View source for Finance:Account (bookkeeping)

{{Short description|Central data structure in the practice of accounting}}
{{Accounting}}

In [[Finance:Bookkeeping|bookkeeping]], an '''account''' refers to assets, liabilities, [[Finance:Income|income]], expenses, and [[Finance:Equity|equity]], as represented by individual [[Finance:Ledger|ledger]] pages, to which changes in value are chronologically recorded with [[Finance:Debits and credits|debit and credit]] entries. These entries, referred to as postings, become part of a ''book of final entry'' or [[Finance:General ledger|ledger]]. Examples of common financial accounts are [[Finance:Sales|sales]], [[Finance:Accounts receivable|accounts]]<ref name=":0" />[[Finance:Accounts receivable|receivable]], mortgages, loans, PP&E, [[Finance:Common stock|common stock]], [[Finance:Sales|sales]], services, wages and payroll.

A [[Finance:Chart of accounts|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 [[Finance:Accounting|accounting]]. Practitioners of accounting are called accountants.<ref name=":0">John Downes, Jordon Elliot Goodman, Lucas Pacioli Dictionary of Finance and Investment Terms 1995 Barron Fourth Edition {{ISBN|0-8120-9035-7}} page 3</ref>

==Classification of accounts==
===Based on nature===
An account may be classified as real, personal or as a nominal account.
{| class="wikitable"
|-
! Type
! Represent
! Examples
|-
| Real
| Physically tangibile in the world and certain intangible things not having any physical existence
| Tangibles – Plant and Machinery, Furniture and Fixtures, Computers and Information processors, [[Finance:Cash account|Cash account]]s etc. Intangibles – [[Finance:Goodwill (accounting)|Goodwill]], [[Social:Patent|Patent]]s and [[Copyright]]s
|-
| Personal 
| Business and Legal entities, [[Finance:Bank account|Bank account]]s
| Individuals, [[Social:Partnership|Partnership]] firms, Corporate entities, [[Engineering:Nonprofit organization|Nonprofit organization]]s, any local or statutory bodies including governments at country, state or local levels
|-
| Nominal
| Temporary [[Finance:Income|Income]] and Expense accounts for recognition of the implications of the financial transactions during each [[Physics:Fiscal year|fiscal year]] until finalization of accounts at the end
| [[Finance:Sales|Sales]], [[Finance:Purchasing|Purchases]], Electricity charges
|}

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 [[Physics:Fiscal year|fiscal year]]:
* 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.

{| class="wikitable"
|-
! Type of accounts
! Long term inflows
! Long term outflows
! Short term inflows
! Short term outflows
|-
| Real
| Assets
|
|
|
|-
| Personal
| Assets
| Liability
|
|
|-
| Nominal
|
|
| Incomes
| Expenses
|}

Items in accounts are classified into five broad groups, also known as the ''elements'' of the accounts:<ref>IASB Framework for the Preparation and Presentation of Financial Statements, Paragraph 47</ref>
* [[Finance:Asset|Asset]], Liability, Equity, [[Finance:Revenue|Revenue]], Expense

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==
* [[Finance:Bookkeeping|Bookkeeping]]
* [[Finance:Chart of accounts|Chart of accounts]]
* [[Finance:Double-entry bookkeeping system|Double-entry bookkeeping system]]

==References==
{{Reflist}}


{{DEFAULTSORT:Account (Accountancy)}}
[[Category:Accounting terminology]]
[[Category:Accounting journals and ledgers]]

{{Sourceattribution|Account (bookkeeping)}}