Accounting Elements: Assets, Liabilities, and Capital
LESSON 2 The three major elements of accounting are: Assets, Liabilities, and Capital. These terms are used widely in accounting so it is necessary that we take a close look at each element. But first, let's define account. What is an Account? The term "account" is used often in this tutorial. Thus, we need to understand what it is before we proceed. In accounting, an account is a descriptive storage unit used to collect and store information of similar nature. For example, "Cash". Cash is an account that stores all transactions that involve cash receipts and cash payments. All cash receipts are recorded as increase in "Cash" and all payments are recorded as deductions to the same account. Another example, "Building". Suppose a company acquires a building and pays in cash. That transaction would be recorded in the "Building" account for the acquisition of the building and a reduction in the "Cash" account for the payment...
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