Understanding the difference between account types is the secret to coding transactions correctly. Here’s the cheat’s guide to understanding the difference between assets and liabilities, equity and income, bananas and apples.
Current asset: Anything that a business owns that can realistically be converted into cash within the next 12 months
Non-current asset: A physical asset such as office equipment, land, buildings, computers or motor vehicles, that isn’t expected to be converted into cash within the next 12 months
Current liability: An amount owed by the business that is due within the next 12 months, including scary stuff such as credit cards
Non-current liability: Anything you owe that isn’t due to be paid out within the next 12 months, such as hire purchase debts or bank loans
Equity: The ‘interest’ that shareholders or an owner has in the business, including both capital contributed and the profit or loss built up over time
Income: Money generated from sales to customers or returns on investments
Cost of sales: What it costs in raw materials, supplies or production labour to make the goods that you sell (also called cost of goods sold)
Expenses: The day-to-day running costs of your business, including things like advertising, bank charges, computer consumables, diamond rings, electricity, exotic perfumes, motor vehicle expenses, rent, telephone expenses and wages
dummies
Source:http://www.dummies.com/how-to/content/bookkeeping-basic-understanding-account-types.html
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