Modern Classification of accounts or Accounting Equation

 Accounts are divided into five categories for the purpose of recording business transactions : 

1. Assets Accounts 

2. Liabilities Accounts

3. Capital Accounts 

4. Expenses Accounts 

5. Revenue Accounts

1. Assets Accounts :- assets accounts are accounts of assets and properties such as (Stock), Goodwill, Prepaid Expenses A/c .... etc.

2. Liabilities Accounts :- Liabilities accounts are the accounts of lenders, bank loan , bank overdraft , outstanding expenses, .... etc.

3. Capital Accounts :- Capital accounts refer to the accounts of the proprietor/ partner who have invested in the business, eg, Capital account of owner, Drawings accounts, ...etc.

4. Expenses Accounts :- Expenses accounts is an accounts opened in the nominal ledger for each expenditure in which the costs or expenses are recorded before being totalled and transferred to trading and profit and loss Account at the end of an accounting period.

5. Revenue Accounts :- Revenue Accounts are accounts of incomes and gains. eg.- sales A/c, interest received A/c,....etc.