The 7 types of accounts are as follows: cash, terms or payments, assets, liabilities, expenses (revenue), and equity. Each account is a way for you to keep track of your business’s earnings and spending, and can be categorized based on the items that come in and go out, as well as how taxed each type of item may be.
The 7 Types of Accounts for Small Businesses
Generally speaking, this is the most straightforward and easy-to-use accounting category for your small business. This includes cash, bank deposits, and withdrawals. It also consists of money paid to your small business by customers in the form of credit cards payroll services, checks, or any other methods that you may have in place for receiving payment. Cash can also include your business’s savings account or interest-bearing checking accounts.
Term or Payments Accounts
Similarly to the Cash account, this is an accounting category that contains the income and expenses that you receive from your customers, either in terms of payment or for services rendered. Typically, these will be entered into your chart of accounts by logging them as a receivable or payable.
The physical things that you own, both tangible and intangible, are known as your business’s assets. Examples of these include machinery, building, furniture, goodwill, and patent rights. The golden rule for these is that when an item comes in, it should be debited and when an expense goes out, it should be credited.
Basically, this is an internal accounting process for collecting and accumulating financial information that will be used for operational reporting. This helps to manage your business and keep it disciplined in the day-to-day activities of running it.