ALICE: Assets, Liabilities, Income, Capital, Expenses

Studying principles of accounts can be very easy once you learn which items are Assets, Liabilities, Capital, Income and Expenses. The accounts that fall under these 5 headings are used throughout your POA course. You can even associate the ALICE accounts with action words, you OWN assets, OWE liabilities, EARN income, INVEST capital and SPEND on expenses.

ALICE accounts list

ASSETS – Own

Goodwill – you own the reputation of the business

Land – you own the space on which your business runs

Building – you own the structure in which your business runs

Fixtures and Fittings – you own the items that make your building functional

Equipment/Machinery/Tools – you own the items that allow your business to operate

Motor vehicles – you own the items that allow you to transport goods in and out of your business

Prepaid expense – you own the light, rented space or repairs of machinery for a period that you paid for in advance

Accounts receivable – you own the money for which you have invoiced persons or businesses for goods, services or assets sold on credit

Debtors –  you own the money that customers owe you for goods and services sold on credit

Bank – you own the money in your bank account

Cash – you own the money in your hand

LIABILITIES – Owe

Bank loan – you owe the bank money that you borrowed

Debenture loan – you owe the bank money that you borrowed while you run a limited liability company

Investor’s loan – you owe a person or business who invested money into your business

Mortgage – you owe the bank money for property or land to pay back over a long period

Hire purchase –  you owe a store money for fixed assets to pay back in installments over an agreed period

Prepaid revenue – you owe your customers the goods and services that they paid for in advance

Accounts payable – you owe persons or businesses for goods, services or assets for which you have been invoiced that you purchased on credit

Creditors – you owe money to suppliers for goods you have purchased on credit for resale

Bank overdraft – you owe the bank money because you withdrew more than you had in your account

Cash dividends – you owe shareholders money that they invested into your business

INCOME – Earn

Cash sales – you earn cash money for goods or services sold to customers

Credit sales – you earn money for goods or services sold to customers but they owe you for it

Revenue – you earn money for goods or services sold to customers both cash and credit

Discount received – you earn money that you saved after purchasing products or services at a lower cost

Returns outwards – you earn money that you get back from a supplier after returning goods that you purchased

Bad debts recovered – you earn money that you have written off as bad debts in a past period

Other names for money earned in the ALICE accounts are:

Earnings

Benefits

Proceeds

Takings

Yield

Commission

CAPITAL – Invest

Cash at start

Owner’s investment

Money out of pocket

Partners’ investment

Share capital

Members’ contribution

Total assets minus total liabilities

Equity

Drawings – owner withdraws money from the business for personal use

EXPENSE – Spend

Cash purchases – you spend cash money on goods for resale from suppliers

Credit purchases – you spend money on goods for resale from suppliers but you owe them for it

Carriage inwards – you spend money to transport goods for resale from suppliers into your business

Carriage outwards – you spend money to transport goods for resale to customers out of your business

Discount allowed – you spend money when you allow customers to pay a lower price for your product

Returns inwards – you spend money when customers bring back goods that you sold them and you refund the money you earned

Rent – you spend money when you pay a landlord for space to run your business for a period

Repairs – you spend money to fix assets that you use to run your business

Utilities – you spend money on light, internet, phone and water used to run your business

Salaries and wages – you spend money on labour provided by your staff

Insurance – you spend money for protection of a possible eventuality such as fire, flood or accident

Tax – you spend money on a mandatory contribution to state revenue

ALICE accounts and transactions

It is important to know the ALICE accounts for recording transactions. Read about Debit and Credit of T accounts and Increase and Decrease of ALICE accounts. Note that all Assets and Expenses have debit balances and all Liabilities, Capital and Expenses have credit balances.