Label the following accounts as either Asset, Liability, Equit...

Question

Label the following accounts as either Asset, Liability, Equity, Revenue, or Expense

Table listing various accounts for labeling as Asset, Liability, Equity, Revenue, or Expense.

Accepted Answer

Alright, so let's take what we just learned and let's practice and let's classify accounts as assets, liabilities, equity, revenues or expenses. Okay? So when you see these practice problems, I'm expecting you to have tried them already. Okay? So if you haven't tried this yet, I suggest you pause the video and you try and classify all these accounts and then we're going to go through 1 by 1, alright? So if you have if you've done it already, let's go ahead and start. Let's start here with accounts receivable. Alright? Accounts receivable. We have this keyword right here, receivable. Whenever you see the word receivable, we're talking about an asset. Okay? I'm just going to put an A for asset here and accounts receivable is an asset account and that is money that our customers owe to us, okay? So we allowed our customers some time, excuse me, some time to pay us and those are accounts receivable, alright? The amount that we're waiting to get from customers. Let's go down the list here, let's go on to land. Alright, so land, what what do you think that one is? Well land, this is an asset as well, right? This is going to be a long term asset. This is something that we use for multiple imagine we have land that we build a building on or a factory and we produce our products there, right? So this land is going to be an asset of the company as well. Let's keep going down. Prepaid expenses. This is a tricky one, right? Because it says the word expense and when you see the word expense, you might think it's an expense account. This is a special case though. When it says prepaid expenses, this is actually an asset. This is when we've paid our expenses in advance and we haven't used them up yet. So if we bought something that if we paid for an expense that we're going to use in the future, asset until that expense actually comes up. Okay? We'll talk more about prepaid expenses in future videos, but for now, it's important to know that prepaid expenses will be an asset. Okay? Marketable Securities. We haven't really talked about this term yet. Well, marketable securities literally defines, right? Marketable means something that you could put on the market, something that you can sell and a security, well that's any kind of investment. It could be a stock, it could be a bond, something that you invested in. So marketable security is a security that you could sell, okay? And so based on that, you could imagine that it's going to be an asset, right? A marketable security is something that the company owns and could readily sell on the market, okay? Let's go on to the next one. Machinery. What do you think about machinery? Well machinery, that's another long term asset, right? This is some sort of big machine that we use to produce our product, right? Maybe we we make hats or something. We have this machine that produces the hats. That machine is an asset of the company. Alright? How about the next one? Customer Deposits. Now I've thrown some tricky ones in here just because I kind of want to keep exposing you to to different accounts, okay? So customer deposits, this one's actually kind of tricky. A customer deposit is where a customer has paid you in advance. A customer has paid you in advance and hasn't received anything from you, right? Maybe let's say, you were going to throw a big party, right? And you sold tickets to the party and you collected the money from the tickets in advance, but the party hasn't happened yet. So you actually have a liability to the customers, you've collected all this cash from customers, but you haven't delivered a product yet. Okay so all these customer deposits are actually a liability because you're holding all this money, this isn't the cash itself, the cash is cash, the customer deposit account is where we hold the liability of having to do this for the customers, right? So once we throw the party, we can eliminate the customer deposit account because we're no longer liable to the customers, alright? So that's actually a pretty tricky one that it's a liability when we receive money from customers in advance. Alright? And we discussed more about customer deposits and another term for customer deposits is unearned revenue and we discussed that in more detail later videos, Okay? Treasury Stock. Well, we talked about Treasury Stock in our account classification video as an equity account. Treasury Stock is an equity account and it holds all of the stock that the company has bought back of its own stock. Okay. So you can imagine that there's all this stock out on the market for our company and we bought some of it off of the open market. The company itself took its cash and bought its own shares back. Okay? So that is an equity account. Let's go on to the 2nd list here. Accrued Expenses. Alright, again we see the word expenses, but the keyword here is accrued. Remember when you see the word accrued, this is like piled up expenses that we haven't paid off yet. Accrued, they are accruing, we have all these expenses we haven't paid off yet, so these are liabilities. We haven't paid them yet, okay? That word accrual, accrued, that's the keyword to let you know that it's a liability, okay? There's expenses that have come up, but we haven't paid them yet. How about common stock? The next one here, common stock. So this one could be tricky. You might think it's an asset account, right? Because you might have bought stock in another company, but that's not how it works. When we call something common stock, that's the common stock in our company. Okay. So this is an equity account. The common stock is the common stock that's owned by the shareholders. Okay. So this holds the value of the common stock that's owned by the shareholders. Okay? We talk about that near the end of the course, but it's good to know that common stock is an equity account. Let's go on. Bonds payable. Here we go. We've got another keyword here. When you see the word payable, that means it's a liability straight up. Okay, liability when we have a payable and bonds payable, this is a long term liability. This is generally when we take on a lot of debt and we have to pay it off over time. Okay? So bonds payable. Additional paid in capital. This was another one of our key equity accounts. There's not so many accounts in equity, we have our common stock, we have our additional paid in capital, retained earnings and those are the main three really, but there might be treasury stock like we saw, right? We might have treasury stock and dividends is an equity account as well, but the main 3 that are pretty much always there, common stock, additional paid paid in capital, and retained earnings, okay? So this is an equity account here. An additional paid in capital, we don't really have to go into too much detail about what that is now, we'll deal with that in the equity chapter, but it's just money that got paid in when we first raised money with our stockholders, it's money that they paid into the company as well. Okay? So the next one here, inventory. Well inventory, this is merchandise that we have for sale, right? When we have inventory, this is stuff that we're sitting on and we're waiting to sell it to customers. So inventory is an asset. We have this inventory and it's worth something, right? We own it, we worth it's worth something, we're just waiting till we get to sell it. How about cash? Well, cash that's an easy one, right? Cash is an asset. This is money. This is just cash that the company has. How about preferred stock? Well, this is another type of equity account, less common. Right? We see common stock all the time. Sometimes a company two types of stock that they sell. They sell common stock and preferred stock. Okay? So this is going to be an equity account here. Alright? And it's just a different class of stock from the common stock. So let's go on to the final column here. I know we're going through a lot of a lot of these and I'm not expecting you to know them all. I've thrown you some curve balls in here, but I think this is so crucial. You're gonna get so much exposure to the names of these accounts and what they mean, alright? So notes payable. Notes payable, we've got this keyword right here. Payable telling us that it's a liability, right? So notes payable, this is where you signed some sort of contract and they gave you money and you're gonna pay them back over time. Okay? So notes payable, that's a liability. Retained earnings, so we've talked about that quite a bit. We know it's an equity account, right? That's one of our key equity accounts with common stock, additional paid in capital and retained earnings. Those are like our core equity accounts. Alright, let's move on to the next one, accounts payable. So again, we've got our payable word and that's a cue that we're talking about liabilities. So accounts payable, this is kind of like day to day money that we owe. Alright? So accounts payable, we're talking about you received an invoice, the gardener came and cleaned up the front of the office and trimmed all the hedges and he sent you an invoice. You haven't paid it yet, it's an account payable. Okay? How about unearned revenue? So I mentioned this when we talked about customer deposits closer to the beginning of the video, these are synonymous. Customer deposits and unearned revenue are synonymous. This is when you've received money from customers in advance, but you haven't done anything for the customer yet, Right? So just like customer deposits, this is a liability. Alright? And we talk more about unearned revenue in future videos. Alright. Supplies. Okay. Supplies. What do you think supplies is gonna fall under? Well this is just supplies that the company has. Let's say you have an office and you buy pens and paper and notepads and you know ink for the printer, whatever supplies you need in the office, well these are assets of the company. They do have some value that you paid for them and they have value. They're going to help the company do its business. It's an asset. Right? We've got an asset here. These supplies are assets of the company. How about investment in Apple Common Stock? Notice the difference here between investment in Apple Common Stock and just common stock over here, right? When it was just common stock, when the title is common stock, that's our equity. That is the equity of our company, but this investment in Apple common stock, that's where our company invested in Apple. So this investment that we made in Apple, that's an asset to this company, right? It's worth something, and it's an investment, okay? So this isn't our own stock and this is the distinction we make here. We're buying stock in a in another company, so it's an asset to our company. And last but not least, we've got restricted cash. Okay, so restricted cash is still cash, but it's been restricted for some purpose. Maybe the bank maybe we have a loan from the bank and they require us to hold a certain amount of cash so that we can make our interest payments or whatever, right? It could be in the contract, well this restricted cash, it's still an asset of the company, it's still our cash, we just can't use it right away, okay? So it might not be a current asset. Remember current assets is cash or anything that can be cash in 1 within 1 year, but if this cash is going to be restricted for 10 years, well then it's not a current asset, okay? So hopefully you guys got a lot out of that. We've discussed all sorts of different accounts. Let's go ahead and move on to the next video.

Struggling with Financial Accounting?

Label the following accounts as either Asset, Liability, Equity, Revenue, or Expense

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