account
/ uh-KOWNT /
If you tracked every business transaction in one long list, you would soon be lost — you could never quickly answer 'how much cash do we have?' or 'how much do we owe suppliers?' The fix is to sort the records into labeled bins, one bin per kind of item. Each of those bins is an account: a dedicated running record of everything that happens to one specific thing the business tracks.
An account is a record that accumulates all the increases and decreases affecting a single item — for instance a Cash account, an Accounts Receivable account (money customers owe you), an Equipment account, a Loan Payable account, a Sales Revenue account, or a Rent Expense account. Every transaction is sorted into the relevant accounts, and at any moment an account's balance is the net result of everything recorded in it. If the Cash account starts at 1,000 dollars, receives 500, and pays out 200, its balance is 1,300 dollars. Accounts come in the five basic element types: assets, liabilities, equity, revenue, and expense.
Accounts are the working units of accounting: transactions are recorded into them, their balances are summarized into financial statements, and the full list of them is the chart of accounts. The word also has an everyday meaning — your bank 'account' — but in accounting it is broader: it is any category being tracked, most of which are not bank accounts at all. A common beginner error is putting a transaction in the wrong account, which keeps the books balanced yet quietly distorts what the reports say.
A shop keeps separate accounts for Cash, Inventory, Accounts Payable, and Sales. When it sells goods for 80 dollars cash, the Cash account rises by 80 and the Sales account rises by 80 — each event lands in the right bins, so the owner can later read each balance at a glance.
An account is a labeled bin that accumulates everything happening to one tracked item.
An accounting 'account' is not the same as a bank account. Most accounts — Sales, Rent Expense, Equipment — hold no money at all; they are simply categories the business tracks.