From the course: Accounting Foundations: Bookkeeping

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Using accounts to categorize transactions

Using accounts to categorize transactions

From the course: Accounting Foundations: Bookkeeping

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Using accounts to categorize transactions

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- There are three primary financial statements, the balance sheet, the income statement, and the statement of cash flows. The elements of the balance sheet: assets, liabilities, owner's equity. The elements of the income statement: revenues and expenses. Each of these elements is comprised of many different accounts. Now, an account is a specific accounting record that provides an efficient way to categorize similar transactions. Thus, we may designate asset accounts, liability accounts, and owner's equity accounts. Examples of asset accounts are cash, inventory, and equipment. Liability accounts include accounts payable and notes payable, for example. The equity accounts for a corporation are capital stock, or paid in capital, and retained earnings. Now, you can think of an individual account as a summary of every transaction affecting a certain item, like cash. The summary may be recorded on one page in a book or in one column of a spreadsheet, as illustrated here. Using our…

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