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TYPES OF ACCOUNTS IN ACCOUNTING


Although businesses have many accounts in their books, every account falls under one of the following five categories:
  • 1. Assets
  • 2. Expenses
  • 3. Liabilities
  • 4. Equity
  • 5. Revenue (or income)

Definition , Nature , and Examples for Each Category:


Assets:

- Definition :represent the different types of economic resources owned by a business. 
- Examples of Asset accounts are cash, cash in bank, building, inventory, prepaid rent, goodwill, accounts receivable
- Nature : Debit is natural balance , that means it increases in Debit Side , and decreases in Credit Side.

Liabilities:

- Definition: represent the different types of economic obligations by a business.
- Examples : such as accounts payable, bank loan, bonds payable, accrued interest.
- Nature : Credit is natural balance, that means it increases in Credit Side, and decreases in Debit Side.

Equity: 

- Definition: represent the residual equity of a business (after deducting from Assets all the liabilities).
- Examples :including Retained Earnings, Net Profit (or Loss) , Other Comprehensive Income, Capital , Owners Withdrawals and legal reserves.
- Nature : Credit is natural balance, that means it increases in Credit Side, and decreases in Debit Side.

Expenses 


- Definition: represent the company's expenditures to enable itself to operate. Common 
- Examples : include , salaries, electricity, water, rentals, depreciation, bad debts, interest, insurance.
- Nature : Debit is natural balance , that means it increases in Debit Side , and decreases in Credit Side.

Revenues :

- Definition: represent the company's source of income that generate from its main activities or other irregular income.
- Examples :include, Sales of Clothes for a Clothes Factory, or Transportation Revenues for Airlines companies , and maintenance Revenues for a workshop.
- Nature : Credit is natural balance, that means it increases in Credit Side, and decreases in Debit Side.




I AM A FINANCE MANAGER, MSc, CMA, CSCA. I AM PUBLISHING THESE ACCOUTING-RELATED POSTS FOR EVERY AMBITIOUS ACCOUNTANT ALL OVER THE WORLD, IN ORDER TO IMPROVE OUR SKILLS IN ACCOUNTING AND FINANCE FIELD, I HOPE THAT WE HELP EACH OTHER TO BECOME CERTIFIED , PROFESSIONAL AND CREATIVE ACCOUNTANTS.

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