Account

Definition

An account is a record in an accounting system that tracks the financial activities and balances of specific assets, liabilities, equity, revenues, or expenses. Each account has a unique identifier and is used to categorize and summarize transactions for reporting purposes.

5 Must Know Facts For Your Next Test

1. Accounts are categorized into five main types: assets, liabilities, equity, revenues, and expenses.
2. The double-entry accounting system requires every transaction to be recorded in at least two accounts.
3. Each account has a normal balance side which indicates whether transactions typically increase or decrease the balance.
4. T-accounts are visual aids used to depict how transactions affect individual accounts.
5. The Chart of Accounts is a complete listing of all accounts used by an organization.

Review Questions

• What are the five main categories of accounts?
• Why is it important to have a unique identifier for each account?
• How does the double-entry accounting system utilize accounts?

Related terms

Double-Entry Accounting: An accounting method where each transaction affects at least two accounts to maintain the accounting equation.

Chart of Accounts: A comprehensive list of all accounts used in an organization's general ledger.

T-Account: A visual representation using a 'T' shape to show increases and decreases in an account.