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Classification of Accounts Video Lecture - Commerce
FAQs on Classification of Accounts Video Lecture - Commerce
| 1. What are the different types of accounts in accounting? |  |
Ans. In accounting, there are five main types of accounts: assets, liabilities, equity, revenue, and expenses. Assets are resources owned by the company, such as cash, inventory, and property. Liabilities are the company's obligations or debts, such as loans and accounts payable. Equity represents the ownership interest in the company, which includes capital contributed by the owner and retained earnings. Revenue accounts record income earned by the company, while expense accounts track the costs incurred in generating revenue.
| 2. How are assets classified in accounting? | |
Ans. Assets in accounting are classified into current assets and non-current assets. Current assets are those that are expected to be converted into cash or used up within one year or the operating cycle of the business, whichever is longer. Examples of current assets include cash, accounts receivable, and inventory. Non-current assets, on the other hand, are long-term assets that are not expected to be converted into cash within one year. Examples of non-current assets include property, plant, and equipment, as well as long-term investments.
| 3. What are the different types of liabilities in accounting? | |
Ans. Liabilities in accounting can be classified into current liabilities and non-current liabilities. Current liabilities are obligations that are expected to be settled within one year or the operating cycle of the business. Examples of current liabilities include accounts payable, short-term loans, and accrued expenses. Non-current liabilities, also known as long-term liabilities, are obligations that are not expected to be settled within one year. Examples include long-term loans, bonds payable, and pension liabilities.
| 4. How is equity calculated in accounting? | |
Ans. Equity in accounting represents the residual interest in the assets after deducting liabilities. It can be calculated by subtracting total liabilities from total assets. The formula for equity is: Equity = Total Assets - Total Liabilities. Equity can also be affected by additional capital contributions from the owner, net income or loss, and drawings made by the owner.
| 5. What is the difference between revenue and expenses in accounting? | |
Ans. Revenue and expenses are two key components of the income statement in accounting. Revenue represents the income earned by a company from its primary business activities, such as sales of goods or services. It is recorded as a credit entry in the revenue account. Expenses, on the other hand, are the costs incurred by a company in generating revenue. They are recorded as debit entries in expense accounts. The difference between revenue and expenses is used to determine the net income or net loss of the company.
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