What account type would be most appropriate for tracking a loan your client took out to buy a delivery van?

Tracking a loan taken out for purchasing a delivery van is best classified under liabilities. This is because a loan represents an obligation to repay borrowed funds, which contributes to the company’s debts. Liabilities are financial obligations that a business owes, and they appear on the balance sheet, indicating the amount that must be repaid to creditors over time.

When your client takes out a loan, this becomes a legal obligation, directly affecting their financial position. The loan amount would be recorded as a liability until it is fully paid off. This classification allows for accurate representation of the company’s financial health, indicating how much debt they are carrying and tracking the repayments over the duration of the loan.

In contrast, asset accounts reflect owned resources like cash, inventory, or property, equity accounts involve owner investments or retained earnings, and revenue accounts record income generated from business operations. These types of accounts do not accurately capture the nature of the loan obligation, making liabilities the appropriate choice for this situation.