What is an Account
In Accounting, an account is a record of all relevant business transactions in terms of money. Account consists all the statements by data wise regarding the business transactions as person, companies, representatives, asset & liabilities, income & expenditures, profit & loss . For e.g. cash account, bank account, etc.
Account is a T-Form, generally it looks like letter word “T”, and it can be called as T-account. T account is an appropriate form to analyze the accounts and it shows sides of account i.e. debit side and credit side of an account.
Proforma of a Ledger Account
It is a tradition design and used to post debit amount using prefix “To” with particulars and post credit amount using prefix “By” with particulars.
- An account consists total 8 columns
- It divides into two parts, i.e. left side and right side.
- The left side of an account is used to record debit transactions and it is called as “Debit Side”
- The right side of an account is used to record credit transactions and it is called as “Credit Side”
- The first four columns of left side are used for debit and other four columns are used for credit.
- Every business transaction is record with debit and credit as per rules of accounting.
Column details of an Account
- Date: Date refers to the transaction date / document date of record.
- Particulars: The details in summary/description of debit/credit transaction will be updated in particular
- J.F: The journal folio is a page number of accounting journal from which debit/ credit are done will updated here.
- Amount : Amount of debit updated in debit side and credit amount will be updated in credit side.
Generally account is divided into three types, i.e.
- Real Accounts
- Personal Accounts
- Nominal Accounts
We will discuss in details in other accounting tutorial concepts how to post journal entries in to ledger accounts.