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Generally accepted accounting principles: Define accounts with examples

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

Solution Preview

See attached file.

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 ...

Solution Summary

The expert defines accounts for generally accepted accounting principles.