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Types of Major Accounts

The document outlines the major types of accounts used in accounting including assets, liabilities, equity, revenue, and expenses. Assets are resources owned by a company, while liabilities are obligations owed. Equity represents the owner's claim and includes capital. Revenue is money earned from sales, and expenses are costs to produce goods and services.

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38 views

Types of Major Accounts

The document outlines the major types of accounts used in accounting including assets, liabilities, equity, revenue, and expenses. Assets are resources owned by a company, while liabilities are obligations owed. Equity represents the owner's claim and includes capital. Revenue is money earned from sales, and expenses are costs to produce goods and services.

Uploaded by

Kelsey Sofia Rojas
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Types of Major Accounts

1. Assets are the resources owned and controlled by the firm or the company.
Examples of these are cash, computer systems and patents.
2. Liabilities are the obligations of the company arising from past events which are to be settled in
the future. These represent what the company owes to other people, organization, and financial
institutions.
Examples of these are mortgages, vehicles and loans.
3. Equity or Owner’s Equity is the owner’s claims in the business. It is part of the total assets that
the owners of the company fully own.
An example of this is capital.
4. Revenue or Income is the money that the company earns from its regular sales of products or
services. This is earned by the company through sales of products or services.
Examples of this are sale of building materials and accounting services by a CPA firm.
5. Expenses are the money that the company spends to produce the goods or services it sells.
Examples of these are rent expense, supplies expense and salaries expense.

Assets
There are the two (2) classifications of assets:
1. Current Assets
2. Non- Current Assets

Difference between Current vs. Non-Current Assets & Tangible vs. Intangible Assets

• Current Assets are assets that can be collected, sold, and even used up to one year after year-
end date.
Examples of Current Assets are:
Cash is money on hand, or in banks, and other items considered as a medium of exchange in
business transactions.
Accounts Receivable is amounts due from customers arising from debts.
Notes Receivable is amounts due from clients supported by a written note or promise.
Inventories are assets held for resale in the course of the business.
Supplies are items purchased by an enterprise that is unused as of the reporting date.
Inventories are assets held for resale in the courses of the business.
Prepaid Expenses are advance payment for expenses.
Accrued Income is an income or revenue earned by the firm but not yet collected.
Short-term Investments are the investments made by the company that is intended to be sold
immediately.

• Non-current Assets are assets that cannot be collected, sold, and even used up to one year after
year-end date.
Examples of Non-Current Assets
Property, Plant, and Equipment are long-lived assets that have been acquired for use in
operations.
Long term Investments are the investments of the firm made for long term purposes.

• Tangible Assets are physical assets in the form of cash, furniture and fixtures, and supplies.
• Intangible Assets are non-physical assets in the form of trademarks and patterns.

Liabilities
Current vs. Non-Current Liabilities
Current Liabilities are those that reach its due date for payment (paid, recognized as revenue) within
one year after year-end date.
Examples of Current Liabilities
Accounts Payable are amounts due or debts to the suppliers for goods purchased or for
services received on account.
Notes Payable is amounts due to third parties supported by a written note or promise.
Accrued Expenses are treated as liabilities since these are the expenses that are incurred but
not yet paid (e.g. salaries payable, taxes payable).
Unearned Income is cash or payment collected in advance.

Non-current Liabilities are those that do not reach its due date for payment, (paid, recognized as
revenue) within one year after year-end date.
Examples of Non-Current Liabilities
Loans Payable is a contract wherein the owner of the property gives the right to use it to
another party in exchange for an interest payment and gives back the property at the end of
their contract. It is documented by promissory note. And in the case there is still a portion
which is unpaid as of the date of a company's balance sheet; the remaining balance on the loan
is called a loan payable.
Mortgage Payable is the liability of a property owner to pay a loan that is secured by property
and from the borrower’s point of view. The mortgage is considered as long-term liability. Some
part of the debt that is payable within the next 12 months is classified as a short-term liability.
The remaining unpaid principal will be the total amount due of the loan.

Owner's Equity
There are two (2) important elements that comprised the equity:
•Capital is the worth of cash and other assets invested in the business.
•Drawing is an account debited for assets withdrawn by the owner for personal use from the
business.

Income - is the increase in resources resulting from the performance of service or selling of goods.
Examples of income accounts are:
•Service revenue for service entities
•Sales for merchandising and manufacturing companies
•Interest Income

Expense -is the decrease in resources resulting from the operations of the business.
Examples of expense accounts are:
•Salaries expense
•Interest expense
•Utilities expense

A chart of accounts is a listing of all accounts used by companies in their financial records.

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