True or False? A chart of accounts consists of five categories: Assets, Liabilities, Equity, Revenue, and Expenses.

Question

BlackTom AI · Accepted Answer

Consider the statement about the chart of accounts and its five categories.
Option 1: 'True' — This aligns with the conventional view that a chart of accounts is organized into five primary categories: Assets, Liabilities, Equity, Revenue, and Expenses. In many accounting frameworks, these top-level categories serve as the main pillars for classifying financial information, with assets representing resources owned, liabilities representing obligations, equity reflecting owner claims, revenue (or income) capturing inflows from operations, and expenses capturing outflows related to earning revenue. It is also worth noting that in practice, many organizations expand these categories with subaccounts and sometimes use the term 'income' interchangeably with 'revenue' or separate classifications for other income types, but the five broad groupings remain the standard core.
Option 2: 'False' — This would be incorrect if we accept the standard structure described above. The claim that there are exactly five categories is widely taught in introductory accounting; challenging this would imply either a nonstandard framework or omitting one or more of the fundamental groups. While there are variations in practice (such as using 'income' instead of 'revenue' or adding additional subcategories), the core five-category framework is widely recognized, making this statement generally true in standard contexts.

SG5024E1 - Sage 50 Accounting Accounting Modules Test

True or False? A chart of accounts consists of five categories: Assets, Liabilities, Equity, Revenue, and Expenses.

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