Question

What are the three types of accounts in accounting?

1) Revenues or (gains), Expenses or (losses), and Drawing accounts
2) Assets, Liabilities, and Equity accounts
3) Income, Expenditure, and Capital accounts
4) Debit, Credit, and Balance accounts

Answer 1

The three types of accounts in accounting are Assets, Liabilities, and Equity accounts. These are represented in a T-account, which shows assets on one side and liabilities plus net worth on the other, balancing out to zero.

Step-by-step explanation:

The three types of accounts in accounting are Assets, Liabilities, and Equity accounts. A T-account is a visual representation that separates a company's assets on the left side from its liabilities and net worth on the right side, with a vertical line down the middle and a horizontal line under the column headings.

In accounting, assets include financial instruments such as reserves and loans made by the bank, while liabilities encompass what the bank owes, including customer deposits. The net worth, also found on the liabilities side of a T-account, is calculated as total assets minus total liabilities, which should balance to zero. For a healthy business, net worth is positive, whereas for a bankrupt firm, it will be negative. Nevertheless, in a bank's T-account, assets will always equal liabilities plus net worth.