I Like Accounting

Account Types

Lesson
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Being able to identify an account as an assets, liabilities, or owner equity is critical.

You need to be able to look at every change in an account and be able to understand the implications for the company.

If you know the accounting equation, you've already learned was assets, liabilities and equity are.

There are three more important types that you need to learn next:

  • Draw - Money that an owner takes out of the company
  • Expense - Money that a company has spent
  • Revenue - Money that a company received from product and service sales
Question
Some auditors are looking over your accounting work, and have come to you with an urgent question.

The only relevant information you've discovered is as follows:

  • The records show a strange $425 transaction involving the additional paid-in capital account.
What kind of account is additional paid-in capital?
Answer
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👉 Answer:

  • Additional paid-in capital is a equity account.

👩‍🎓 Here are the steps to figure it out:

  • It often helps to think about the DEALER table.
    DC DEALER
    + DEBITCREDIT +
    DrawLiability
    ExpenseEquity
    AssetRevenue
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