Bookkeeping Accounts
Bookkeeping Accounts
Bookkeeping accounts are systematic records used to track and manage a business’s financial transactions. These accounts categorize financial data into distinct sections, allowing businesses to monitor their income, expenses, assets, liabilities, and equity effectively. The primary purpose of bookkeeping accounts is to ensure that all financial activities are accurately recorded and organized, which facilitates the preparation of financial statements and aids in decision-making processes.
Basic Bookkeeping Accounts for a small business:
Cash: The cash account tracks your receipts and payments. Cash is the lifeblood of a business. Without adequate cash you may not be able to pay your suppliers and employees.
You should track cash using tools such as daily cash reports.
Accounts Receivable: If your company sells products or services and grants credit terms, you have receivables, or money due from customers. This accounts tracks your customer billings and payments. You should track Accounts Receivable using tools such as aging reports.
Inventory: Products held for future sales is future cash waiting to be realized and must be monitored, tracked, and controlled. For many businesses this is one of their largest assets.
This account tracks your inventory purchases and sales. Periodic physical counts of inventory should be made to determine the accuracy of the inventory and any possible discrepancies due to fraud and theft.
Accounts Payable: If your company buys products or services and the supplier grants credit terms, you have payables, or money owed to suppliers. This account tracks your supplier purchases and payments received. You should track Accounts Payable using tools such as aging reports in order to avoid paying suppliers late. Late payments may result in having your credit terms terminated resulting in having to pay in advance or when the product is delivered or the service rendered
Loans Payable: If you borrow money to finance equipment, vehicles, furniture, or other purchases for your business, this account tracks yur balances and payments. You should track you balances and payments in order to maintain a good credit rating for possible future needs.
Owners Equity: This account tracks the amount an owner (or owners) invest into the business. The owners equity account reflects the amount of money left for the owner once the liabilities are deducted from assets.
Retained Earnings: The Retained Earnings account tracks the company profits that are reinvested in the business and are not paid out as draws or dividends to the owners. Retained earnings represent the total of the money that has been retained since the company started.
Sales: The Sales account tracks all revenue resulting from products and services sold. You should track your sales by products and services and also by customers.
Expenses: Expense accounts track all expenses resulting from business operations. Some major expense accounts are purchases and cost of goods sold and payroll.
Purchases: The Purchases Account tracks any materials, products, or services that you buy for your business. You should track purchases by products and services and also by suppliers.
Payroll Expenses: These accounts track employee salaries and wages, employee deductions, and employer payroll tax expenses as well as the resulting payroll liabilities. Keeping this account accurate and up to date is essential for meeting tax and other government reporting requirements.
Account Categories accounts are organized and grouped in the following major categories:
Balance Sheet Accounts
Assets: Assets are economic resources that have value and can be owned or controlled by an individual, organization, or business entity. Assets can be tangible, such as physical items like property, equipment, and inventory, or intangible, such as investments, intellectual property, and goodwill.
Liabilities: Debts or obligations that a person or company owes to another party. They represent a financial commitment that requires future economic benefits, typically in the form of money, goods, or services, to be transferred from the debtor to the creditor.
Owner's Equity: Owner’s equity represents the residual interest in the assets of a business after deducting liabilities. It is essentially what the owner or owners would claim from the business if all assets were liquidated and all debts were paid off.
Income Statement Accounts
Revenue: The total amount of money generated from a company’s normal business operations. It represents the income received from the sale of goods or services before any expenses are deducted.
Expenses: Cost incurred by a business or individual in order to generate revenue or maintain operations. It represents an outflow of resources,typically cash, in exchange for goods or services
that are necessary for conducting business activities.
Equity Accounts
Draws or Dividends
Owner Draws: Withdrawal of funds from a business by owner of a sole proprietorship, partnership, or limited liability company (LLC) for personal use.
Dividends: Portion of a company’s earnings that are distributed to its shareholders as a reward for their investment in the company.
Types of Accounts Videos
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Types Of Accounts Quiz
Bet you didn't realize there are so many accounts that you can use !