Question

What are the four types of accounts included in owner's equity?

1) Owner's Capital, Revenues, Expenses, and Owner's Drawing
2) Assets, Liabilities, Revenues, and Expenses
3) Cash, Accounts Receivable, Inventory, and Prepaid Expenses
4) Sales, Purchases, Rent, and Wages

Answer 1

The four types of accounts included in owner's equity are capital, retained earnings, drawings, and income.

Step-by-step explanation:

The four types of accounts included in owner's equity are:

1. Capital: This represents the owner's investment in the business. It includes the initial investment made by the owner and any additional contributions made over time.
2. Retained Earnings: This account reflects the accumulated profits of the business that have not been distributed to the owner as dividends. It represents the portion of the earnings that the owner chooses to reinvest in the business.
3. Drawings: This account is used to record any withdrawals made by the owner for personal use. It represents the amount of money taken out of the business by the owner for their own needs.
4. Income: This account records the revenue generated by the business through its sales of goods or services. It represents the inflow of assets into the business as a result of its operations.

These four accounts together make up the owner's equity section of the balance sheet, which represents the residual interest in the assets of the business after deducting liabilities.