The five types
Every account in BitBooks belongs to exactly one of five types. The same five types exist in every accounting system in the world:
| Type | What it represents | Example accounts |
|---|---|---|
| Asset | What you own | Cash, BTC wallet, Accounts Receivable, Office Equipment |
| Liability | What you owe | Accounts Payable, Credit Card, Loan |
| Equity | Owner's stake | Owner's Capital, Retained Earnings |
| Income | Money coming in (revenue) | Sales, Interest Income, Tips Received |
| Expense | Money going out (operating costs) | Rent, Salaries, Software Subscriptions |
That's it. Every dollar (and every satoshi) flows through accounts of these types.
Where each type appears on reports
The two main financial statements use these types:
Balance Sheet = Assets, Liabilities, Equity. Shows what you own and owe at a moment in time.
Profit & Loss = Income and Expenses. Shows whether you made money over a period.
Picking the right type at account creation determines which report the account appears on.
Asset accounts
Anything of value the business has.
Common ones:
- Cash on Hand (your bank account)
- BTC Hot Wallet, BTC Cold Storage (Bitcoin wallets)
- Accounts Receivable (money customers owe you)
- Inventory (goods you have to sell)
- Office Equipment, Vehicles (long-term assets)
- Prepaid Expenses (you paid in advance, the benefit is still coming)
In BitBooks, every wallet you create is also an Asset account. The wallet IS the account.
Assets normally have debit balances (they go up with debits, down with credits).
Liability accounts
Anything the business owes to others.
Common ones:
- Accounts Payable (vendor bills you haven't paid yet)
- Credit Card (your business credit card balance)
- Equipment Loan, Mortgage (long-term debt)
- Sales Tax Payable (sales tax you've collected but not yet remitted)
- Wages Payable (salaries earned but not yet paid)
Liabilities normally have credit balances (they go up with credits, down with debits).
Equity accounts
The owners' stake in the business. Mathematically: Equity = Assets minus Liabilities.
Common ones:
- Owner's Capital (money the owners put into the business)
- Retained Earnings (accumulated profits not paid out as dividends)
- Owner's Draws (money the owners have taken out)
- Common Stock (for incorporated businesses)
- Unrealized FX Gain on Bitcoin (created when you run an FX revaluation, see Tracking Bitcoin Value Changes)
Equity normally has credit balances.
Income accounts
Money coming in from your normal business activities.
Common ones:
- Sales (revenue from your main offerings)
- Service Revenue (revenue from services rendered)
- Tips Received (separate from sales, common for hospitality)
- Interest Income (interest your bank account earns)
- Other Income (catch-all for unusual income)
Income normally has credit balances.
Income accounts reset to zero at year-end. They report on the P&L for one period, then start fresh next period. The cumulative profit gets rolled into Retained Earnings.
Expense accounts
Money going out for normal business operations.
Common ones:
- Cost of Goods Sold (direct cost of what you sold)
- Rent
- Salaries
- Marketing
- Software Subscriptions
- Office Supplies
- Utilities
- Other Expenses
Expenses normally have debit balances.
Like Income, Expense accounts reset to zero at year-end.
Sub-types within each type
Each type has sub-types that further organize accounts on reports. For example, Asset sub-types:
- WALLETS (Bitcoin wallets and bank accounts)
- OTHER_CURRENT_ASSETS (cash equivalents, receivables)
- FIXED_ASSETS (equipment, vehicles, property)
- OTHER_ASSETS (prepaids, deposits, intangibles)
When you create an account, you pick the type AND the sub-type. The sub-type determines exactly where on the Balance Sheet (or P&L) the account appears.
For the full sub-type list, see Account Sub-Types and How They're Used.
Picking the right type
A simple decision tree:
- Does it represent something you own? → Asset
- Does it represent something you owe? → Liability
- Does it represent owner's investment or accumulated profit? → Equity
- Does it represent money coming in from operations? → Income
- Does it represent money going out as a cost? → Expense
Examples:
- A Bitcoin wallet → Asset (you own the Bitcoin in it)
- A credit card → Liability (you owe the credit card company)
- A loan from the founder to the business → Liability (the business owes the founder) OR Equity (if it's effectively investment, no formal loan)
- A monthly Slack bill → Expense
- A customer paying you for service → Income
When in doubt, ask your accountant. The mapping is conventional and rarely surprising.
What goes wrong if the type is wrong
If you accidentally create a Sales account as Expense type:
- Every Sales transaction reduces "expenses" instead of adding to "income"
- P&L revenue is understated
- P&L expenses are understated
- Net profit is wrong
The numbers can still total correctly inside their type, but they appear in the wrong report section. This is rare but possible if you click the wrong type when creating.
The fix: archive the wrong-typed account, create a new correctly-typed account, move transactions over (talk to support if there's history involved).
Where to go next
- What is the Chart of Accounts? for the foundational concept
- Account Sub-Types and How They're Used for the next layer of detail
- Creating Custom Accounts for the how-to walkthrough
- Account Codes and Numbering for the optional numeric structure