To get a complete overview of your business finances, it's important to organize all your data in a defined structure.
On Refrens, all your financial data is organized this way - Accounts > Account Groups > Categories > Types
- All your financial data comes under 5 major types of accounts - Assets, Liabilities, Income, Expenses, and Capital (Equity).
- Each of these types of accounts is further segmented into different categories. For example, assets can be classified into categories such as current assets and non-current assets and so on.
- Each category consists of several account groups. For example, the current asset category consists of groups such as bank accounts, account receivables, etc.
- All the individual accounts are part of any of such groups.
Let's understand this in detail.
(This will just give you a theoretical explanation. If you want to understand how to create new account groups, click here.)
Tip: Unless you are an accountant, you don't have to worry about all these details. This is just to simplify the understanding of accounting. Refrens will automate most of this for you and the rest will be taken care of by your accountant!
1. Assets (Type)
Assets are resources owned by a company that has future economic value.
They can be classified into:
A. Current Assets (Category)
These are assets that can be converted into cash within one year. Examples include:
- Cash and Cash Equivalents (Group)
This includes cash in hand, bank deposits, and other short-term highly liquid investments.
For instance - HDFC Bank A/c, Cash In Hand A/c, etc. - Accounts Receivable (Group)
This is money owed to the company by its customers for goods or services delivered or used but not yet paid for.
For instance - Customer X Receivable, Customer Y Receivable, etc. - Inventory (Group)
This includes raw materials, work-in-progress, and finished goods that a company has on hand.
For instance - Raw Material Inventory, Finished Goods Inventory, etc. - Prepaid Expenses (Group)
These are expenses paid in advance for benefits yet to be received.
For instance - Prepaid Rent, Prepaid Insurance, etc.
B. Non-Current Assets (Category)
These are assets that cannot be converted into cash easily or are expected to be consumed in more than one year. Examples include:
- Property, Plant, and Equipment (PPE) (Group)
These are long-term assets, such as buildings, machinery, and equipment, used in the operation of the business.
For instance - Office Building, Manufacturing Equipment, etc. - Intangible Assets (Group)
These are non-physical assets, such as patents, trademarks, copyrights, and goodwill.
For instance - a Patent on a new product a trademark of the company logo. - Long-term Investments (Group)
These are investments that a company intends to hold for more than a year.
For instance, Investment in Company Z, Bonds Held to Maturity.
2. Liabilities (Type) 
Liabilities are obligations or debts that a company needs to pay. They can be classified into:
A. Current Liabilities (Category)
These are debts that must be paid within one year. Examples include:
- Accounts Payable (Group)
This is money owed by a company to its suppliers for goods or services received but not yet paid for.
For instance, Supplier X Payable, Supplier Y Payable. - Short-term Loans (Group)
These are loans that need to be repaid within one year.
For instance, Bank Loans, Bank Overdrafts, etc. - Accrued Expenses (Group)
These are expenses that have been incurred but not yet paid.
For instance, Accrued Wages and accrued Utilities.
B. Non-Current Liabilities (Category)
These are debts that are not due within one year. Examples include:
- Long-term Loans (Group)
These are loans that do not need to be repaid within one year.
For instance, Mortgage Loans, Bank Term Loans, etc. - Deferred Tax Liabilities (Group)
These are taxes that have been accrued but will not be paid for another year.
For instance, Deferred Tax Liability from Depreciation, Deferred Tax Liability from Carry Forward Losses. - Pension Obligations (Group)
These are obligations to pay pension benefits.
For instance, Defined Benefit Pension Plan Obligation and post-retirement Healthcare Obligation.
3. Income (Type) 
Income is the money that a company earns from its business activities. It can be classified into:
A. Operating Income (Category)
This is income earned from a company's core business operations. Examples include:
1. Sales Revenue (Group)
This is income from selling goods or providing services.
For instance, Sales from Product A and sales from Service B.
2. Service Income (Group)
This is income from services provided.
For instance, Consulting Fees and maintenance Service Fees.
B. Non-Operating Income (Category)
This is income earned from non-core business activities.
Examples include:
- Interest Income (Group)
This is income from investments or bank deposits.
For instance, Interest from Bank A Deposit, Interest from Corporate Bond Investment. - Dividend Income (Group)
This is income from investments in other companies' stocks.
For instance, Dividends from Company X Shares, Dividends from Company Y Shares. - Gain from Sale of Assets (Group)
This is income from selling assets for more than their book value.
For instance, Gain from the Sale of Old Machinery, Gain from the Sale of Investment Property.
4. Expenses (Type) 
Expenses are the costs incurred in the process of earning revenue. They can be classified into:
A. Operating Expenses (Category)
These are expenses related to a company's core business operations. Examples include:
- Cost of Goods Sold (COGS) (Group)
This is the cost of producing the goods sold by a company.
For instance, Raw Material Costs for Product A, Direct Labor Costs for Product B. - Wages and Salaries (Group)
This is the cost of employees' time.
For instance, Wages for Hourly Workers, Salaries for Salaried Employees. - Rent and Utilities (Group)
These are costs related to a company's premises.
For instance, Rent for Office Space, Electricity, Water Bills, etc.
B. Non-Operating Expenses (Category)
These are expenses not related to core business operations. Examples include:
- Interest Expense (Group)
This is the cost of borrowing money.
For instance, Interest on Bank A Loan, Interest on Credit Card Debt. - Loss from Sale of Assets (Group)
This is the loss from selling assets for less than their book value.
For instance, Loss from the Sale of Old Machinery, Loss from the Sale of Investment Property.
5. Capital (Equity) (Type)
Capital, also known as equity, represents the owners' claim on the company's assets after all liabilities have been paid. It can be classified into:
- Share Capital (Group)
This is the money that shareholders have invested in the company.
For instance, Common Stock, Preferred Stock. - Retained Earnings (Group)
This is the net income that a company has kept, rather than distributed to shareholders as dividends.
For instance, Retained Earnings from 2022, Retained Earnings from 2023. - Treasury Shares (Group)
These are shares that a company has repurchased from shareholders.
For instance, Treasury Shares from Buyback in 2022, and Treasury Shares from Buyback in 2023.
Note: Don't take this article as a standard or as an exhaustive list. Everyone has a unique way of accounting. This is just an attempt to give you a bird's eye view of the accounting architecture.
Additional Resources:
1. Introduction to advanced accounting on Refrens
2. How to create, edit, and download account groups?
Read the help article here>
3. How to create accounts (i.e. ledgers) and track ledger entries?
Read the help article here>
4. What are voucher books & voucher types?
5. How to create new voucher books and add voucher entries?