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    Generally accepted accounting principles: Define accounts with examples

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    Listed below are accounts that are found in financial statements. For each of the accounts, using any and all sources available to you, provide the following infor mation.

    a. Provide the official definition under Generally accepted accounting principles.
    b. Identify the type of account (asset, liability, equity, revenue, expense, etc.)
    c. Give an example of a specific transaction or event that would cause the account to increase and a specific transaction or event that would cause it to decrease.
    d. If and when the account is recognized, is an increase in the account recorded with a debit or a credit?
    e. The normal balance for the account (debit or credit), if applicable.
    f. Indicate the financial statement and section of that statement where the account will be found (example: current asset section of the classified balance sheet or other revenues and gains section of the income statement, other financial statements, or footnotes). Assume that the income statement is a multiple-step statement. Explain the type of transactions that would result in the account appearing in the financial statements.

    1. Cash surrender value - Life insurance
    2. Production animals
    3. Cash Equivalent
    4. Treasury stock
    5. Trading securities

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    https://brainmass.com/business/accounting/generally-accepted-accounting-principles-define-accounts-425051

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    Financial Accounting
    Cash Surrender Value of Life Insurance
    This is an account that is created when the saving plan of an insurance policy in a firm is cancelled thus the amount accumulated as premium is returned to the firm. It is treated as an asset in because the cash surrender value of life insurance acts as a long term investment which increases annually from the policy. (Nikolai et al, 2010).Example: AXZ Ltd pays a premium of $9,000 annually to cover up for its employees. These payments are recorded as follows:
    Prepaid Insurance $9,000
    Cash $9,000
    To record the premium prepaid to the insurance company.
    According to the insurance company policy the saving plan of the premium increases from $ 12,000 to $14, 000. The adjusting entry at the end of the year will be recoded as:
    Insurance Expense $7,000
    Cash Surrender Value of Life Insurance $2,000
    Prepaid insurance $9,000
    To record the Insurance expense and the increase in cash surrender value of life insurance.
    When the returns imposed on premiums increases, the amount is debited on the Cash surrender value of life insurance and if the amount decreases the amount is credited in the same account. This account is accounted for in the long term asset section of the financial statement.
    Production animal
    In manufacturing accounts, the production costs accounts are treated as a direct material which is an asset to a production company. A direct material is a raw material that forms part of the finished product and is identifiable (Rajasekaran & Lalitha). From the definition it can be deduced that production animals are direct materials since they are purchased by a firm for its product. An example of the production animals are sheep kept for wool, cattle of cows kept for the milk production etc. The purchase of the production animal leads to an increase to the asset account which is debited and the death or sale of the animals leads to a decrease in the asset account which is credited. This account is found at the current asset section of the financial statement. Example: Fhoniey Ltd battle 10 sheep at the cost $5,400 and 5 cows at $ 680 each for the purpose of the manufacturing process of the firm. This transaction will be recorded as:
    Production animal $ 8,8 00
    Cash $ 8,8 00
    To record the purchase of production animals.
    The company later sold the animals at their face value. The adjusting entry at the end of the year will be recorded as:
    Purchase of cattle $ 8,8 00
    Cash $ 8,8 00
    To record the sale of production animals.
    Cash Equivalents
    These are short term investments that are highly liquid i.e. they can be turned to cash in a period less than one year e.g. commercial papers, money orders, short term treasury bills etc. It is an asset. Example: A company has Treasury bill worth $ 20,000 due in 60 days and deposits of money order worth $ 5, 400. The maturity of the treasury bills is due in 90 days. To record the transaction before maturity date will be recorded as:
    Treasury bills 20,000
    Money order 5400
    Cash Equivalents 25,400
    An increase in the deposits of money orders leads to a subsequent increase in the cash and cash equivalent and accounts which is debited and a decrease to the money order accounts which is credited and the vice versa is true. Maturity of treasury bills decreases the cash and cash equivalents.

    Treasury stock.
    This is stock that has been reacquired by the company issuing it through an open market and has decreased the amount of outstanding stock. Treasury stock is an Equity account found in the Stock holder's equity in the financial statement. The purchase of treasury stock causes an increase in the Stockholder's equity where it is debited and a decrease in the cash asset account where it credited. The sale treasury stock causes a decrease in the Stockholder's equity account where it is credited and an increase in the Cash account where it is debited (Needles et al, 2011).
    Trading Security.
    These are investments that are held as security for the purpose of selling them at a profit at the short run. Trading security is an asset. The purchase of trading securities for causes an increase in the Trading security account where it is debited and a decrease in the cash account where it is debited. The sale of the Trading Security causes the decrease in the current asset where it is debited and an increase in the cash account where it is debited. (Needles et al, 2011).

    Reference
    Needles B.E., Powers M. & Crosson S.V. (2011) Principles of Accounting. Cengage Learning. Retrieved September 21, 2011 from http://books.google.com/books?id=_IXIqS6svO8C&pg=PA539&dq=treasury+stock&hl=en&ei=ZpZ5Tsb9KcyJrAfnoMneDw&sa=X&oi=book_result&ct=result&resnum=2&ved=0CC8Q6AEwAQ#v=onepage&q=treasury%20stock&f=false
    Needles B.E., Powers M. & Crosson S.V. (2011) Principles of Accounting. Cengage Learning. Retrieved September 21, 2011 from http://books.google.com/books?id=_IXIqS6svO8C&pg=PA1264&dq=trading+securities&hl=en&ei=oJ15TtPLNorOrQemzZHgDw&sa=X&oi=book_result&ct=result&resnum=4&ved=0CEIQ6AEwAw#v=onepage&q=trading%20securities&f=false
    Nikolai L. A., Bazely J.D. & Jones J.P. (2010). Intermediate Accounting, 11th Edition. Cengage Learning. Retrieved September 21, 2011 from http://books.google.com/books?id=_ouCLUeCvKwC&pg=PA749&dq=cash+surrender+value&hl=en&ei=Jm95TsuPJ8yqrAfo08nYDw&sa=X&oi=book_result&ct=result&resnum=1&sqi=2&ved=0CCwQ6AEwAA#v=onepage&q=cash%20surrender%20value&f=false
    Nikolai L. A., Bazely J.D. & Jones J.P. (2010). Intermediate Accounting, 11th Edition. Cengage Learning. Retrieved September 21, 2011 from http://books.google.com/books?id=_ouCLUeCvKwC&pg=PA317&dq=cash+equivalents&hl=en&ei=RZ55TsH0DcLtrQf8_IyxDw&sa=X&oi=book_result&ct=result&resnum=1&ved=0CCwQ6AEwAA#v=onepage&q=cash%20equivalents&f=false
    Rajasekaran V. & Lalitha R. (2011). Cost Accounting .New Delhi. Dorling Kindersley (India) Ltd. Retrieved September 21, 2011 from http://books.google.com/books?id=zHS1CLAS-PoC&pg=PA37&dq=definition+of+direct+material+cost&hl=en&ei=woJ5Tu6BLI2JrAe5qPnYBg&sa=X&oi=book_result&ct=book-thumbnail&resnum=1&ved=0CDUQ6wEwAA#v=onepage&q=definition%20of%20direct%20material%20cost&f=false

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