Assets are not small donkeys

Accounts are used to indicate and summarize the increases or decreases to and balances of each asset, liability and owner's equity-type items, such as, capital, withdrawals, revenues and expenses.

The names of accounts sometimes seem strange at first. This section is intended to help you learn or memorize asset account names.

ASSETS are what the business has or owns. Following are some common asset accounts:

Cash is money the business has on hand and in the bank.

Accounts Receivable is the amount of money customers owe the business for goods or services.

Inventory is the cost of goods a business buys to resell.

Prepaid Expenses is a category of accounts that summarize things that the business pays for in advance, to use in the near future. They are broken down into individual accounts such as: Supplies Inventory (for office supplies, etc.); Prepaid Insurance (businesses pay for insurance sometimes two or three years in advance); Prepaid Rent, Prepaid Interest, etc.

Land (Property), Buildings (Plant) and Equipment (all are sometimes called fixed assets) are purchased to operate the business. They are expected to last a long time. As the fixed assets are used, their cost is written off systematically - this is called depreciation. It is assumed that land cannot be used up; therefore, the cost of land is never written off in this manner. As the cost of the other fixed assets is written off, the amount is accumulated in an account that serves as an off-set against the cost of the asset.

Accumulated Depreciation is the account that is used to report the total amount that a fixed asset has been depreciated from the time it was acquired. The accounts are specific to each asset account (for example, Accumulated Depreciation - Buildings or Accumulated Depreciation - Equipment) and the balance in the accumulated depreciation account is deducted from the balance in the respective asset account to arrive at a net (undepreciated) cost for the asset. This amount is called the Book Value of the asset