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CREATING A CHART OF ACCOUNTS

• The chart of accounts is simply a list of all of the account titles a company uses. Generally, there are five categories of accounts, as follows: 1. Asset accounts. Record what the company owns. 2. Liability accounts. Record what the firm owes, including unpaid monthly bills and unpaid invoices for purchases. These are called liability accounts because the company is liable for the money. 3. Owners’ equity accounts. Record how much the owners put into and take out of the company. 4. Revenue accounts. Record revenues from sales of products and services the company has earned. 5. Expense accounts. Record expenses that the company has incurred—that is, the goods and services that the company has used up