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What is an Account in Accounting?

Posted by Kashoo Team on December 2, 2013 at 7:44 PM

If we are talking about an account in the context of accounting then it has a different meaning than most people are used to. The word account usually triggers thoughts of a bank account: checking or savings. In the business world, account might refer to a client. Both of these ideas are valid, but in accounting an account takes on a whole 'nother meaning—especially when you ponder how many accounts could an accountant count if an accountant could count accounts. (We know. We're hilarious.) In accounting, an account is simply a unique place in the general ledger that is used for recording a dollar balance along with a history of changes to that balance. This balance can be associated with a bank account or it can represent the amount of money owed to you by a client or customer. It could also represent your reported income, expenses or the value of assets that you own.

Account Type

Because there is so much variety when thinking about accounts we give each one a type that will determine where the account appears in different reports and how it can be used when entering income, expenses, payments and transfers.

Account Number

Account numbers are a type of short-hand for naming accounts. Accountants do a lot of data entry using the number pad on the keyboard and it is much easier to punch in a 4-digit number than it is to use the main part of the keyboard and spell it out.

Account numbers are organized so that the left-most digits represent what part of the balance sheet it is located on and the right-most digits determine what order the accounts in that section are shown.

Chart of Accounts

The chart of accounts is basically a list of all the accounts and their number that you have set up in your accounting system. Kashoo allows you to rename, renumber and remove accounts at any time so if things are not perfect out of the gate you can always change them.

And there you have a high-level overview of what an account is in accounting terms. Next week we will follow up with an article on how to get your accounts set up in Kashoo. In the meantime, if you have any questions our support team is here to help. Contact us at answers@kashoo.com or on Twitter at@KashooOnline.

Topics: Accounting