Account is a formal record of particular types of transactions which is expressed in term of money. In other words, the individual records of a person, firm, property, any expenditure, any income, is called account. In business, so many transactions take place. To know the summary relating to a particular type of transactions, the help of account is being taken because we summarize all the transaction of similar nature at one place i.e. in one account.
For example:- we pay conveyance expense throughout the year. To know the amount spent on conveyance expenses, we will summarize all the transactions relating to conveyance expenses, at one place or at one account, which is called as Conveyance Expenses Account. Therefore, the account is a summary of similar type of transactions during a particular period,
Every account shows the following details:-
- Ledger Folio of Account
- Name of Account
- Date of Transaction
- Ledger folio of the journal where from the transaction is recorded in account
- Debit Amount
- Credit Amount
- Balance (Dr. or Cr.)
All the entries relating to a particular account are recorded at one place and the total of both sides (debit and credit side) is done. After totaling both sides the balancing is done. If the total of debit side is more than credit side then there will be debit balance and if the total of credit side is more than debit side then the balance will be credit balance. In case, if total of both sides are same then balance will be shown as nil. These balances are then shown in trial balance and with the help of trial balance the final accounts are prepared.
So, Account is like a mirror which gives the total transparency of the related transactions during a given period.
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