You owe me -- Big Time!

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 liability account names.

LIABILITIES are what the business owes outsiders. Following are some common liability accounts:

Accounts Payable is what the business owes to people or companies that it has purchased goods or services from on open account. This type of credit is normally referred to as trade credit.

Notes Payable are liabilities for which the business has issued (signed) a promissory note to pay the lender what they borrowed, plus interest. Normally, just the principal (what the business borrowed) is in the account. The interest is reported in a separate account (Interest Payable) that will be discussed later.

Accrued Expenses Payable is a category of accounts that summarize things the business has used but has not yet paid for. They are broken down into different accounts such as: Salaries and Wages Payable (for salaries and wages that have been earned by the employees but not yet paid); Interest Payable (for interest on notes payable, etc., that has accumulated on the note but has not been paid).

Unearned Revenue is used to record advance payments for goods or services that have not yet been delivered.

Customer Deposits is used to record deposits (such as rent deposits) that are made to secure payment or cover damages to