Select Account Type dialog box: options and information

Account types are categories that describe the various nominal accounts in your Chart of Accounts. Selecting an account type determines where information about that account appears. Account types fall into two basic categories: Income and Expense accounts and Balance Sheet accounts.

  • Income and Expense accounts are used to determine the profitability of a company. The information appears on profit and loss statements, cash flow statements, job profitability reports and various sales reports.

  • Balance Sheet account information is reflected on balance sheets, cash flow statements, stock reports and various banking reports.

Open the dialog box

To open the Select Account Type dialog box, click New Account on the Company menu.

Dialog box options

The dialog box contains the following options.

Option

Description

Income

Accounts that represent revenues from sales of goods and services to your customers.

Other income

Accounts that represent revenues coming into your company that do not relate directly to the main operations of your company, for example, interest income.

Expense

Accounts that represent what your company is spending to operate the business. For example, operating expenses include wages, rent, supplies, advertising or utilities.

Other expense

Accounts that represent expenses that do not directly relate to the normal business operations of your company, for example, interest payments on long-term debt.

Cost of Sales

Accounts that represent the cost of products, materials or services sold in the sales cycle operation of your company. These costs are reckoned as part of input costs in calculating the gross margin.

Cash

Accounts that consist of cash items, such as petty cash or cash.

Bank

Accounts that are considered liquid or easily convertible to cash, for example, bank accounts, short-term investments and some securities.

Other current asset

Assets other than liquid assets that have a life cycle of under one year. For example, accounts receivable and stock. Even though accounts receivable is a current asset, you do not have to set up an Accounts Receivable account. When you create a company, Microsoft Office Accounting 2009 creates a system account named Accounts Receivable.

Stock asset

The value of goods on hand at a specific time. Stock assets are purchased or manufactured to sell to your customers.

Other asset

Assets of a minor type that are classified outside of the current or fixed asset categories. They can include investments or intangible assets such as goodwill or patents.

Fixed asset

Fixed assets are the tangible goods owned by a business, meant for long-term use and are not intended to be converted to cash in the near term. Fixed assets include manufacturing equipment, real estate, office buildings, furniture and motor vehicles. These fixed assets become obsolete over time and are amortised over their useful life. This decrease in value is called depreciation and is written off as a charge against the profits of the business every year, over the life of the asset. The annual charge toward depreciation is accumulated in separate accounts for each class of asset and is shown as offset accounts against the original cost of the assets. The net value is called book value. The original costs of various classes of assets and their accumulated depreciation are grouped under the account type Fixed Assets in Accounting 2009.

Credit card/Line of Credit

Current obligations to a financial institution that are created by using your credit card or line of credit for purchases or expenses.

Payroll liability

Current payroll obligations.

Current liability

Obligations due within one year or the normal operating cycle of your business. Accounts payable, short-term notes, accrued liabilities and tax accruals are examples of this type of account. Even though accounts payable is a current liability, you do not have to set up an Accounts Payable account. When you create a company, Accounting 2009 creates a system account named Accounts Payable.

Long-term liability

Financial obligations and commitments that extend beyond a period of one year. Mortgages, long-term notes or non-current portions of customer warranties are examples of this type of account.

Equity

An account to record the difference between assets and liabilities. This category is also known as net worth, shareholders' equity or net assets on company balance sheet. Another account of this type is Retained Earnings, which records the cumulative amount of net income left in the company.


Related topics

Add an account

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