The five major types of accounts in accounting are:
1. Assets
- Definition: Resources owned by a business that have a future economic benefit.
- Examples: Cash, inventory, equipment, buildings.
2. Liabilities
- Definition: Obligations owed by a business to external parties.
- Examples: Accounts payable, loans, salaries payable.
3. Equity
- Definition: The owners' claim on the assets of a business.
- Examples: Common stock, retained earnings.
4. Revenue
- Definition: Income earned by a business from its operations.
- Examples: Sales revenue, service revenue.
5. Expenses
- Definition: Costs incurred by a business in the process of generating revenue.
- Examples: Rent expense, salaries expense, utilities expense.
These five types of accounts are used in the accounting equation, which states that Assets = Liabilities + Equity. This equation is the foundation of double-entry bookkeeping and helps ensure that the accounting system is balanced.
