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Balance accounts
The first classification type of transactional accounts is balance accounts, which represent the balance sheet report components.
The balance in a balance account is calculated from the day the account opened till the date of reporting. In the year-end transaction, the closing voucher is transferred to the opening balance of the account.
Balance accounts have the following three classifications that represent their nature:
- Assets: This represents the resources that are owned by the organization and are used to carry out business activities, such as producing a product
- Liabilities: This represents the claims against assets; for example, the obligations of borrowing money to acquire machines, or products
- Equity: This represents the claim on total assets; it is equal to total assets minus total liabilities