Account Types

Transactions have the right to be summarized right into equivalent team or accounts. A firm compiles a list of accounts to make the chart of accounts. Need even more information about what an account is? Watch this brief video.

You are watching: Classify each of the following accounts as an asset (a), liability (l), or equity (eq) account.

The video explained that accounts are choose file folders. What are some things a company might have? A firm could have cash or a checking account, invoices for money we will receive from customers later on, bills we need to pay, and we can very own home prefer land also, structure or equipment. We have 5 standard categories for accounts:

Asset: Something a business has or ownsLiability: Something we owe to a non-ownerEquity: Something we owe to the owners or the value of the investment to the ownerRevenue: Value of the goods we have offered or the services we have performedExpenses: Costs of doing business

Let’s look at each one individually. We will look at the broad picture of each category as you will certainly learn the details later on in the course.

Assets: Assets are somepoint you very own or have actually and they are resources you mean to obtain a benefit from in the future. Depending on the nature of the business tbelow are many points that deserve to be classified as assets.

Some examples of assets are:

Cash (describes the service cash accessible however can also be a checking or savings account)Office Supplies or other prephelp costs (any costs the service pays in advance)Accounts receivable (amount we will receive from customers at a later date)Inventory (items we intend to sell later)Equipment (value of tools purchased)Building (value of building purchased)Land (value of land purchased)

Liabilities: Liabilities are somepoint that company owes to a non-owner (debt and also service obligations). Liabilities deserve to easily be determined as the account will the majority of regularly end in the word “payable” because it is something we must pay someone later on.

Some examples of liabilities are:

Accounts Payable (bills the agency should pay)Sales Tax Payable (sales tax obligations)Wperiods Payable (obligations to employees for job-related performed),Payroll Taxes Payable (duties phelp on a monthly or quarterly to state, local or federal agencies)Unearned Revenue (dvery own payments received on job-related to be completed in the future)Mortgage Payable (for instance mortgage on business property)Notes Payable (business financial obligations from signing a promissory note).

Equity: Equity accounts recurrent the worth of the owner’s investment in the agency. The Equity accounts are various based upon the kind of agency.

For sole-proprietorship and also partnership, a Capital account is used to document the investment of the owners and also income earned by the agency. A Withdrawal (or drawing) account is used once the owner takes money out for individual use.For corporations, a Typical Stock account is offered to document the investment of the owners. A Retained Earnings account is supplied to document the income of a corporation and to record as soon as earnings are offered back to the owners in the create of dividends.

Revenues recurrent the value of the goods or solutions provided. Thanks to the revenue recognition principle, we record revenue when we actually perform the job-related by performing a business or moving a product. Examples of revenue accounts include:

Service Revenue (revenue from completing a business, could be particular choose plumbing organization revenue, accounting service revenue, photography business revenue, etc.)Sales Revenue (value of products you sell)Interemainder Revenue (value of interest earned on investments or financial institution accounts)

Expenses are expenses to the firm and reflect the outflow of money. What matters is have we incurred or used the price. These prices recurrent the all prices of doing business and also are offered in order to geneprice the revenue. Instances of expenses accounts incorporate (alert exactly how a lot of cost accounts finish in the word “expense”):

Cost of Goods Sold (what we paid for inventory we have sold)Utilities Expense (price of utilities)Wperiods Expense (expense of employee’s earnings)Rent Expense (cost of renting office room or equipment)Supplies Expense (cost of gives used)Insurance Expense (expense of insurance used)Advertising Expense (expense of advertising)Bank Fees Expense (price of financial institution fees charged by the bank)

Below is an example of a chart of accounts for Metro Courier, Inc. which is a corporation. Notice just how the chart is listed in the order of Assets, Liabilities, Equity, Revenue and Expense. This order provides it straightforward to finish the financial statements. Click Metro COA for a printable copy.

Metro Courier Inc.

See more: Which Of The Following Actions Explains Why Britain Officially Entered World War Ii?

Chart of Accounts
Account NameAccount Type
CashAsset
SuppliesAsset
Accounts ReceivableAsset
Prepaid RentAsset
InventoryAsset
Office EquipmentAsset
BuildingAsset
LandAsset
Accounts PayableLiability
Interemainder PayableLiability
Weras PayableLiability
Sales Tax PayableLiability
Unearned RevenueLiability
Income Tax PayableLiability
Social Security Tax PayableLiability
Mortgage PayableLiability
Notes PayableLiability
Typical StockEquity
Retained EarningsEquity
Service RevenueRevenue
Interemainder RevenueRevenue
Utilities ExpenseExpense
Rent ExpenseExpense
Supplies ExpenseExpense
Wperiods ExpenseExpense
Taxes ExpenseExpense
Insurance ExpenseExpense
Bank Fees ExpenseExpense

 

You deserve to develop your very own grasp chart of accounts for use in this course and develop on it as we go along. You should be able to complete the account type column and also some of the account descriptions. Click Chart of Accounts to accessibility a google spreadsheet that you can download and also use during the course.