Reference fixture — not teaching material
This lesson exists to exercise the platform. It was not written by a subject-matter expert and has not been reviewed by one. Do not study from it.
Accounts and the chart of accounts
By the end: Classify any account into one of the five types.
An account is a labelled bucket that collects one kind of change. Rather than one giant list of everything that ever happened, a business keeps a bucket for cash, another for equipment, another for wages, and so on. The full list of buckets a business uses is its chart of accounts.
Every account is one of five types, and being able to sort an account into the right type is the skill this lesson is for. It matters because the next module’s rules are stated per type — if you cannot classify an account, you cannot record a transaction involving it.
- Assets — what the business controls. Cash, equipment, accounts receivable, prepaid insurance.
- Liabilities — what it owes. Accounts payable, bank loans, wages payable, unearned revenue.
- Equity — the owners’ residual claim. Owner capital, retained earnings.
- Revenue — value earned from doing the work. Service revenue, sales.
- Expenses — the cost of doing that work. Wages, rent, supplies, depreciation.
The first three types appear in the accounting equation and are called permanent accounts: they carry their balances forward year after year. Revenue and expenses are temporary. They accumulate during a period, get swept into equity at the end of it, and start again at zero. That is what closing the books means, and Module 6 covers it.