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The chart of accounts is a list of all accounts a company uses and includes an identification number assigned to each account.  A small business might use the following numbering system for its accounts.  These numbers provide a three-digit code that is useful in record keeping.  In this case, the first digit assigned to asset accounts is a 1, the first digit assigned to liability accounts is a 2, and so on.  The second and third digits relate to the accouts’ subcategories.

Source:  Fundamental Accounting Principles

Revenues and expenses are the final two categories of equity.  Examples of revenue accounts are Sales, Commissions Earned, Professional Fees Earned, Rent Earned, and Internet Revenue.  Revenues increase equity and result from products or services provided to customers.  Examples of expense accounts are Advertising Expense, Store supplies Expense, Office Salaries Expense, Office Supplies Expense, Rent Expense.  Expenses decrease equity and result from assets or services used in a company’s operations.

Source:  Fundamental Accounting Principals

When an owner invests in a company, the invested amount is recorded in an account titled Owner, Capital.  Any further investments are recorded in this account.  When the owner withdraws assets for personal use the withdrawal decreases both the company’s assets and its total equity.  Withdrawals are not expenses of the business.  They are simply the opposite of owner investment.  An Owner, Withdrawals account is used in recording withdrawals by the owner.

The owner’s claim on a company’s assets is called equity or owner’s equity.  Equity is the owners’ residual interest in the assets of a business after deducting liabilities.  There are four subcategories of equity: owner’s capital, owner’s withdrawals, revenues, and expenses.

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Source:  Fundamental Accounting Principals

Accrued Liabilities are amounts owed that are not yet paid.  Examples are wages payable, taxes payable, and interest payable.  These are often recorded in separate liability accounts by the same title.  If they are not large in amount, one or more ledger accounts can be added and reported as a single amount on the balance sheet.

Source:  Fundamental Accounting Principals

Unearned Revenue refers to a liability that is settled in the future when a company delivers its products or services.  When customers pay in advance for products or services, the revenue recognition principle requires that the seller consider this payment as unearned revenue.

Examples of unearned revenue include magazine subscriptions collected in advance by a publisher, sales of gift certificated by stores, and season ticket sales by sports teams.

Source:  Fundamental Accounting Principals

A note payable refers to a formal promise, usually denoted by the signing of a promissory note, to pay a future amount.  It is recorded in either a Short-Term Note Payable account or a Long-Term Note Payable account, depending on when it must be repaid.

Source:  Fundamental Accounting Principals

Accounts payable refer to oral or implied promises to pay later, which commonly arise from purchases of merchandise. Payables can also arise from purchases of supplies, equipment, and services. Accounting systems (such as quickbooks) keep separate records about each creditor.

Source:  Fundamental Accounting Principals

Liabilities are claims (by creditors) against assets, which means they are obligations to transfer assets or provide products or services to other entities.

Creditors are individuals and organizations that own the right to receive payments from a company.

The more common liability accounts are:

• Accounts Payable
• Notes Payable
• Unearned Revenue
• Accrued Liabilities

Source:  Fundamental Accounting Principals

Buildings such as stores, offices, warehouses, and factories are assets because they provide expected future benefits to those who control or own them.  Their costs are recorded in a Building asset account.  When several buildings are owned, separate accounts and sometimes kept for each of them.

The cost of land owned by a business is recorded in a Land account.  The cost of buildings located on the land is separately recorded in one or more building accounts.

Source:  Fundamental Accounting Principals