Frequently used accounts

Dappr will automatically add some of the most frequently used accounts to your company's Chart of Accounts when setting up the accounting feature. These are some of those accounts.

Assets

In accounting, assets are resources that a business owns and controls with the expectation that they will provide future economic benefits. Assets can be either physical (such as equipment, inventory, and land) or intangible (such as trademarks, copyrights, and patents).

Short-Term Assets

A short-term asset is an asset that is expected to be converted into cash or used up within one year or the company's operating cycle, whichever is longer. Short-term assets are also known as current assets.

Taxes Recoverable

Taxes recoverable refer to taxes that a business has paid but may be able to recover or claim back from the government in the future. This can include taxes that were paid in error or taxes that were paid on expenses that were later found to be tax-deductible.

For example, a business may have paid sales tax on a purchase that was later determined to be tax-exempt. In this case, the business may be able to recover the sales tax that was paid by filing a claim with the government.

Similarly, a business may have paid taxes on expenses that are tax-deductible, such as employee salaries or rent. In this case, the business can claim these taxes as a tax deduction on its tax return, effectively recovering the taxes that were paid.

It's important to note that the rules and regulations surrounding taxes recoverable can vary significantly depending on the jurisdiction and the type of tax involved. Businesses should consult with a tax professional or refer to relevant tax laws to determine their eligibility for tax recovery.

Liabilities

In accounting, liabilities are obligations that a business owes to others. Liabilities can be either current or non-current, depending on when they are expected to be settled.

Accounts Payable

Accounts payable refers to the amount of money that a business owes to its creditors or suppliers for goods or services that it has received but has not yet paid for. These are typically short-term obligations that are expected to be paid within a year or less.

In accounting terms, accounts payable is a liability account that represents the amounts the company owes to its creditors. It is typically listed on the balance sheet as a current liability, since it is expected to be paid within the current accounting period or within one year.

For example, if a business orders supplies from a supplier and receives the supplies before paying for them, the business will have an account payable to the supplier. When the business pays the supplier, the account payable is reduced and the payment is recorded as a credit in the accounts payable account.

Managing accounts payable is an important part of financial management for businesses. It is necessary to ensure that the company pays its creditors on time to maintain good relationships and avoid late payment fees or other penalties. At the same time, businesses may also want to negotiate favorable payment terms with their creditors to help manage their cash flow.

Taxes Payable

Taxes payable is a liability account that represents the amount of taxes that a company owes to the government or other tax authorities as of a particular date. This can include income taxes, property taxes, sales taxes, payroll taxes, and other types of taxes that the company is required to pay.

The taxes payable account is typically recorded in the company's general ledger as a current liability, which means that it is expected to be paid within one year or less. The balance in the taxes payable account is determined by calculating the amount of taxes that the company owes based on its financial transactions and comparing it to any payments that have already been made.

When a company pays its taxes, the amount is recorded as a reduction in the taxes payable account and an expense in the company's income statement. This is because the payment of taxes is a necessary cost of doing business and is therefore recorded as an expense.

It's important for companies to accurately track and manage their taxes payable, as failure to pay taxes on time can result in significant penalties and interest charges. In addition, the taxes payable account is typically closely scrutinized by external auditors and regulatory authorities, so it's important to ensure that the account is accurately maintained and that all tax obligations are being met.

Income

Income in accounting refers to the increase in economic resources of an entity as a result of the sale of goods or services. It is recorded in the income statement and represents the revenue earned by a business during a specific period of time

Sales

A sales account is a financial account that records the revenue earned by a business from the sale of goods or services. It is an important component of a company's income statement, which is a financial statement that shows the company's revenues, expenses, and profits over a specific period of time.

The sales account is used to record the total amount of revenue earned from the sale of goods or services to customers. It is usually classified as a revenue account and is credited when a sale is made. The sales account is typically used to track the performance of a business and is used to measure the company's ability to generate revenue.

Expenses

Expenses in accounting refer to the costs that a business incurs in order to generate revenue. They are recorded in the income statement and represent the cost of goods sold (COGS) and operating expenses incurred by a business during a specific period of time.

Operating Expenses

Operating expenses are the costs that a business incurs in order to maintain its daily operations and keep the business running. These costs include things like rent, utilities, salaries and wages, insurance, and other expenses that are necessary for the business to function. Operating expenses are typically distinguished from capital expenses, which are costs that are incurred to acquire or improve long-term assets, such as buildings or equipment. Operating expenses are typically recorded as expenses in the period in which they are incurred, while capital expenses are recorded as assets and are then depreciated over time.

Dappr will automatically add a list of operating expense accounts to your Chart of Accounts.

Cost of Goods Sold

In accounting, the cost of goods sold (COGS) refers to the direct costs associated with producing the goods or services that a business sells. COGS includes the cost of raw materials, direct labor costs, and any other direct costs that are directly incurred as a result of producing the goods or services. COGS is typically calculated on a per-unit basis, and is used to determine the gross profit of a business.

To calculate COGS, a business must first determine the total cost of all goods or services produced during a given period. This amount is then reduced by the value of any goods or services that were not sold during that period, such as goods that are still in inventory or services that are not yet completed. The result is the COGS for the period.

COGS is an important concept in accounting, as it is used to calculate gross profit and net profit, which are key indicators of a business's financial performance. It is also used in the calculation of various financial ratios, such as the gross profit margin and the net profit margin, which help to assess the efficiency and profitability of a business.

Owner's Equity

Owner's equity, also known as shareholder's equity or simply equity, is the portion of a business's assets that is owned by the business's shareholders. In a corporation, owner's equity represents the residual value of the business after all liabilities have been paid. It is the difference between the company's assets and its liabilities, and can be thought of as the capital that the shareholders have invested in the business.

In a sole proprietorship or partnership, owner's equity represents the capital invested in the business by the owner or owners, as well as any profits that have been retained by the business rather than being distributed as dividends.

In accounting, owner's equity is usually represented on the balance sheet, which is a financial statement that shows a company's assets, liabilities, and equity at a specific point in time. The balance sheet equation, which represents the relationship between a company's assets, liabilities, and equity, is as follows:

Assets = Liabilities + Owner's Equity

Owner's equity can be increased through the generation of profits, the receipt of additional capital from shareholders, or the reduction of liabilities. It can be decreased through the distribution of dividends to shareholders, the incurrence of losses, or the assumption of additional liabilities.

Common Shares

Common shares, also known as common stock or ordinary shares, are a type of security that represents ownership in a corporation. Common shareholders are owners of the corporation and are entitled to a share of the company's profits, as well as a vote in the company's decision-making process.

In accounting, common shares are typically recorded on the company's balance sheet as a component of owner's equity. The value of common shares is determined by the market price of the stock, which is influenced by factors such as the company's financial performance, the state of the economy, and investor sentiment.

Common shareholders have a residual claim on the company's assets, which means that they are entitled to receive any remaining assets after all debts and other obligations have been paid. However, common shareholders have a lower claim on the company's assets compared to holders of preferred shares, who have a higher claim on the company's assets and are entitled to receive their share of profits before common shareholders.

Owner Contribution

In an LLC, owner contribution refers to the capital that is contributed by the owners (also known as members) of the LLC to fund the business. This capital may be in the form of cash, property, or other assets, and it is typically used to finance the operations of the business.

It is important for an LLC to accurately track and record owner contributions, as they are a key source of funding for the business and can have a significant impact on the company's financial position. Additionally, owner contributions may be subject to tax consequences and other regulatory requirements, so it is important to understand and comply with these rules when making or receiving contributions.

Retained Earnings/Deficit

Retained earnings are a company's net income that is retained by the company rather than being paid out as dividends to shareholders. In other words, retained earnings are the portion of a company's profits that are kept by the company to be reinvested in the business, rather than being distributed to shareholders.

Retained earnings can be used to pay off debt, fund expansion and growth, or to provide a financial cushion in case of unexpected expenses or downturns in the business. Retained earnings are an important source of capital for a company, as they represent the accumulated profits of the company that can be used to finance future growth.

Retained earnings are reported on the balance sheet under the heading "retained earnings". They are calculated by taking the beginning balance of retained earnings for a specific accounting period and adding any net income or loss for the period, and then subtracting any dividends paid to shareholders.