what is accounts, explain ?
Answers
Numerous transactions take place in business concerns every day. For example, goods are sold to various customers every day, purchases are made from suppliers, cash is paid to creditors and is received from debtors, expenses are paid etc. All these transactions should be properly analyzed and recorded. Again, the concept of double change in a business transaction is important to keep in mind. To record these changes different accounts are maintained in the ledger
Definition and Explanation of Account:
Account is the individual record of an asset, a liability, a revenue, an expense or capital, in a summarized manner. For example, the individual record of sales is 'sales account'. In the same way there are so many accounts which are opened in the ledger like salary account, machinery account, furniture account etc. How many accounts there should be in the ledger of a business? It depends upon the nature and size of the business.
Generally one full page is fixed in the ledger for each account. But it depends, how many times the changes take place in that particular account. Some accounts are very busy accounts like cash account, bank account and sales account. Obviously for such accounts one page for each will not be enough and so, they need more pages in the ledger to be fixed. In some accounts, changes take place only once or twice in a year, so only one page will be enough. e.g. machinery account, capital account, loan account etc.
There are two types of changes that may take place in an account, e.g. either there will be increase or there will be decrease. Take the example of cash (an asset), either there is inflow of cash or there is outflow of cash. To record these two types of changes, every account (a page) is divided in two sides. Increase is recorded on one side and decrease is recorded on the other side.
When a change takes place in an account, either it will be recorded on the left side (debit side) or on the right side (credit side). Amounts recorded on the left side of an account, regardless of the account title, are called debits, and the account is said to be debited. Amounts recorded on the right side of an account are called credits, and the account is said to be credited. Now keeping in mind the concept of double change in every business transactions, we can say that every business transaction affects a minimum of two accounts and every change (in a particular transaction) is recorded in a separate account.