Oregon Construction Contractors (CCB) Practice Test

How many basic types of accounts do most companies use in posting transactions?

1. Three

2. Five

3. Seven

4. Ten

The correct answer is: Five

Most companies typically use five basic types of accounts in posting transactions. These account types are crucial for organizing financial information. They include assets, liabilities, equity, revenue, and expenses. Assets represent resources owned by the company, such as cash, inventory, and equipment. Liabilities are obligations or debts the company owes, such as loans and accounts payable. Equity represents the owner’s interest in the company, which can include common stock and retained earnings. Revenue accounts record the income generated from business activities, while expense accounts track the costs incurred in generating revenue. Using these five categories allows companies to maintain clear and organized financial records, facilitating accurate reporting and analysis of financial performance. Understanding these account types is essential for anyone involved in finance or accounting, especially in the context of managing construction projects and budgets effectively.