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. T ...

, an account refers to

assets 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 can b ...

, liabilities,

income Income is the 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 different across fields. F ...

expenses An expense is an item requiring an outflow of money, or any form of fortune in general, to another person or group as payment for an item, service, or other category of costs. For a tenant, rent is an expense. For students or parents, tuition i ...

, and equity, as represented by individual

ledger A ledger is a book or collection of accounts in which accounting transactions are recorded. Each account has: * an opening or brought-forward balance; *a list of transactions, each recorded as either a debit or credit in separate columns (usu ...

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

. 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. A period during which goods are sold for a reduced price may also be referred ...

, accounts receivable,

mortgages A mortgage loan or simply mortgage (), in civil law jurisdictions known also as a hypothec loan, is a loan used either by purchasers of real property to raise funds to buy real estate, or by existing property owners to raise funds for any pur ...

loans In finance, a loan is the tender of money by one party to another with an agreement to pay it back. The recipient, or borrower, incurs a debt and is usually required to pay interest for the use of the money. The document evidencing the debt ( ...

, PP&E,

common stock Common stock is a form of corporate equity ownership, a type of security. The terms voting share and ordinary share are also used frequently outside of the United States. They are known as equity shares or ordinary shares in the UK and other C ...

, services, wages and

payroll A payroll is a list of employment, employees of a company who are entitled to receive compensation as well as other work benefits, as well as the amounts that each should obtain. Along with the amounts that each employee should receive for time ...

. A

chart of accounts A chart of accounts (COA) is a list of financial accounts and reference numbers, grouped into categories, such as assets, liabilities, equity, revenue and expenses, and used for recording transactions in the organization's general ledger. Acco ...

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 process of recording and processing information about economic entity, economic entities, such as businesses and corporations. Accounting measures the results of an organization's economic activit ...

. Practitioners of accounting are called

accountants An accountant is a practitioner of accounting or accountancy. Accountants who have demonstrated competency through their professional associations' certification exams are certified to use titles such as Chartered Accountant, Chartered Certifie ...

.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 (also known as a 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. La ...

: * 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 can b ...

, Liability, Equity,

Revenue In accounting, revenue is the total amount of income generated by the sale of product (business), goods and services related to the primary operations of a business. Commercial revenue may also be referred to as sales or as turnover. Some compan ...

Expense An expense is an item requiring an outflow of money, or any form of fortune in general, to another person or group as payment for an item, service, or other category of costs. For a tenant, rent is an expense. For students or parents, tuition i ...

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.

References

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

Classification of accounts

Based on nature

Based on periodicity of flow

See also

References