What Is Accounts, Accountancy and Accountants

What Is Accounts accountancy and accountants

 

What is an Account?

Definition: An account is a record in an accounting system that tracks the financial activities of a specific asset, liability, equity, revenue, or expense. These records increase and decrease as the business events occur throughout the accounting period. Each individual account is stored in the general ledger and used to prepare the financial statements at the end of an accounting period.

What Does Account Mean?

What is the definition of account? There are five main types of accounts used in an accounting system. Each of these are represented in the expanded accounting equation. Assets = Liabilities + Owner’s Equity + Revenues – Expenses.

Let’s take a look at an example of each

Example

Assets are resources that the company can use to generate revenues in current and future years. Asset accounts have a debit balance and are always presented on the balance sheet first.

Liabilities represent the debt obligations that the company owes to creditors. This can include bank debt as well as notes from owners. Liability accounts have a credit balance and appear below assets on the balance sheet.

Equity accounts represent the owner’s stake in the business. Equity is often called net assets because it shows the amount of assets that the owners actually own after the creditors have been paid off. You can calculate this by flipping the accounting equation around to solve for equity instead of assets.

Revenue and expense accounts are technically both temporary equity accounts, but they are significant enough to mention separately. Revenue accounts track the income generated by the business. These items have a credit balance and increase total equity.

Expense accounts, on the other hand, represent the resources used to generate income. These items have a debit balance and lower total equity.

At the end of each accounting period, the revenue and expense accounts are closed to either the income summary account, retained earnings account, or capital account depending on the type of organization.

Summary Definition

Define Account: Accounts are records of business transactions in categoried on the basis of the accounting equation.2

 

What is Accounting and Why it Matters For Your Business

When becoming an entrepreneur, you accept the new responsibility of business accounting. But what exactly is it? What value does it provide to you? And what does it mean for your time?

Fortunately, with the right people, tools, and resources, accounting isn’t a black hole for your time.

Here, we’ll cover the basics you need to know to get started. But if you want to jump straight to the how-to, you can download our free guide to small business accounting.

A simple definition of “accounting”

Accounting is how your business records, organizes, and understands its financial information.

You can think of accounting as a big machine that you put raw financial information into—records of all your business transactions, taxes, projections, etc.—that then spits out an easy-to-understand story about the financial state of your business.

Accounting tells you whether or not you’re making a profit, what your cash flow is, what the current value of your company’s assets and liabilities is, and which parts of your business are actually making money.

Accounting 

Accounting and bookkeeping overlap in many ways, and some say bookkeeping is one aspect of accounting. But if you want to break them apart, you could say that bookkeeping is how you record and categorize your financial transactions, while accounting puts that financial data to good use through analysis, strategy, and tax planning.

What is accountancy?

Accountancy is the practice of recording, classifying, and reporting on business transactions for a business. It provides feedback to management regarding the financial results and status of an organization. The key accountancy tasks are noted below.

Recordation

The recording of business transactions usually involves several key transactions that are handled on a repetitive basis, which are issuing customer invoices, paying supplier invoices, recording cash receipts from customers, and paying employees. These tasks are handled by the billing clerk, payables clerk, cashier, and payroll clerk, respectively.

There are also a number of business transactions that are non-repetitive in nature, and so require the use of journal entries to record them in the accounting records. The fixed asset accountant, general ledger clerk, and tax accountant are most likely to be involved in the use of journal entries.

Classification

The results of the efforts of the preceding accountants are accumulated into a set of accounting records, of which the summary document is the general ledger. The general ledger consists of a number of accounts, each of which stores information about a particular type of transaction, such as product sales, depreciation expense, accounts receivable, debt, and so on. Certain high-volume transactions, such as customer billings, may be stored in a subledger, with only its totals rolling into the general ledger. The ending balances in the general ledger may be altered with adjusting entries each month, mostly to record expenses incurred but not yet recorded.

The information in the general ledger is used to derive financial statements, and may also be the source of some information used for internal management reports.

Reporting

The reporting aspects of accountancy are considerable, and so have been divided into smaller areas of specialization, which are:

  • Financial accounting. This area is the province of the general ledger accountant, controller, and chief financial officer, and is concerned with the accumulation of business transactions into financial statements. These documents are presented based on sets of rules known as accounting frameworks, of which the best known are Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Standards (IFRS).

  • Management accounting. This area is the province of the cost accountant and financial analyst, who investigate ways to improve the profitability of a business and present their results to management. Their reports may be derived from the main system of accounts, but may also include separate data accumulation systems, as may be found with activity-based costing systems. Management accounting is not governed by any accounting framework – the structure of the reports issued to management are tailored to the needs of the business.

In short, accountancy involves each of the preceding tasks – recordation, classification, and reporting.

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