Accounting revolves around five types of heads of accounts which are Asset, Liability, Capital, Income, and Expenditure, it is also known as chart of Accounts in which the complete accounting revolves.
Asset is anything which is owned by the company or organization, assets are mostly tangible some intangible assets are there as well. We can call anything asset which posses two main quality which are the ownership and its span of life, the span of life of an asset must not be less than a year.
Well sometimes things become a bit complex in order to define an asset for instance a company which has well name and fame and it is well set it consist of different branches at different cities except main branch or headquarter all other branch’s buildings are on rent now according to the definition that we have provided you can call anything asset which has two main qualities ownership and span of life, now this building has span of life more than a year but we do not have its ownership so we cannot call that building as an asset.
For Instance: Machinery, Building, Furniture, Supplies and many more
Liabilities are the obligations which are needed to be paid by the organization from whom they have borrowed.
These are the due payment or debt that organization has to pay. The concept of liability here in the accounting is limited only upto the borrowing and liability whereas on broader sense liability means obligation.
It is an obligation of the manager to provide all the necessary inputs to staff, obligation can also the service that you have pay to your parents as well. In nut shell any amount which is due on you and you have to pay to anybody is known as liability.
For Instance: Machinery Purchased on account, merchandise obtained on account and so on.
Capital is anything which is invested in the business by the owner in order to gain profit, the total investment of an owner in a business is known to be as capital or sometimes owner’s equity, money invested in business to start a business or to purchase anything for the company will be considered as the capital.
Income and Expenditure: The benefits or the profit that a person got from its investment is to be known as income and all those expense which accrued from the production to distribution of products of company is to be known as expense.