Accounts Associated with the Income Statement - Essay Example

. Prepaid insurance was selected because insurance is typically paid in advance for a period of one year or longer. Office equipment was selected to recognize the existence of this asset. All assets depreciate and have accumulated depreciation until they reach salvage value.

The notes payable account was selected to record short-term debt associated with the purchase of merchandise from suppliers. Notes payable was selected as an account of ABC Corporation to recognize short-term debt associated with running the business. Salaries payable were selected to recognize salaries owed once the accounting period is over. This account is typically used as an adjusting entry. The common stock account was chosen to recognize the equity of the firm. ABC Corporation is a public company whose stocks are traded on the New York Stock Exchange (NYSE). The revenues account was chosen to recognize sales made by the company. “Sales management is one of the key components that every business which relies on sales must practice” (Gregory, 2012).

The advertising supplies expense account was selected to acknowledge expenses associated with advertising. Companies rely on advertising to boost the sales of the products and services of a company (Blurtit). The depreciation account was selected because the assets of a company depreciate over time. The reason insurance expense was chosen was to adjust the prepaid insurance account on a monthly basis as it expires. Salaries expense was selected to recognize the payment of salaries to the employees of the company. The rent expense account was selected due to the fact that ABC Corporation is renting the space where the store is located.
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