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Account

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Financial Accounting I

Definition

An account is a record in an accounting system that tracks the financial activities and balances of specific assets, liabilities, equity, revenues, or expenses. Each account has a unique identifier and is used to categorize and summarize transactions for reporting purposes.

5 Must Know Facts For Your Next Test

  1. Accounts are categorized into five main types: assets, liabilities, equity, revenues, and expenses.
  2. The double-entry accounting system requires every transaction to be recorded in at least two accounts.
  3. Each account has a normal balance side which indicates whether transactions typically increase or decrease the balance.
  4. T-accounts are visual aids used to depict how transactions affect individual accounts.
  5. The Chart of Accounts is a complete listing of all accounts used by an organization.

Review Questions

  • What are the five main categories of accounts?
  • Why is it important to have a unique identifier for each account?
  • How does the double-entry accounting system utilize accounts?
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