From an accounting standpoint, the par value of an issued share of common stock must be recorded in an account separate from the amount received over and above the amount of par value. For example, if a corporation issues 100 new shares of its common stock for a total of $2,000 and the stock’s par value is $1 per share, the accounting entry is a debit to Cash for $2,000 and a credit to Common Stock—Par $100, and a credit to Paid-in Capital in Excess of Par for $1,900. In total the Cash account increased by $2,000 and the paid-in capital reported under stockholders’ equity increased by a total of $2,000 ($100 +$1,900).

If a corporation is not required to have a par value or a stated value and the corporation issues 100 shares for $2,000, then the accounting entry will be a debit to Cash for $2,000 and a credit to Common Stock for $2,000.

In other words, when the issued stock has a par value, the proceeds from the issuance gets divided between two of the paid-in capital accounts within stockholders’ equity. If the issued stock does not have a par value, the proceeds from the issuance goes into just one paid-in capital account within stockholders’ equity.

Learn more about Stockholders’ Equity.

In some accounting software the chart of accounts may be the means to open new general ledger accounts and to control their position in the financial statements.

Usually the chart of accounts begins with the balance sheet accounts followed by the income statement accounts. The accounts will usually be in the same order as they are presented on the two financial statements.

Learn more about Chart of Accounts and see two examples.

The assets reported as property, plant and equipment are described as long-lived, tangible assets. They are also described as fixed assets or as plant assets.

Generally, the property, plant and equipment assets are reported at their cost followed by a deduction for the accumulated depreciation that applies to all of these assets.

For example, if the credit card purchases had not been previously entered, then there will be debits to the accounts that are appropriate for the charges. Let’s assume that one credit card transaction was for an enrollment fee for a seminar. That amount might be debited to Seminars & Conventions Expense. If the other credit card transactions were for airline tickets and hotels, you might debit the account Travel Expenses for those amounts.

However, it is possible that the credit card bill was recorded in the accounts prior to paying the credit card bill. Using the example above, the accountant may have debited Seminars & Convention Expenses and Travel Expense, and credited Credit Card Payable at the time the bill or statement was received. If the credit card bill is paid two weeks later, the payment will be recorded with a debit to Credit Card Payable and a credit to Cash.  

Some companies will list the current liabilities in this order: 1) short-term notes or loans payable, 2) current portions of long-term debt, 3) accounts payable, 4) payroll related liabilities, 5) other accrued expenses, and 6) income taxes payable. Other companies will list its accounts payable ahead of its short-term debt.

After the current liabilities are listed, the long-term or noncurrent liabilities will be listed. This might include long-term debt, bonds payable, and deferred income taxes.

In short, I would arrange the chart of accounts in the order that the accounts will appear on the balance sheet and income statement.

AccountingCoach.com provides two samples of the Chart of Accounts. 

Learn more about the Balance Sheet.  Also try our Free Interactive Puzzles on Balance Sheet and many more topics. 

For example, when a corporation issues shares of its common stock and receives more than the par value of the stock, two accounts are involved: 1) the account Common Stock is used to record the par value of the shares being issued, and 2) the amount that is greater than the par value is recorded in an account entitled Paid-in Capital in Excess of Par—Common Stock, or Premium on Common Stock.

Many years ago, the account Paid-in Capital in Excess of Par—Common Stock and the account Premium on Common Stock were referred to as capital surplus.

Learn more about Stockholders’ Equity.

The retailer can record the delivery surcharges in a separate operating revenue account. In other words the sales revenues account could be used to record the revenues excluding the surcharges and then another sales revenue account could be designated as the delivery surcharge revenues account. Those two accounts would then be added together to report total operating revenues.

The portion of the balance in Loans to Employees that will be due within one year of the balance sheet date is reported as a current asset. The portion of the balance in that account that is not due within one year of the balance sheet date will be reported as a long term asset.

Interest on the loan should be accrued by the company and reported as other revenue. The company’s entry to accrue interest is a debit to the current asset Interest Receivable and a credit to Interest Revenue.

Let’s illustrate the Cash Short and Over account with the petty cash fund. Assume that the company has a petty cash fund of $100 and its general ledger account Petty Cash reports an imprest balance of $100. Let’s now assume that when the petty cash fund is replenished, there is $6.00 on hand and there are petty cash receipts indicating that $93.00 were disbursed. These two amounts indicate there is a shortage of $1.00. (The custodian started with cash of $100 and has documents showing that $93 was disbursed. Therefore, the custodian should have $7 on hand—not $6.)

Using the above information, the journal entry to replenish the petty cash fund will include a credit to Cash-Checking Acct for $94. (This is the amount needed to get the petty cash on hand back to the imprest general ledger amount of $100.) The debits will be the accounts and amounts shown on the petty cash receipts, which total $93. To get the journal entry to balance, there needs to be another debit for $1 and it will be recorded in Cash Short and Over.

A debit in Cash Short and Over represents an expense. In our example, the company will have an expense of $1, since there was a cash shortage of $1. A credit to Cash Short and Over indicates that there was more cash on hand than was expected. In other words, a credit to Cash Short and Over represents a revenue.

If petty cash custodians and bank tellers were perfect money handlers, there would never be an entry to the account Cash Short and Over. The Cash Short and Over account provides an organization with a mechanism for monitoring its cash handling proficiency.

The balance in Cash Short and Over is reported on the income statement. If the balance is insignificant, the account balance will likely be reported as part of miscellaneous expense.

Learn more about dividends and stockholders’ equity.

If a corporation issues $300,000 of bonds at a price of 102, it will be issuing the bonds at a premium of 2%. The journal entry will include a debit to Cash for $306,000; a credit to Bonds Payable for $300,000; and a credit to Premium on Bonds Payable for $6,000. Since a credit balance is the normal balance for a liability account, the account Premium on Bonds Payable cannot be referred to as a contra account. Here is where the term adjunct account is used. Immediately after the bonds are issued, the bonds will have a carrying value of $306,000 ($300,000 PLUS $6,000).

Some people might use the term adjunct accounts for both the Discount on Bonds Payable and for the Premium on Bonds Payable. Others might use the term valuation accounts.

Other examples of contra accounts include Allowance for Doubtful Accounts, Accumulated Depreciation, Discount on Notes Payable, Discount on Notes Receivable, LIFO Reserve, and certain investment accounts.

Under the perpetual inventory system, the account Purchases won’t exist. Rather, the cost of inventory items purchased will be recorded directly into the account Inventory.

Under the periodic system, the cost in the account Purchases will be added to the cost of the beginning inventory to arrive at the cost of goods available. The cost of the ending inventory is computed through a physical count (or an estimate) and is subtracted from the cost of goods available. The resulting amount is the cost of goods sold.

Under the perpetual system, the balance in the account Inventory should be the cost of the ending inventory. Under the perpetual system, the cost of goods sold will have been removed from the account Inventory when the items were sold and placed in the account Cost of Goods Sold.

Learn more about Inventory & Cost of Goods Sold.

A creditor is a person, bank, or other enterprise that has lent money or extended credit to another party. (The party to whom the credit has been granted is often a customer that will now be referred to as a debtor.)

If Company X borrowed money from its bank, Company X is the debtor and the bank is the creditor. If Supplier A sold merchandise to Retailer B, then Supplier A is the creditor and Retailer B is the debtor.

You can find the definitions for 1,000 accounting terms in our accounting dictionary.

To illustrate the closing entry, let’s assume that at the end of the accounting year the account Eve Jones, Drawing has a debit balance of $24,000. This balance is the result of Eve withdrawing $2,000 per month from her sole proprietorship for her personal use. (Each monthly withdrawal was recorded with a debit to Eve Jones, Drawing and a credit to Cash.) The journal entry to close the drawing account requires a credit to Eve Jones, Drawing for $24,000. The other part of the entry is a debit of $24,000 to Eve Jones, Capital.

The drawing or withdrawal account is a temporary owner equity account, requiring it to be closed at the end of the accounting year. The drawing account is also a contra account to owner’s equity, because the drawing account’s debit balance is contrary to the normal, expected balance for an owner equity account.

Also note that the drawing account is closed directly to the capital account. The drawing account is not an expense and as a result it does not get closed to the Income Summary account.

Learn more about accounting entries at Debits & Credits.

When the proper account is determined, the amount will be moved from the suspense account to the proper account.

Learn more about Bookkeeping.

When the deferred revenue becomes earned, an adjusting entry is prepared that will debit the Unearned Revenues or Deferred Revenues account and will credit Sales Revenues or Service Revenues.

Learn more about Adjusting Entries. AccountingCoach.com also has three FREE interactive Crossword Puzzles on adjusting entries.

A gain results from a peripheral activity, such as selling the old delivery truck. A gain is the amount received that is in excess of the asset’s carrying amount (book value). For example, if the company receives $3,000 for the truck, and its carry amount was $600, the company will report a gain of $2,400.

Income is sometimes used instead of the word revenue: some people refer to the rent they receive as rent income. Generally, accountants use the word income to mean “net of revenues and expenses.” For example, a retailer’s income from operations is sales minus the cost of goods sold minus operating expenses.

Learn more about the Income Statement.

Contrast the bank loan with phoning one of your company’s suppliers and asking for a delivery of products or supplies. On the next day the products arrive and you sign the delivery receipt. A few days later your company receives an invoice from the supplier and it states that the payment for the products is due in 30 days. This transaction did not involve a promissory note. As a result, this transaction is recorded in your company’s general ledger account Accounts Payable. The supplier will record the transaction with a debit to its asset account Accounts Receivable (and a credit to its account Sales).

Learn more about the Balance Sheet.

The purpose of the control account is to keep the general ledger free of details, yet have the correct balance for the financial statements. For example, the Accounts Receivable account in the general ledger could be a control account. If it were a control account, the company would merely update the account with a few amounts, such as total collections for the day, total sales on account for the day, total returns and allowances for the day, etc.

The details on each customer and each transaction would not be recorded in the Accounts Receivable control account in the general ledger. Rather, these details of the accounts receivable activity will be in the Accounts Receivable Subsidiary Ledger. This works well because the employees working with the general ledger probably do not need to see the details for every sale or every collection transaction. However, the sales manager and the credit manager will need to know detailed information on individual customers, including whether a customer recently reduced their account balance. The company can provide these individuals with access to the Accounts Receivable Subsidiary Ledger and can keep the general ledger free of a tremendous amount of detail.