1RQ - Horngren'S Financial And Managerial Accounting

Question

Identify the three categories of the accounting equation, and list at least four accounts associated with each category.

Step-by-Step Solution

Answer

The categories of the accounting equation are assets (Cash, Accounts receivables, Notes receivables, and, Land), liabilities (Accounts payable, notes payable, accrued liability, and unearned revenue), and equity (Common Stock, dividends, Revenues, and expenses).

Categories of Accounting Equation

The three categories of the accounting equation are as follows:

Assets: Assets are the economic resources owned by businesses or individuals which generate some revenue in the future.

Liabilities: It is defined as the amount owed by the business to an outside party.

Equity: It is defined as the claim of owners on the assets of the business. 

Accounts associated with each category

Assets: Cash, accounts   receivables, notes  receivables, and land.

Liabilities: Accounts payable, notes payable, accrued liability, and unearned revenue

Equity: Common Stock, dividends, revenues, and expenses.