What Are the Different Types of Accounts for Businesses?
Accounts are at the heart of any business or organisation. They tell you how your business is performing financially, highlighting any major issues. To keep things organised, companies typically have a number of accounts for specific purposes, which come together to form financial reports.
It’s important to be aware of these accounts and what they represent, so you can understand your company’s finances. In this post, we’ll take a closer look at the five main types of business accounts.
Assets refers to everything that’s owned by your company, which can be both tangible and intangible. So, any intellectual property, copyrights and logos are intangible, while computers, equipment, vehicles and buildings are tangible. It’s also important to note that cash is a tangible asset.
Businesses should declare their assets when they launch and update them whenever new items are purchased, so your accountant can keep track of expenses.
Your expenses account keeps track of anything spent on products or services related to your business. That includes everything from rent and salaries to new equipment (assets) and marketing costs.
It’s up to your accountant to keep track of how these expenses affect taxation, as some may be tax-deductible.
A company’s liabilities are any obligations they have to external entities. In simple terms, what is your company liable for? This could be debts to creditors, unpaid bills or invoices, or even loans taken out such as car finance or a mortgage. Again, this will change on an ongoing basis, so it’s important to keep track.
Revenue is probably the most familiar account, which covers any money your business earns. Generally, this is from the products or services you sell. However, it also includes any income from dividends, bonds or stocks.
Last but by no means least is equity, which summarises the value of your business. This can be value that has been created by your business, such as retained income, or value that’s put into your business from investors.
Combining the accounts
To give a complete overview of your business’s performance, accountants will combine your accounts and create a balance sheet. From this, you will be able to see how revenue compares to expenses, for instance, and whether changes need to be made going forward.
Accountants in Leeds
Accounting isn’t something you want to take any chances with. Fortunately, with UWM Accountants, you don’t have to. We are a team of expert Leeds accountants, providing tailored accounting services to companies across the UK. From business planning to cloud accounting, our team of experienced accountants has you covered.
Give us a call on 0113 231 0202 to find out more about how our services can help you.