When a student gets enrolled in the accounting program the first thing he or she will be introduced to is a chart of accounts. The chart represents some of the most common and complicated types of accounts used by various companies across the globe. The decision of adding and removing particular accounts totally depends on the business needs.

What are the Types of Accounts in the Accounting?

You must be aware of the fact that the important part of the bookkeeping is to keep the track of your transactions, costs, revenue, expenses and everything in between. Apart from keeping the track of the transactions, bookkeeping basically focuses on the earning and the spending determining the minor details related to the income and expenses. This is the reason the incomes and expenses are mainly two types of accounting system in bookkeeping.

In order to take full advantage of the tax regulation, the business owners have to keep the track of expenses they paid during the year in the categories like the meal, entertainment, supplies. Apart from income and expenses, there is also a third type of accounting exists that is liability accounting. The liability accounting as you can figure out from the name keeps the track of things that actually cost you money like credit card debts, account payable, the line of credit, etc. Just opposite of the liability accounts there are the asset accounts that keep the track of the assets a firm owns. So here are the 4 main types of accounts in accounting.

  1. Asset account

The asset accounts keep the track of assets owned by the firm. This account keeps classifying information like increasing and decreasing the value of assets. Only assets that have the resale value falls under the asset accounts. For example – furniture, cash, building, etc. student who is new to asset accounts must understand that each year assets are adjusted to the accommodated depreciation.

  1. Liability account

The liability account represents the type of debt the business firm has to pay. The duration of the liability depends on the type of debt. The basic subheading of liability accounts is loan account, creditors’ accounts, bills payable account, capital account, etc.

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  1. Income account

The income account is one of the main accounts that is used to keep the track of the source of the income. With income accounts, the business owners can track the flow of income that is coming to their business. Let’s try to understand it with the help of an example BookMyEssay begins as an assignment writing service provider company that also provides career consulting services. Now the accounts the company will hold under the Income accounts are

  • Academic writing income
  • Career consultant income
  • Interest income (interest received on the bank deposit)

In most cases, it is better to create another income account to keep the record of the income that could not fall under the above income accounts. If you are not sure then you can consult your accounting manager. The main examples of income accounts are interest received account, sale account, Rent received an account, etc.

  1. Expenses account

The expense account represents the expenses made by the company. In simple words, any product that doesn’t have the resale value is an expense. Do not get confused with the asset and the expenses, if you are paying for something and selling it ahead is an asset, not an expense. It is better to consult with your accountant before setting up an expense account as there are certain categories you will have to stay adhere to like the meal, office supplies, telecommunication, and entertainment.

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