Name: Aliza Rajani

Class id: 20201-27450

Course instructor: Sir Nayeem

Accounting Assignment 1

Question Number 2:

Definitions of all of the 5 Core / sub components of Accounts (Revenue, Expense, Asset, Liability, Equity).
And also to highlights maximum examples of each of the heads.

1. Assets - Assets are the physical or non-physical types of property that add value to your business.
For example, your computer, business car, and trademarks are considered assets.

Some examples of asset sub-accounts include:

 Checking
 Petty Cash
 Inventory
 Accounts Receivable
 Cash
 Temporary Investments
 Prepaid Insurance
 Property, Plant & Equipment
 Land
 Buildings
 Goodwill
 Trademark
 Patents
 Copyrights

Although your Accounts Receivable account is money you don't physically have, it is considered an asset
account because it is money owed to you. Again, debits increase assets and credits decrease them. Debit
the corresponding sub-asset account when you add money to it. And, credit a sub-asset account when
you remove money from it.

2. Expense - Expenses are costs your business incurs during operations. For example, office supplies
are considered expenses.

Examples of sub-accounts that fall under the expense account category include:
  Payroll
 Insurance
 Rent
 Equipment
 Cost of Goods Sold (COGS)
 Sales commissions expense
 Delivery expense
 Salaries expense
 Advertising expense
 Interest expense
 Transaction fees
 Depreciation and amortization
 Impairment charges

Remember that debits increase your expenses, and credits decrease expense accounts. When you spend
money, you increase your expense accounts.

3. Liability - Liabilities represent what your business owes. These are expenses you have incurred but
have not yet paid.

Types of business accounts that fall under the liability branch include:

 Payroll Tax Liabilities

 Sales Tax Collected
 Credit Memo Liability
 Accounts Payable
 Wages owed
 Taxes owed
 Mortgage debt
 Salaries payable
 Bonds, debentures and long-term loans
 Deferred tax liabilities
 Lease payments that aren’t due for more than a year
 Pension obligations
 Principle and interest payments

Accounts payable (AP) are considered liabilities and not expenses. Why? Because accounts payables are
expenses you have incurred but not yet paid for. As a result, you add a liability, or debt. Credit liability
accounts to increase them. Decrease liability accounts by debiting them.

4. Equity - Equity is the difference between your assets and liabilities. It shows you how much your
business is worth.

Here are a few examples of equity sub-accounts:

  Owner's Equity
 Common Stock
 Retained Earnings
 Preferred Stock
 Paid-in Capital in Excess of Par Value
 Paid-in Capital from Treasury Stock
 Accumulated Other Comprehensive Income
 Share capital
 Contributed surplus
 Net income (loss)
 Dividends
 Authorized share

Again, equity accounts increase through credits and decrease through debits. When your assets
increase, your equity increases. When your liabilities increase, your equity decreases.

5. Revenue - Last but not least, we've arrived at the revenue accounts. Revenue, or income, is money
your business earns. Your income accounts track incoming money, both from operations and non-
operations.

Examples of income sub-accounts include:

 Product Sales
 Earned Interest
 Miscellaneous Income
 Service Revenues
 Fees earned
 Interest Income
 Consulting services
 Dividend revenue
 Government revenue: In the case of government, revenue refers to the money received from
fines, fees, taxation, governmental transfers or grants, mineral or resources rights, securities
sales, as well as any sales made.
 Non-profit organization revenue: For non-profit organizations, revenues are their gross receipts
 Revenue from real estate investments: When it comes to real estate investments, revenue
refers to income that a property generates, such as on-site laundry costs, parking fees, rent, etc.

To increase revenue accounts, credit the corresponding sub-account. Decrease revenue accounts with a
debit.