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What Is the Difference Between Assets, Liabilities, Income, Expenses, and Equity

These five categories are the foundation of the Chart of Accounts, and every account you create belongs to one of them. Assets - what the business owns, such…

Steps

  1. Assets - what the business owns, such as Cash on Hand, bank accounts, and Accounts Receivable.
  2. Liabilities - what the business owes, such as Accounts Payable.
  3. Equity - the owner's stake in the business, such as Retained Earnings or Owner's Draw.
  4. Income - money the business earns, such as sales revenue (Discount Given is a contra-income account that reduces it).
  5. Expenses - costs the business incurs, such as Advertising & Promotion or Bank Service Charges.

Related Articles

  • What Account Types Are Available in the Chart of Accounts?
  • Why Are Accounts Divided Into Categories?
  • How Do Category Filters Work?

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