Account Definition, Meaning and Example
Account Definition – “A record of a transaction which involves receiving and paying of money”
The word account is used differently in the different scenario. In accounting the word ‘account’ means record of receiving and payment of money. The account consists of two parts one is debit and other is credit. Payment of money records in debit side whereas receiving of money records in credit side. To be precise, account refers to the record of all the financial transaction that takes place in an organisation.
On the other hand, account also means the record of the customer relationship. So, whenever a credit purchase or sale is made it is records as accounts payable. Similarly the credit sale is records as account receivable. So in financial accounting, account not only concern with recording transaction that involves cash but also records transaction that establishes a relationship with customer.
Account Example
To get a more clear picture of account definition, let’s discuss an example –
Case 1 – A purchases goods of Rs. 10,000 from XYZ company. The transaction will record as –
Purchase A/c Debit……………………………………………………………………………………….10,000
To XYZ company …………………………………………………………………………………………………………10,000
Case 2 – B sold goods of Rs 5,000 to Shyam on cash. The entry of the transaction in the account will be
Cash A/c Dr. ……………………………………………………………………………………..5,000
To Shyam …………………………………………………………………………………………………………………5,000
