Account (accountancy)
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In
bookkeeping Bookkeeping is the recording of financial transactions, and is part of the process of accounting in business and other organizations. It involves preparing source documents for all transactions, operations, and other events of a business. Tr ...
, an account refers to
assets In financial accounting Financial accounting is the field of accounting concerned with the summary, analysis and reporting of financial transactions related to a business. This involves the preparation of Financial statement audit, financial ...
, liabilities,
income Income is the Consumption (economics), consumption and saving opportunity gained by an entity within a specified timeframe, which is generally expressed in monetary terms. Income is difficult to define conceptually and the definition may be diff ...
,
expenses An expense is an item requiring an outflow of money, or any form of Wealth, fortune in general, to another person or group as payment for an item, service, or other category of costs. For a leasehold estate, tenant, renting, rent is an expense. Fo ...
, and equity, as represented by individual ledger pages, to which changes in value are chronologically recorded with debit and credit entries. These entries, referred to as postings, become part of a ''book of final entry'' or ledger. Examples of common financial accounts are
sales Sales are activities related to selling or the number of goods sold in a given targeted time period. The delivery of a service for a cost is also considered a sale. The seller, or the provider of the goods or services, completes a sale in ...
, accounts
receivable Accounts receivable, abbreviated as AR or A/R, are legally enforceable claims for payment held by a business for goods supplied or services rendered that customers have ordered but not paid for. These are generally in the form of invoices raised b ...
, mortgages, loans, PP&E, common stock,
sales Sales are activities related to selling or the number of goods sold in a given targeted time period. The delivery of a service for a cost is also considered a sale. The seller, or the provider of the goods or services, completes a sale in ...
, services, wages and
payroll A payroll is the list of employees of some company that is entitled to receive payments as well as other work benefits and the amounts that each should receive. Along with the amounts that each employee should receive for time worked or tasks pe ...
. A chart of accounts provides a listing of all financial accounts used by particular business, organization, or government agency. The system of recording, verifying, and reporting such information is called
accounting Accounting, also known as accountancy, is the measurement, processing, and communication of financial and non financial information about economic entity, economic entities such as businesses and corporations. Accounting, which has been calle ...
. Practitioners of accounting are called accountants.John Downes, Jordon Elliot Goodman, Lucas Pacioli Dictionary of Finance and Investment Terms 1995 Barron Fourth Edition page 3


Classification of accounts


Based on nature

An account may be classified as real, personal or as a nominal account. Example: A sales account is opened for recording the sales of goods or services and at the end of the financial period the total sales are transferred to the revenue statement account (Profit and Loss Account or Income and Expenditure Account). Similarly expenses during the financial period are recorded using the respective Expense accounts, which are also transferred to the revenue statement account. The net positive or negative balance (profit or loss) of the revenue statement account is transferred to reserves or capital account as the case may be.


Based on periodicity of flow

The classification of accounts into real, personal and nominal is based on their nature i.e. physical asset, liability, juristic entity or financial transaction. The further classification of accounts is based on the periodicity of their inflows or outflows in the context of the
fiscal year A fiscal year (or financial year, or sometimes budget year) is used in government accounting, which varies between countries, and for budget purposes. It is also used for financial reporting by businesses and other organizations. Laws in many ju ...
: * Income is a short term inflow during the fiscal year. * Expense is short term outflow during the fiscal year. * An asset is a long term inflow with implications extending beyond the financial period and by the traditional view could represent unclaimed income. Alternatively, an asset could be valued at the present value of its future inflows. * Liability is a long term outflow with implications extending beyond the financial period and by the traditional view could represent unamortised expense. Alternatively, a liability could be valued at the present value of future outflows. Items in accounts are classified into five broad groups, also known as the ''elements'' of the accounts: IASB Framework for the Preparation and Presentation of Financial Statements, Paragraph 47 *
Asset In financial accounting, an asset is any resource owned or controlled by a business or an economic entity. It is anything (tangible or intangible) that can be used to produce positive economic value. Assets represent value of ownership that c ...
, Liability, Equity,
Revenue In accounting, revenue is the total amount of income generated by the sale of goods and services related to the primary operations of the business. Commercial revenue may also be referred to as sales or as turnover. Some companies receive rev ...
,
Expense An expense is an item requiring an outflow of money, or any form of Wealth, fortune in general, to another person or group as payment for an item, service, or other category of costs. For a leasehold estate, tenant, renting, rent is an expense. Fo ...
The classification of equity as a distinctive element for classification of accounts is disputable on account of the "entity concept", since for the objective analysis of the financial results of any entity the external liabilities of the entity should not be distinguished from any contribution by the shareholders.


See also

*
Bookkeeping Bookkeeping is the recording of financial transactions, and is part of the process of accounting in business and other organizations. It involves preparing source documents for all transactions, operations, and other events of a business. Tr ...
* Chart of accounts *
Double-entry bookkeeping system Double-entry bookkeeping, also known as double-entry accounting, is a method of bookkeeping that relies on a two-sided accounting entry to maintain financial information. Every entry to an account requires a corresponding and opposite entry to ...


References

{{DEFAULTSORT:Account (Accountancy) Accounting terminology Accounting journals and ledgers