What is an Account?
An account is a record of financial transactions for an asset or individual, such as purchases, sales, receipts and payments. Accounts are used to track the financial progress of a business, organization, or individual over time. Accounts are generally categorized into four main types: asset accounts, liability accounts, equity accounts, and income/expense accounts.
Types of Accounts
Asset Accounts – Asset accounts list the resources a company owns or is owed. Examples of asset accounts include cash, accounts receivable, inventory, and prepaid expenses. Liability Accounts – Liability accounts list the money that a company owes to others. Examples of liability accounts include accounts payable, taxes payable, and loans payable. Equity Accounts – Equity accounts list the money that owners have invested in a business. Examples of equity accounts include common stock, retained earnings, and capital contributions. Income/Expense Accounts – Income/expense accounts list the money that a company earns and spends. Examples of income/expense accounts include sales, cost of goods sold, and operating expenses.
Accounts are an important part of any financial system, and understanding the different types of accounts is essential for tracking the progress of a business or organization. For more information on accounting, check out the following resources: