HOW TO PROPERLY CITE SOURCES YOU PUT IN A CHART FREE
The rules for making tweaks to your chart of accounts are simple: feel free to add accounts at any time of the year, but wait until the end of the year to delete old accounts. The way that the balance sheet and income statement accounts interact with each other is complex, but one general rule to remember is this: revenues increase your company’s equity and asset accounts, while expenses decrease your assets and equity. Revenue accounts keep track of any income your business brings in from the sale of goods, services or rent.Įxpense accounts are all of the money and resources you spend in the process of generating revenues, i.e. We use the income statement accounts to generate the other major kind of financial statement: the income statement. They basically measure how valuable the company is to its owner or shareholders. They represent what’s left of the business after you subtract all your company’s liabilities from its assets. “Unearned revenues” are another kind of liability account-usually cash payments that your company has received before services are delivered.Įquity accounts are a little more abstract.
Liability accounts usually have the word “payable” in their name- accounts payable, wages payable, invoices payable. Liability accounts are a record of all the debts your company owes. They can be physical assets like land, equipment and cash, or intangible things like patents, trademarks and software. There are three kinds of balance sheet accounts:Īsset accounts record any resources your company owns that provide value to your company.
We call these the “balance sheet” accounts because we need them to create a balance sheet for your business, which is one of the most commonly used financial statements. This one is for a fictional business: Doris Orthodontics.Īs you can see on the right, there are different financial statements that each account corresponds to: the balance sheet and the income statement.