Things You Should Know About Accounting Accounts

accounting accounts

Many people always think that accounting is a confusing subject, even the owner of a business think like that too. It is so because the accounting is usually put into double entry accounting into the mix and the chart of accounts.  Before getting more information about this system you’ll be told three categories of accounting accounts include of their explanation, they are:

Assets

In assets accounting accounts are broken into two parts, current assets and fixed assets. Current assets have parts again, they are: petty cash, checking accounts, saving accounts, money markets accounts, investment accounts, and certificates of deposit which usually mature in less than a year. Process accounts, prepaid expenses, accounts receivable and inventory accounts are usually included and work in asset accounting accounts too.

Meanwhile fixed asset are usually consisted of land, buildings, furniture, fixtures, equipment, vehicles, and some other items which can be depreciated. Depreciation is usually put in fixed asset account as this account subtracts assets accounting accounts. Depreciation is called as contra asset.

Liabilities

Liability accounting accounts have two parts, current liabilities and long-term liabilities. Accounts payable, wages payable, taxes payable, and deposit from customers are the parts of current liabilities. Every bill which is paid is counted as expense as it moves from accounts payable.

Loans, equipment, vehicles and land loans, are included in Long-term liability accounting accounts as usually these points have term exceeding in one year.

Equity Accounts

Capital accounting accounts are the other name of Equity (or owner’s equity). Any capital which is invested by owners is put in these accounts. Expense and income are parts of capital.

Accounting accounts which affect one another in basic manner of Assets is calculated as = Liabilities + Equity. Actually double entry accounting is useful very much as it teaches us that whenever one account is affected, it usually affects one other account at least.

For example, if a company purchases $2,000 inventory on account from their vendor, the inventory and accounts payable accounts will automatically increase. So, this purchasing will of course support the accounting equation of Assets. (+$2,000 to inventory) = Liabilities (+$2,000 to account payable) + Equity. The equation will be in balance still.

By doing and understanding this way (the basic equation and each types of accounting accounts that is put into the correct place and the correct report, the owner of a business gets a solid foundation so that he/she will be more easily to learn the basic of accounting.

The other related articles, See more information at: “SYWIDS Articles Resources” or “Software Accounting Must Not Be Done By Accounting Background People”.

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