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. 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 expected to last a long time. As the fixed assets are used , their cost is written off systematically - this is called depreciation . 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.