers to movable items of significant value and acquired to improve the workable condition of a place. 13. Office Equipment heavy, metallic and movable items used in an office to perform certain functions or are capable of performing certain functions.

LIABILITIES:
1. Accounts Payable obligations to suppliers for items bought and are not supported by promissory notes. 2. Notes Payable obligations covered by promissory notes. 3. Loans Payable obligations arising from loans obtained. 4. Taxes Payable amount of levies on property or income due to the government. 5. Mortgage Payable this is a long-term debt of the business for which property has been give as collateral or security.

OWNERS EQUITY
1. Owner, Capital capital of the sole proprietor on his business. If the owner is Ric D. Generoso, the account becomes Ric D. Generoso, Capital.

2. Owner, Drawing this account title is used for withdrawals used by the owner. If the owners name is Ric. D. Generoso, the account title is Ric D. Generoso, Drawing or Ric D. Generoso, Personal.

REVENUE
1. Service Income this refers to revenue realized by providing services to the customers. 2. Fees Income - refers to revenue realized by providing professional services to customers. 3. Sales this account title is used to refer to revenue from sell of goods that were previously acquired for sale. 4. Rent Income this account absorbs the amounts of rental earned on the properties of the business. 5. Interest Income amount earned for the lending of money.

EXPENSES
1. Taxes and Licenses cost of permits and taxes incurred. 2. Advertising Expense incurred in making the public aware of the good or services being offered by the business. 3. Salaries and Wages the compensation earned by the employees for services rendered for the business. 4. Supplies Expense cost of supplies already used. 5. Light, Power and Water cost of light power and water consumption as indicated on bills presented by utility companies. 6. Telephone and Telegram telephone and telegram charges as indicated on bills presented by telecommunication companies. 7. Rent Expense the amount of rentals incurred based on occupancy of space or usage of property and equipment. 8. Tools Expense cost of tools treated as expense. 9. Depreciation Expense the portion of property cost allocated to an accounting period. 10. Insurance Expense insurance premiums related to current period. 11. Bad Debts provision for uncollectible receivables. 12. Miscellaneous Expenses the different minor expenses incurred and for which no specific account title has been adopted.

The accounting process is a series of activities that begins with a transaction and ends with the closing of the books. Because this process is repeated each reporting period, it is referred to as the accounting cycle and includes these major steps: 1. Identify the transaction or other recognizable event. 2. Prepare the transaction's source document such as a purchase order or invoice. 3. Analyze and classify the transaction. This step involves quantifying the transaction in monetary terms (e.g. dollars and cents), identifying the accounts that are affected and whether those accounts are to be debited or credited. 4. Record the transaction by making entries in the appropriate journal, such as the sales journal, purchase journal, cash receipt or disbursement journal, or the general journal. Such entries are made in chronological order. 5. Post general journal entries to the ledger accounts. __________________ The above steps are performed throughout the accounting period as transactions occur or in periodic batch processes. The following steps are performed at the end of the accounting period: 6. Prepare the trial balance to make sure that debits equal credits. The trial balance is a listing of all of the ledger accounts, with debits in the left column and credits in the right column. At this point no adjusting entries have been made. The actual sum of each column is not meaningful; what is important is that the sums be equal. Note that while out-of-balance columns indicate a recording error, balanced columns do not guarantee that there are no errors. For example, not recording a transaction or recording it in the wrong account would not cause an imbalance. 7. Correct any discrepancies in the trial balance. If the columns are not in balance, look for math errors, posting errors, and recording errors. Posting errors include: o posting of the wrong amount, o omitting a posting, o posting in the wrong column, or o posting more than once.

8. Prepare adjusting entries to record accrued, deferred, and estimated amounts. 9. Post adjusting entries to the ledger accounts. 10. Prepare the adjusted trial balance. This step is similar to the preparation of the unadjusted trial balance, but this time the adjusting entries are included. Correct any errors that may be found. 11. Prepare the financial statements. o Income statement: prepared from the revenue, expenses, gains, and losses. o Balance sheet: prepared from the assets, liabilities, and equity accounts. o Statement of retained earnings: prepared from net income and dividend information. o Cash flow statement: derived from the other financial statements using either the direct or indirect method.

12. Prepare closing journal entries that close temporary accounts such as revenues, expenses, gains, and losses. These accounts are closed to a temporary income summary account, from which the balance is transferred to the retained earnings account (capital). Any dividend or withdrawal accounts also are closed to capital. 13. Post closing entries to the ledger accounts.

14. Prepare the after-closing trial balance to make sure that debits equal credits. At this point, only the permanent accounts appear since the temporary ones have been closed. Correct any errors. 15. Prepare reversing journal entries (optional). Reversing journal entries often are used when there has been an accrual or deferral that was recorded as an adjusting entry on the last day of the accounting period. By reversing the adjusting entry, one avoids double counting the amount when the transaction occurs in the next period. A reversing journal entry is recorded on the first day of the new period.