Accounting

Financial Accounting Rules of debit and credit (or left and right):*

Asset (A) + – = Liability (L) – + + – Equity (E) +

Franco Wong

Revenue / Gain# – + +

Dividend# –

Expense / Loss# + –

* Hints: (1) The rules for L & E are opposite to that for A; (2) Since revenue and gain increase equity, the rules for Revenue and Gain are the same as that for Equity; and (3) Since dividend, expense, and loss reduce equity, the rules for Dividend, Expense, and Loss are opposite to that for Equity. # Revenue, gain, dividend, expense, and loss accounts are temporary accounts that will be “closed” to Retained Earnings at the end of the accounting period. The “closing” procedure will not be covered in this course.

Common account titles:

Asset

Cash and cash equivalents Liquid funds Marketable securities Short-term investments Notes receivable

Liability

Accounts payable Trade payable Other payables: Wages/salaries payable Interest payable Utilities payable Notes payable etc.

Equity

Common stock Common share Share capital Additional paid-in capital Share premium Contributed surplus

Revenue / Gain

Sales Revenues Turnover Operating items: Share of profits of associates Equity-method inv. income Gain from sale of PPE

Expense / Loss

Cost of sales Cost of goods sold Cost of merchandise Operating items: Wage/salary expense Selling/marketing expense Depreciation and amortization Research expense Tax expense Share of losses of associates Equity-method inv. loss Loss from sale of PPE Loss on impairment Non-operating items: Interest expense Finance charges/costs

Loss from sales of financial assets

Prepaid expenses: Pre-paid advertising Pre-paid insurance Pre-paid rent etc. Accounts receivable Trade receivable Allowance for bad debt1 Inventories Stock Property, plant & equipment Fixed assets Accumulated depreciation1 Long-term investments Investments in associates Equity-method investment Investments in joint ventures Intangible assets Goodwill

Accrued...