Account

In accountancy, an account is a label used for recording and reporting a quantity of almost anything. Most often it is a record of an amount of money owned or owed by or to a particular person or entity, or allocated to a particular purpose. It may represent amounts of money that have actually changed hands, or it may represent an estimate of the values of assets, or it may be a combination of these.

Types of Accounts

1. Asset accounts: represent the different types of economic resources owned by a business, common examples of Asset accounts are cash, cash in bank, building, inventory, prepaid rent, goodwill, account receivable.
2. Liability accounts: represent the different types of economic obligations by a business, such as accounts payable, bank loan, bonds payable, accrued interest.
3. Equity accounts: represent the residual equity of a business (after deducting from Assets all the liabilities) including Retained Earnings and Appropriations.
4. Revenue accounts: represent the company's gross earnings and common examples include Sales, Service revenue and Interest Income.
5. Expense accounts: represent the company's expenditures to enable itself to operate. Common examples are electricity and water, rentals, depreciation, doubtful accounts, interest, insurance.
6. Contra-accounts: from the term contra, meaning to deduct, the value of which are opposite the 5 above mentioned types of accounts. For instance, a contra-asset account is Accumulated depreciation. This label represent deductions to a relatively permanent asset like Building.