Alright, let's start this account title classification video. Alright, this is super important because, at least for me, this is where I got confused when I started this course. It's because they start throwing all these different names for things, different account titles, and you've never been exposed to it before. Alright? So here we're going to go through and we're going to discuss different account titles and how to classify them into different categories, okay? Accounts are going to fall into one of five broad categories. Okay? And it's very important, just like I said, to be able to classify them into a category. So here are five categories along the left-hand side. It's things we've talked about already. We've got assets, liabilities, equity, revenue, and expenses. Okay? These are our five categories that we want. When you see an account title, I want you to be able to say that's a liability, or that's an equity account, or that's an asset, that's revenue, right? I want you to have that skill down super well. Okay? So let's go over some of the most common accounts that we're going to see. Let's start here with assets and remember that assets are on the balance sheet. Right? We show the assets on the balance sheet and here are some of the most common ones. We see cash and cash equivalents. Right? The cash is an asset of the company, investments that the company has made. So investments, this has to do with investments that they made in, say, other companies. If the company were to purchase, let's say the company itself purchases shares of Apple stock, well that would be an investment in the company. It's not equity in this case, right? They're buying the shares of another company. So to our company, it's an investment. To that other company, that's part of their equity, but we're thinking just about our company. Okay? So those are investments. We've got land, equipment. Now a key one here. When you see the word receivable, notice how we have accounts receivable? Well, accounts receivable is money that our customers owe us and they're going to pay us in the short term. Right? So whenever you see receivable, that is a keyword for an asset. That means it's something that is owed to you, okay? So we see accounts receivable, we'll see notes receivable, there are different types of receivables, but whenever you see that word, it's a cue that it's in paid expenses. Okay? Because it has the word expense in it, so you might automatically think that it's an expense. But when we talk about prepaid expenses, which we go into more detail later, prepaid expenses are something that you paid for in advance. Let's say you bought an insurance policy that's going to last you five years. Well, if you paid for the entire insurance policy upfront, then you prepaid for other years, right? You have other years' payments involved here, so it actually becomes an asset, alright? And we discussed that in further detail, but that is a tricky one there. Prepaid expenses, that is an asset. This is expenses that we paid in advance, alright? than when we're going to use them. So that's an asset there. Other common ones, machinery, patents. Patents is an intangible thing. That's something a patent is something you get from the government if you invented something and they're going to give you the exclusive right to produce that thing. Well, that is an asset, right? Having this exclusive right to produce something, that can have value so that can be an asset as well. Other common ones inventory, right? Merchandise that we have to resell. Buildings, a building that we own. Long-term investments, right? Maybe we bought something that we're going to hold for a long-term. That could also be an asset. Okay? Let's move on to liabilities now. These are also balance sheet accounts, Right? Remember, assets equal liabilities plus equity. Liabilities show up on the balance sheet, and here are some of the common ones. We've got some good cues here. Whenever you see payable, just like we have accounts payable, we had accounts receivable as an asset, that's money that customers owe to us, we should receive it, well accounts payable this is money that we owe that we haven't paid yet, right? We received an invoice from a company for some service we received, and we got to pay that, right? So it's an account payable, that's a liability. Whenever you see that word payable, we're talking about a liability. Okay? Notes payable, notice it's right there. Bonds payable, right? These are all very common terms that you're going to see and that all means money that we have to pay out. It's money that is expected to be paid by us. Okay? So just like I said, accounts payable, let's go over these other two. Notes payable and bonds payable, these are bigger loans. When we talk about accounts payable, this is on a small scale, this might be to just like our suppliers or you know some little service like a the maintenance guy that comes and cleans the office every now and then, these are accounts payable, alright? Where we talk about notes payable, this is like a contract that you signed. A note payable would be like so notes and bonds payable, they deal with larger sums of money. Accounts payable is so notes and bonds payable, they deal with larger sums of money. Accounts payable is kind of day-to-day operations kind of stuff. Okay? Another great way to queue a liability is the word accrued. When you see accrued expenses, let's say like accrued payroll expenses or something like that, well when you see accrued that makes it a liability. That means that you've accrued these expenses, but you haven't paid them up yet. Accruing means they're building up, right? All the expenses are building up and you have to pay them off eventually, okay? So accrued should be a sign that we're talking about liabilities. Again, here we have income taxes payable,so we're due to pay some taxes. We haven't paid them yet, we've got this liability to pay that out. And the last one. We might see something like the current portion of long-term debt. Well, the long-term debt is a liability, but remember when we talked about current liabilities versus long-term liabilities, a current liability is due in under one year. So we might have part of that long-term debt. Maybe we have this huge loan that we're going to pay off over 20 years. Well, the part that we have to pay off this year would be the current portion, okay? So it's still a liability, it would just be part of the current liabilities there. Alright? So I know we're talking about a lot of things here, but this is an important topic even if we just expose you to this now and you come back to this video later after you've seen a lot more examples of how we use these accounts, I think it's going to be really beneficial, okay? So equity, let's go on to equity here. This again is a balance sheet account here. Okay. We're dealing with balance sheet accounts again, and some of the things in equity. So I see students get tripped up a lot when we see things like common stock so that the account called common stock, well that's different than investments up here, right? Investments, when we talked about okay? Just like preferred stock. That's a different type of stock that we'll talk about a little bit, but it's also another equity, it's just a different type of stock, okay? And then we've got additional paid in capital so that's money that you pay that got paid in over the top value of the stock and retained earnings, we've talked about retained earnings a bit already that is one of the main, equity accounts, okay? We also have treasury stock and this is stock that the companies bought back in their own stock. You don't have to remember what all these accounts are right now, okay? I'm just giving you a high-level overview of what they are and what you should be aware of when you see these account titles, titles. Okay? So these are the most common ones that you're going to see in equity. Alright? And the last ones are revenues and expenses. These are actually pretty easy to to catch because they have very good cues. Okay? So remember that revenues and expenses, they come up on our income statement. Okay? Both of them. Alright. And so let's start here with revenue. Revenue, when you see a revenue account, it's gonna it could just be called sales. Sales could be the name of the account. It could be called sales revenue, it could be called revenue, or they could get into more detail about how they earned the revenue. They might say something like service revenue for the service they provide, right? Or investment revenue, right? For revenue they got on investments. As long as it has that word revenue in it, as long as it says sales or revenue something like that, that means that we're talking about a revenue account, and it should be on the income statement. Another weird one that comes up every now and then is fees earned, and that could be a revenue account as well. You don't see it very often. Generally, you're going to see it called sales revenue or just revenue or something like that. Alright? And our expenses, well, those are really simple too. They're going to say expense. Every time you have an expense, the word expense is going to be in there. Payroll expense, wage expense. Right? Anything that's an expense is going to have the word expense. Now there are a couple, excuse me, a couple that kind of don't fit the bill here, but overall, this is a great general rule. And what about dividends expense while we're at it? Dividends are not an expense, alright? I just wanted to throw that in here, just I'm going to throw it in randomly here and there because it's a huge way that they love to trick you. Dividends are not an expense. They are an equity account, okay? So you would see that in equity. Okay? Alright. Let's go ahead and move on to the next video.
