What Are the 5 Accounts in Bookkeeping?

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Bookkeeping organizes a business’s financial transactions into distinct accounts to track its financial activities accurately. These accounts are categorized based on their role in the business’s financial structure. In the double-entry Bookkeeping Services San Antonio system, all transactions are recorded across five fundamental types of accounts. Below is an explanation of these five key accounts.

1. Assets
Assets are resources owned by a business that have economic value and can provide future benefits. They include tangible items like cash, inventory, or equipment, and intangible items like patents or accounts receivable (money owed by customers). For example, when a business receives a $1,000 payment, the cash asset account is debited. Assets are recorded on the balance sheet and represent what the business owns.

2. Liabilities
Liabilities represent the business’s obligations or debts owed to others. These include loans, accounts payable (money owed to suppliers), or accrued expenses like unpaid wages. For instance, if a business takes out a $10,000 loan, the loan liability account is credited. Liabilities are also recorded on the balance sheet and show what the business owes.

3. Equity
Equity, often called owner’s equity or net worth, represents the residual value of the business after subtracting liabilities from assets (Assets = Liabilities + Equity). It includes the owner’s investment in the business and retained earnings (profits kept in the business). For example, if an owner invests $5,000, the equity account is credited. Equity reflects the owner’s stake in the business and is reported on the balance sheet.

4. Revenue
Revenue accounts track the income a business earns from its operations, such as sales of goods or services. When a business makes a sale, the revenue account is credited, increasing the business’s income. For instance, selling $2,000 worth of products would result in a credit to the sales revenue account. Revenue is reported on the income statement and contributes to the business’s profitability.

5. Expenses
Expenses are the costs incurred by a business to operate, such as rent, utilities, salaries, or supplies. When a business pays for an expense, the expense account is debited. For example, paying $500 for office rent would debit the rent expense account. Expenses are recorded on the income statement and reduce the business’s net income.

These five accounts—assets, liabilities, equity, revenue, and expenses—form the foundation of Bookkeeping Services in San Antonio. By recording every transaction across these accounts using the double-entry system, businesses ensure their financial records are balanced, accurate, and ready for reporting or analysis.