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,