The three major types of equity accounts are:
Common Stock: Common stock is a type of equity that represents ownership in a company. When a company issues common stock, it is essentially selling ownership shares in the company to investors. Common stockholders have voting rights and may receive dividends, which are a portion of the company's profits distributed to shareholders.
Retained Earnings: Retained earnings are the portion of a company's profits that are not distributed to shareholders as dividends but are instead retained by the company for reinvestment in the business. Retained earnings are reported as a component of shareholders' equity on the balance sheet.
Preferred Stock: Preferred stock is a type of equity that gives shareholders preferential treatment over common stockholders. Preferred stockholders typically receive a fixed dividend, which is paid out before common stock dividends, and they may have other rights such as priority in the event of liquidation. Preferred stock is often seen as a hybrid security because it has features of both equity and debt.
Note that the classification and naming of equity accounts may vary depending on the accounting standards used and the nature of the business.