Five basic accounts
Q i) Expalin in detail five basic accounts along with their types and examples
Five basic Acounts
1. Assets
2. Liabilities
3. Capital/Owner Equity
4. Revenue/Income
5. Expenses
Assets
Assets are the resources owened by a business and are expected to give benefit for future operation
Example:
If you buy a land and it will give benefit in the future operation then it is your asset . if the land which you buy
And in future you have to sell only then this is not your asset. If you built a building on land it will give you banefit in future then this is also your asset
There are two type of assets
1. Current asset
2. Fixed asset/Non-current
Current Asset
If asset given expected life of one year or giving benfit is current asset
Fixed Asset
If asset given expected life of more than one year or giving benefit then it is fixed asset
They both are depend on expectation
Examples
Current Assets
1. Cash
2. Bank
3. Acounts recievable
4. Note recievable/promisly note
5. Bills recievable
6. Prepaid rent
7. Office supply
8. Mdse inventory
Fixed Assets
1. Land
2. Building
3. Equipment
4. Machinery
5. Furniture
6. Automobile
Liabilities
Liabilities are debts
Any amounts payable by a business are called liability Or The Claim of creditor over the asset of business is called liability
As we know basic acounting equation
Assets= liabilitties + capital
100,000= 60,000 + 40,000
If employ want a machine in a factory he is going to owner that I want a machine if owner give all the money for that machine than this machine is capital. If owner give 40,000 n says remaining money you borrow from someone then the person who give 60,000 remaining is creditor and that amount is liability for business and creditor have rights to claim over the assets.
Types of liabilities
1. Current liabilities/short term
2. Non-current liabilities/long term
Current liabilities
The liabilities which has expected life of one year Or before one year
Five basic Acounts
1. Assets
2. Liabilities
3. Capital/Owner Equity
4. Revenue/Income
5. Expenses
Assets
Assets are the resources owened by a business and are expected to give benefit for future operation
Example:
If you buy a land and it will give benefit in the future operation then it is your asset . if the land which you buy
And in future you have to sell only then this is not your asset. If you built a building on land it will give you banefit in future then this is also your asset
There are two type of assets
1. Current asset
2. Fixed asset/Non-current
Current Asset
If asset given expected life of one year or giving benfit is current asset
Fixed Asset
If asset given expected life of more than one year or giving benefit then it is fixed asset
They both are depend on expectation
Examples
Current Assets
1. Cash
2. Bank
3. Acounts recievable
4. Note recievable/promisly note
5. Bills recievable
6. Prepaid rent
7. Office supply
8. Mdse inventory
Fixed Assets
1. Land
2. Building
3. Equipment
4. Machinery
5. Furniture
6. Automobile
Liabilities
Liabilities are debts
Any amounts payable by a business are called liability Or The Claim of creditor over the asset of business is called liability
As we know basic acounting equation
Assets= liabilitties + capital
100,000= 60,000 + 40,000
If employ want a machine in a factory he is going to owner that I want a machine if owner give all the money for that machine than this machine is capital. If owner give 40,000 n says remaining money you borrow from someone then the person who give 60,000 remaining is creditor and that amount is liability for business and creditor have rights to claim over the assets.
Types of liabilities
1. Current liabilities/short term
2. Non-current liabilities/long term
Current liabilities
The liabilities which has expected life of one year Or before one year