There are also other types of equity, such as paid-in capital and retained earnings. One example is stocks, including common stock and preferred stock. Think of stockholders’ equity as the assets that you as a small business owner and other shareholders fully own. EquityĮquity is the portion of your company that shareholders-including yourself-own. Wages payable, interest payable and unearned revenue are also liabilities. The most common types of liabilities are accounts payable and loans payable. Like assets, liabilities come in several forms. You can pay off liabilities with cash or through the transfer of goods and services. They’re what you’re obligated to pay either in the near future or further down the road. Liabilities are what your company owes other parties. And then there are intangible assets-like prepaid expenses, accounts receivable or patents. There are tangible assets-like cash, property or equipment. They include tangible and intangible things of value gained through the company’s ongoing transactions.Īssets come in all shapes and sizes.
AssetsĪn asset is anything that your company owns that can be converted to cash or has the capacity to generate revenue. They consist of assets, liabilities, equity, revenue and expenses. There are five types of accounts that show up on both your balance sheet and income statement. Specifically, we’ll cover expenses and liabilities and go over what makes these two different from each other. Today, we’ll dive into the different account types you need to know and what goes into each. You may handle your balance sheet, income statements and cash-flow statements yourself or outsource the duties to an accountant, but regardless, you’ll want to understand how each of these work. Staying on top of your financial statements is just one crucial aspect of your operations, but it will help you know your business inside and out. One day, you’re the marketer, and the next, you’re the accountant. As you organize your financials, you may wonder, “Are expenses liabilities?”Īs a small business owner, there’s a good chance you’re wearing several hats at once. Whether it’s pulling together your balance sheet or organizing your income statement, you’ll likely stumble across some questions. It’s that time again-the time of the year to switch gears and start thinking about the accounting aspects of your business.
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