Account

Definition: An account is a financial statement used to prepare your financial report that generally includes allocation of resources, balance sheets, and profit and loss statements. 

Usually, these records contain information about transactions made by the business itself, but sometimes they may also include information about the accounts of customers or suppliers. Account details may include the name of the person or business who is responsible for managing the account, itemized bills and receipts for purchases and payments made by customers through the account, balance, and date of transfer, income statement, and statement of liquidity (the total amount available in an account at any given time).

Examples of account in a Sentence

  1. He closed his account and started a new one.
  2. She gave us differing accounts of the accident.
  3. The accused gave an account of what happened.

History and Etymology for account

account, borrowed from Anglo-French and Middle French acounte, from Vulgar Latin

counted, computed, evaluated, given an account of, count; enumerate; keep a record of; log; mark; number; sum up

What Does Account Mean?

Accounts are groups of assets and liabilities associated with one or more people or entities. In simple terms, accounts are used to manage the money and assets of individuals or businesses for whom the personal or business records are maintained. For example, if you own a restaurant, your restaurant accounts would show revenues, expenses, assets, and liabilities.

Types of Account (Examples of Account)

There are 5 primary types of accounts:

  1. Asset: Asset accounts are the ones you use to purchase items. Asset refers to a pre-existing financial position that may or may not be liquid. The asset group contains cash and non-cash tangible assets like buildings, businesses, or inflatables like video poker machines.
  2. Liability accounts: Liability refers to an event or conduct which puts an obligation into existence or imposes liability upon an entity.  The liability group contains liabilities such as mortgages, public lectures, copyrights, and bonds. Liability has two subcategories: negligence (causing damage or failure to provide a warranty) and conversion.
  3. Equity accounts: Equity refers to the value or status of a thing and its resulting rights regarding property and services, whether payable or unpaid. The equity group covers income from equity interests in businesses, land, or equipment.
  4. Revenue accounts: Revenue refers to the income resulting from an activity, whether coming to an entity as income or independently generated. Revenue accounts include deposits and payroll deductions from your company, pension funds, the employee provided health insurance, alimony/spousal support payments, refundable tax amounts from lodging and rental property use, fees paid to a financial intermediary through a bank transfer, or check if a financial institution initiates it, etc
  5. Expense accounts: Expense consists of payments required to maintain current obligations, usually those incurred in carrying out current business activities. Expense accounts pay for out-of-pocket expenses like cell phone bills, gas or public transportation, unexpected car repairs, or replacing lost or stolen property.

Role of Account in Account Statements

Financial institutions typically use account statements to communicate important information, such as balances, income, expenses, and account usage. They also report transaction and account activity to investors and lenders through news releases, auditor reports, and regulatory documents.

Accounts represent the truth behind a company’s transactions, with the most common being current, capital, assets, and liabilities. The role of an account in an account statement is a simple way to communicate how an entity is holding its assets: as the account holder, the person directly or indirectly responsible for an asset’s cash balance. According to Mergers and Acquisitions, an account statement will typically include the statement balance of an asset, the current loan amount outstanding from another party, and any cash buyback offer made by the company. Other accounts may also contain information about marketable securities held by the party, including interest rates, taxes payable, etc.