Let's start by examine what goes into a business.
What sort of items make up a business ?
Inventory, Motor Vehicles, Salaries, Bank Loans, Goodwill, Sales .....
The list is extensive.
In accounting it is important to be able to classify an Item as an
Account Type
There are 5 main Account Types,
| Assets | - items owned by a business. |
| Liabilities | - items owed by a business to others. |
| Owners Equity | -(also known as Proprietorship) - the amount the owner has invested. |
| Revenue | - The income from running the business such as the sale of inventory. |
| Expenses | - The costs associated with the sale of inventory. |
The Account Types are related to each other by way of the Accounting Equation
Next you can test your skill at classifying items according to their Account type by playing 'Who Wants To Be A Millionaire'.