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Classification of Accounts
Account Title Account Classification Financial Statement Normal Balance A Accounts Payable Current Liability Balance Sheet Credit Accounts Receivable Current Asset Balance Sheet Debit Accumulated Depreciation - Buildings Plant Asset - Contra Balance Sheet Credit Accumulated Depreciation – Equipment Plant Asset - Contra Balance Sheet Credit Accumulated Depletion Plant Asset - Contra Balance Sheet Credit Accumulated Amortization Intangible Asset - Contra Balance Sheet Credit Advertising Expense Operating Expense Income Statement Debit Allowance for Doubtful Accounts Current Asset – Contra Balance Sheet Credit Amortization Expense Operating Expense Income Statement Debit B Bad Debt Expense Operating Expense Income Statement Debit Bonds Payable Long-Term Liability Balance Sheet Credit Buildings Plant Asset Balance Sheet Debit C Cash Current Asset Balance Sheet Debit Common Stock Stockholder’s Equity Balance Sheet Credit Copyrights Intangible Asset Balance Sheet Debit Cost of Goods Sold Cost of Goods Sold Income Statement Debit D Depletion Expense Operating Expense Income Statement Debit Depreciation Expense Operating Expense Income Statement Debit Discount on Bonds Payable Long-Term Liability – Contra
Balance Sheet Debit
Dividends Temporary Account closed to Retained Earnings
Retained Earnings Statement
Debit
Dividend Income Other Income Income Statement Credit Dividends Payable Current Liability Balance Sheet Credit Donated Capital Stockholder’s Equity Balance Sheet Credit E Equipment Plant Asset Balance Sheet Debit Exchange Gain Other Income Income Statement Credit Exchange Loss Other Expense Income Statement Debit F Freight-out Operating Expense Income Statement Debit G Gain on Disposal of Plant Assets Other Income Income Statement Credit Gain on Sale of Investments Other Income Income Statement Credit
Goodwill Intangible Asset Balance Sheet Debit
Account Title Account Classification Financial Statement Normal Balance I Income Summary Temporary Account closed to Retained Earnings
Not Applicable (1)
Income Tax Expense Income Tax Expense Income Statement Debit Income Tax Payable Current Liability Balance Sheet Credit Insurance Expense Operating Expense Income Statement Debit Interest Income / Interest Revenue Other Income Income Statement Credit Interest Expense Other Expense Income Statement Debit Interest Payable Current Liability Balance Sheet Credit Interest Receivable Current Asset Balance Sheet Debit Investment in Bonds Long-term Investment Balance Sheet Debit Investment in Stock Long-term Investment Balance Sheet Debit Investment in subsidiary Long-term Investment Balance Sheet Debit Inventory Current Asset Balance Sheet (2) Debit L Land Plant Asset Balance Sheet Debit Loss on Disposal of Plant Assets Other Expense Income Statement Debit Loss on Redemption Bonds Extraordinary Item Income Statement Debit Loss on Sale of Investments Other Expense Income Statement Debit M Maintenance & Repair Expense Operating Expense Income Statement Debit Marketable Securities Current Asset Balance Sheet Debit Materials Current Asset Balance Sheet Debit Mortgage Payable Long-Term Liability Balance Sheet Credit N Notes Payable Current Liability / Long- Term Liability
Balance Sheet Credit
Notes Receivable Current Asset / Investment Balance Sheet Debit O Organization Costs Intangible Asset Balance Sheet Debit Owner’s Capital Owner’s Equity Owner’s Equity / Balance Sheet
Credit
Owner’s Drawings Temporary Account closed to Owner’s Capital
Owner’s Equity Debit
P Patent Intangible Assets Balance Sheet Debit Paid-in Capital in Excess of Par-Common Stock
Stockholder’s Equity Balance Sheet Credit
Unearned Rent Current Liability Balance Sheet Credit Utilities Expense Operating Expense Income Statement Debit
- The normal balance for Income Summary will be credit when there is a net income, debit when there is net loss. The Income Summary account does not appear on any financial statement.
- If a periodic system is used, Inventory also appears on the income statement in the calculation of cost of goods sold. The following is a sample of chart of accounts. It does not represent a comprehensive chart of all the accounts used in this textbook but rather those accounts that are commonly used. This sample chart of accounts is for a company that generates both service revenue as well as sales revenue. It uses the perpetual approach to inventory. If a periodic system was used, the following temporary accounts would be needed to record inventory purchases; Purchases; Freight-in; Purchase Returns and Allowances; and Purchase Discounts.
CHART OF ACCOUNTS ASSETS LIABILITIES OWNER’S AND STOCKHOLDER’S EQUITY
REVENUES EXPENSES
Cash Notes Payable Owner’s Capital Service Revenue Advertising Expense Accounts Receivable Accounts Payable Owner’s Drawing Sales Revenue Amortization Expense Allowance for Doubtful Accounts
Unearned Service Revenue
Common Stock Sales Discounts Bad Debt Expense
Interest Receivable Salaries and Wages Payable
Paid-in Capital Excess of Par-Common Stock
Sales Returns and Allowances
Cost of Goods Sold
Inventory Unearned Rent Revenue
Preferred Stock Interest Revenue Depreciation Expense
Supplies Interest Payable Paid-in Capital Excess of Par-Preferred Stock
Gain on Disposal of Plant Asset
Freight-out
Prepaid Insurance Dividends Payable Treasury Stock Rent Revenue Income Tax Expense Prepaid Rent Income Tax Payable Retained Earnings Insurance Expense Land Bonds Payable Dividends Interest Expense Equipment Discounts of Bond Payable
Income Summary Loss on Disposal of Plant Asset Accumulated Depreciation – Equipment
Premium on Bonds Payable
Maintenance and Repair Expense
Buildings Mortgage Payable Rent Expense Accumulated Depreciation – Buildings
Salaries and Wages Expense
Copyrights Supplies Expense Goodwill Utilities Expense Patents
