What Are the 5 Basic Accounts?

What Are the 5 Basic Accounts?
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A person who wants to become an accountant will need to know what the five basic accounts are. Each of these accounts has its unique purpose and will be used for different things. For example, an income account can track your income from a specific source. An expense account is a way to track your expenses.

Similarly, a liability account is a way to track your liabilities. You can find all these accounts on your financial statement, also known as your balance sheet. These accounts are very important to your finances.


Balance sheet

The balance sheet is an important business document. It is a financial statement that shows the assets, liabilities, and shareholders’ equity of a company.

Balance sheets have two columns and are usually broken into two categories. Assets are the items at the top, and liabilities are the items at the bottom. Both classes are organized in descending order of maturity and liquidity.

Fixed assets, also known as capital assets, are those items that are purchased for long-term use by Chicago tax accountants. Examples include land, buildings, and equipment. Depreciation is the process of lowering the value of an asset as it ages.

Liabilities are items that are owed to other people. They can be in the form of loans, accounts payable, or other expenses. These are listed in a column on the right side of the balance sheet.

Income statement

An income statement provides an analysis of the performance of a company and identifies areas for improvement. Investors and creditors use it to assess a company’s financial viability. In addition, it is a tool for business owners to evaluate their business performance and find the best possible solutions.

Financial analysts also use income statements to analyze the company’s performance and forecast its future. They are also used by management to make decisions based on the data.

Revenue is one of the key components of an income statement. This revenue is the money that the company receives from the sale of goods or services. Typically, revenue is broken down into operating and non-operating revenue. Non-operating revenue is generated by activities that are not directly connected to the production process.

Income account

An income account is one of five basic accounts used by businesses to track their revenues and expenses. These accounts allow companies to keep their records straight and allow bookkeepers to report daily transactions. In addition to balancing the books, these accounts help a company stay organized and acquaint shareholders with the activities of their business.

There are many reasons for a company to track incoming money. Some examples include the receipt of cash for the sale of goods, receivables for the sale of services and payments from customers for their products or services. Also, companies can document other costs associated with liabilities. This includes student loans, mortgages and investment margin accounts.

Another example is the credit card account. While this account is not always debited, it does show how much credit a customer has on hand.

Liability account

Liability accounts are a type of business records. They show what a company owes to its creditors. Examples include loans, taxes, insurance, etc. Those who are interested in the topic can study the details.

Liabilities are usually classified as short-term and long-term. A long-term liability is something that will take more than a year to repay. For example, if a business is looking to buy a building, it will owe the bank for a mortgage.

Liabilities are usually recorded on the right side of the balance sheet. The main purpose of a liability account is to record the debts owed to third parties.

These liabilities can be real or potential. A liability is a legally binding obligation between a party and another. It may also refer to a legal or regulatory risk.


A sub-account is a special kind of account that is created under a parent account. It can be created for many reasons, including tracking detailed expenses and other budgeting needs.

Sub-accounts can also be used to track activity across multiple accounts, which is important for financial reporting. For example, if a faculty member attends several meetings in a week, each meeting’s expense can be tracked separately.


Sub-accounts are useful because they help businesses and individuals better track their spending habits. For instance, it’s easier to analyze a person’s actual spending, or to find out which department is the most profitable.

Small business owners use sub-accounts to keep track of their spending, track income, and maintain a budget. This allows them to better manage their financial assets, and track spending in real time.