Account Characteristics/Flashcards
Make flashcards for each of the following accounts. As you encounter new account names in homework
assignments or class lectures, add them to your flashcards.
An account is a record of all the increases and decreases in a reporting element of a financial
statement. Accounts can be divided into five basic categories: Assets, Liabilities, Owner’s Equity,
Revenues and Expenses.
For each account write the account name on the front of an index card. On the back of the flashcard,
fill in the following:
1. Type of account (Asset, Liability, Owner's Equity, Revenue or Expense)
2. On which financial statement the account is reported (Income Statement, Balance Sheet, or
Statement of Retained Earnings)
3. How the account is increased (Debit or Credit)
4. Whether the account is temporary or permanent.
ASSET AND CONTRA-ASSETS
Make a flashcard for each of the following asset accounts. If it will help you learn the accounts, you
may use a colored card or colored ink for each category of accounts. I use green for asset accounts.
Asset accounts: Cash, Accounts Receivable, Notes Receivable, Inventory, Supplies, Prepaid Rent,
Prepaid Advertising, Prepaid Insurance, Investments, Equipment, Buildings, Copyrights, Patents,
Goodwill
For all asset accounts the back of the card will be the following:
1. Asset
2. Balance Sheet
3 Debit
4. Permanent
Example of a flashcard for an
asset account
Front
Cash
Back
1. Asset
2. Balance Sheet
3. Debit
4. Permanent
Sometimes the balances of similar accounts are combined and reported as a total. For instance,
Prepaid Rent, Prepaid Advertising, and Prepaid Insurance account balances might be combined and
reported as one line item on the Balance Sheet called Prepaid Expenses. Make a flashcard for the line
item, Prepaid Expenses. The back of the card will be the same as above for assets.
3-1A
Land (used in the business), Buildings, Furniture and Fixtures, Equipment, and Machinery might be
combined and reported as one line item on the Balance Sheet called Property, Plant, and Equipment.
Make a flashcard for the line item Property, Plant, and Equipment. The back of the card will be the
same as above for assets.
Copyrights, Patents, and Goodwill are all intangible assets and could be combined and reported as a
single line item on the Balance Sheet called Intangibles. Make a flashcard for the line item,
Intangibles. The back of the card will be the same as above for assets.
Each category of accounts (Assets, Liabilities, Owners’ Equity, Revenues and Expenses), can have contraaccounts. A contra-account is a valuation account that reduces the total dollar amount of the category.
Each contra account can have a companion account that it reduces. For example, Accumulated
Depreciation is a contra-asset account. Its companion account would be an asset account like
Buildings. Make a flashcard for Accumulated Depreciation. Notice that contra-accounts increase the
opposite way from the other accounts in that category. The back of the card would look like this:
1.
2.
3.
4.
Contra-asset
Balance Sheet
Credit
Permanent
Another contra-asset is Allowance for Doubtful Accounts. Its companion account is Accounts
Receivable. Make a flashcard for Allowance for Doubtful Accounts. The back of the card would look
the same as the Accumulated Depreciation flashcard.
LIABILITIES
Make a flashcard for each of the following liability accounts. If it will help you learn the accounts, you
may use a colored card or colored ink for each category of accounts. I use pink or red for liability
accounts.
Liability accounts: Accounts Payable, Wages Payable, Utilities Payable, Interest Payable, Taxes
Payable, Unearned Revenue, and Bonds Payable
For all liability accounts the back of the flashcard will be the following:
1. Liability
2. Balance Sheet
3. Credit
4. Permanent
Similar liability accounts could be combined and reported as a single line item on the Balance Sheet. For
instance, Wages Payable and Utilities Payable could be combined and reported as Accrued Liabilities.
Make a flashcard for the line item, Accrued Liabilities. The back of the card will be the same as above
for liabilities.
There can be contra-liability accounts. We will study this in a later chapter and make a flash- card for a
contra liability then.
3-1 B
OWNERS’ EQUITY
Make a flashcard for each of the following owners’ equity accounts. If it will help you learn the
accounts, you may use a colored card or colored ink for each category of accounts. I use blue for
owners’ equity accounts.
Owners' Equity accounts: Capital Stock, Common Stock, Preferred Stock, Paid in Capital in Excess of Par,
Retained Earnings
The back of each owners’ equity account flashcard should look like this:
1. Owners’ Equity
2. Balance Sheet
3. Credit
4. Permanent
Similar owners’ equity accounts could be combined and reported as a single line item on the Balance
Sheet. For instance, Capital Stock, Common Stock, Preferred Stock, and Paid in Capital in Excess of Par
are all contributed capital accounts and might be reported as a single item called Contributed Capital.
Make a flashcard for the single line item, Contributed Capital. The back of the card will look the same
as above for owners’ equity.
Dividends is a contra-owners’ equity account. Make a flashcard for it. The back of the Dividends
flashcard will look like this:
1. Contra-owners’ equity
2. Statement of Retained Earnings
3. Debit
4. Temporary
Notice all its characteristics are different from other equity accounts.
REVENUES
Make a flashcard for each of the following revenue accounts. If it will help you learn the accounts,
you may use a colored card or colored ink for each category of accounts. I use a white card with black
ink for revenue accounts.
Revenues: Sales Revenue, Fees Earned, Interest Revenue, Rent Revenue, Service Revenue
The back of each revenue card should look like this:
1. Revenue
2. Income Statement
3. Credit
4. Temporary
There can be contra-revenue accounts. We will study these in a later chapter and make flashcards for
them then.
3-1 C
EXPENSES
Make a flashcard for each of the following expense accounts. If it will help you learn the accounts,
you may use a colored card or colored ink for each category of accounts. I use a yellow card with
black ink for expense accounts.
Expenses accounts: Cost of Goods Sold, Wages Expense, Rent Expense, Interest Expense, Depreciation
Expense, Advertising Expense, Income Tax Expense
The back of each expense account should look like this:
1. Expense
2. Income Statement
3 Debit
4. Temporary
There can be contra-expense accounts. We will study these in a later chapter and make flashcards for
them then.
REMEMBER THESE RULES:
1. Assets, liabilities and owner's equity are reported on the Balance Sheet. All Balance Sheet
accounts are permanent.
2. Revenues and expenses are reported on the Income Statement. All Income Statement
accounts are temporary.
3. Dividends are reported on the Statement of Retained Earnings. The Dividends account is
temporary.
4. Assets, expenses, and dividends are increased with Debits
5. Liabilities, revenues, and owner's equity are increased with Credits.
3-1 D