If you are a business owner or accountant, understanding capital accounts in accounting can be essential to financial success. Knowing how to track and calculate capital accounts can help you manage your company's financial data and maintain accurate books. This guide provides an overview of capital accounts and their role in accounting, including what types of accounts are considered capital, how to record capital transactions, and the importance of monitoring capital accounts. With this knowledge, you'll be well-prepared to manage your company's finances confidently.
Accumulated depreciation is the total amount of depreciation expense that has been charged against an asset since it was acquired. Depreciation is a method used in accounting to allocate the cost of an asset over its useful life. The accumulated depreciation account is a contra-asset account. It has a credit balance and is subtracted from the asset's original cost to determine its net book value or carrying value on the balance sheet.
Accrual accounting is an accounting method that recognizes economic events regardless of when cash is received or paid. In accrual accounting, revenues and expenses are recognized when they are earned or incurred, rather than when the related cash is received or paid.
An accrued expense is a type of accounting transaction that occurs when a company incurs a cost but does not immediately pay for it. This cost is recorded as a liability on the company's balance sheet until it is paid. Some common examples of accrued expenses include interest expenses, rent expenses, and salaries expenses.
Accounts receivable is the total amount of money that is owed to a company by its customers for goods or services that have been provided on credit. Accounts receivable is considered to be an asset on a company's balance sheet, because it represents money that the company is owed and is expecting to receive.