Blog entry by Orji Anyianuka

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by Orji Anyianuka - Friday, 4 June 2021, 1:05 PM
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Asset Account

Asset Accounts are accounts where the Assets of the company are recorded.

Assets are resources under the control of a business that have monetary value.

These Assets include buildings, machinery, raw materials, cash, and other resources a company needs in their operations and to make investments.

The Assets which the company can convert into cash within one year are called Short Term Assets, while the Assets that cannot be recovered within one year are called long term assets.

Assets are financed by the shareholders equity and banks and creditors: Assets = Owners Equity + Liabilities

Generally, the more Assets a company has, the more investments it can make and the more its ability to create positive net cash flows.


Liability Account

Liability Accounts are the accounts that records how much a company owes to banks and other creditors who are financing  the part of its asset not covered by the shareholders' equity.

Like Assets, there are short term Liabilities and long term liabilities.

Depending on the industry, a high liability figure might be regarded as positive or negative.


Revenue Account

Revenue Accounts are those accounts where the income of a company are recorded.

A company produces goods and services and sells them to customers, and the proceeds from these operations are revenue. This revenue is called operating revenue because it comes from the main activities of the company.

However, when the company makes income from an activity not considered to be the company’s main activity, that revenue is called nonoperating revenue.

It is important that a company keeps his revenue high, because high revenues are impacted positively on profits.


Expense Account

Expense Accounts are those accounts the expenses of a company are recorded

Just as in Revenue, the Expenses that relates directly to the main activity of the company are operating expenses, while those not related directly are called non-operating expenses.

Every company will work towards keeping its expenses low so that it can maximize profit and reduce cash outflows.


Equity Account

Equity account records the value of a company that belongs to its Shareholders.

Equity represents what the shareholders will have remaining if they sold all the assets of a company and paid all its liabilities It is made up of the money invested by shareholders plus all the profits and losses that the company has earned or lost on behalf of its owners or shareholders.

[ Modified: Sunday, 13 June 2021, 6:39 AM ]