Accounting Q&A

Definition of General Ledger Account

A general ledger account organizes and summarizes a company’s transactions. These accounts are listed in the general ledger (and chart of accounts), with balance sheet accounts first, followed by income statement accounts.

Examples of General Ledger Accounts

• Balance Sheet Accounts: Cash, Accounts Receivable, Inventory, Notes Payable, and Retained Earnings.
• Income Statement Accounts: Sales Revenue, Salaries Expense, and Interest Expense.

General Ledger Control Accounts
Control accounts summarize details stored in subsidiary ledgers. For example, the Accounts Receivable control account provides a summary, while individual customer details are in the subsidiary ledger. Other control accounts include Inventory and Accounts Payable.

Definition of Adjunct Account

An adjunct account is linked to another general ledger account and reflects the carrying amount or book value of the main account. It is sometimes called a valuation account.

Example of Adjunct Account
If a corporation issues bonds with a $2,000,000 maturity value but sells them for $2,100,000 due to favorable interest rates, it records:

• Bonds Payable (liability account): $2,000,000 (credit)
• Premium on Bonds Payable (adjunct liability account): $100,000 (credit)
• Cash: $2,100,000 (debit)
  The bond’s initial carrying amount is $2,100,000, with the premium amortized over its life.

Definition of Contra Account
A contra account offsets the balance of a related account, reflecting an opposite balance. For example, Accumulated Depreciation offsets asset accounts, reducing their book value.

Examples of Contra Accounts

1. A company’s equipment account shows a $450,000 debit balance, while Accumulated Depreciation has a $190,000 credit balance, resulting in a book value of $260,000.
2. If Sales is credited $900,000 for goods sold and Sales Allowances (a contra sales account) is debited $10,000 for customer returns, the net sales reported would be $890,000.

The balance sheet, or statement of financial position, details a corporation's assets, liabilities, and stockholders’ equity at the end of an accounting period (e.g., December 31). It summarizes account balances after all transactions are recorded.

Part of a Financial Set
The balance sheet is one of five financial statements required to understand a corporation's financial position fully. It works in conjunction with the other statements and accompanying notes.

Accounting Equation Structure
The balance sheet follows the accounting equation:
Assets = Liabilities + Stockholders’ Equity, maintained through double-entry accounting.

Sections of the Balance Sheet
The balance sheet aggregates ending balances into key sections:

• Assets: Current assets, investments, property, plant & equipment, intangibles, and other assets.
• Liabilities: Current and noncurrent liabilities.
• Stockholders’ Equity: Owner or shareholder equity details.

This structure provides a clear financial snapshot of the corporation.

Account Payable

Amount owed to a CREDITOR for delivered goods or completed services.