TYPES OF ACCOUNTS:

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)
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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.