Account and Account Titles

What is an "ACCOUNT"?

When we hear the word "account" in accounting, it refers to a device being used in referring or representing a summarized group of similar values (whether received or parted with) of relatively one item only.

Meaning, say when we received or parted with a coin, paper money, bank draft, checks, money orders, or similar items, we refer them as one item only.  We group and summarize the amounts of these similar values and we represent them by one account name or account title -- cash (or cash and cash equivalents). 

What is an "ACCOUNT TITLE"?

To reiterate, an account title is the name we assign to a group of similar values of relatively one item only. In other words, we use the account title in grouping and summarizing the amounts of relatively similar values.  

However, it is important to note that the account title is unique to a business.  That we don't just give a name to an account title but we look at the chart of accounts of the entity and find the account title the business assigned to groups of similar values.  And, such naming, assigning or identification of accounts are normally explained or enumerated in the accounting manuals or policies and procedures manuals of the company.

Giving or Naming an ACCOUNT TITLE to group of relatively similar values.

The Account Title should appropriately and briefly describe the items within that account. 

The following are illustrative examples of assigning an account title to group of similar values of relatively one item only:

• Money like coins, paper money, checks, money orders, bank drafts are described as CASH.
• Chairs, tables, display counters, etc are referred to as FURNITURES & FIXTURES.
• Computers, laptops, adding machines, copiers, etc. may be called as OFFICE EQUIPMENT
• Cars, Vans, SUVs and similar items are represented as SERVICE VEHICLE.
• Amounts collectible from various customers are called ACCOUNTS RECEIVABLE
• Amounts payable to creditors are referred as ACCOUNTS PAYABLE
• Proprietor's contributions whether initial or additional, are the CAPITAL 

Once we assigned an account title to the group of similar values of relatively one item only, such account name is its identified account title forever.  Meaning, in the next transactions relating to cash, we always call them as cash regardless if we received or parted a paper money or checks (or any items belonging to cash account).

Hence, it is important to acquire the skill of recognizing each and every item belonging to an account title. Because it is important that the items inside the account are the items belonging to it.  So a bookkeeper must always refer to the entity's chart of accounts.

Click here to see discussions on CHART OF ACCOUNTS. 

Related topics:

T-Account

Account Form of a General Ledger

Naming or identification of account

A bookkeeper must remember that an Account Name or Account Title is the assigned name or title to a group of values in business transactions which have or bears the same / similar nature, function or character pertaining to one item only.

Meaning, a bookkeeper must assign a name or a title to a grouping of values pertaining to one item only.  Say, a coin, a paper money, checks, bank drafts, or money orders are received or paid. These items pertain to one item only and they are described as Cash. So, assign them the account name or title Cash. In other words, identify them as Cash Account. Other practitioners, uses the account name Cash and Cash Equivalents for Cash Account.  Another example, computers, adding machines, calculators, and filing cabinets pertain to one item only and can be represented as Office Equipment.

This process is called identification of accounts.  The moment an account name or title has already been designated or identified or assigned to a grouping of values, such account becomes identical to the items pertaining to the similar items in the grouping of values.  For instance, the account assigned to cash items becomes known or identified as Cash Account or Cash and Cash Equivalents Account.  Similarly, the account for office equipments becomes identified or known as Office Equipment Account.

The skill or ability to recognize or identify the account name or title of values parted with or values received is a very significant factor in the performance of the work of bookkeeping and accounting. Thus, the bookkeeper must familiarize himself with account names or titles.

Researched by:

Classification of Accounting Elements

Accounting Elements are classified into the following:

• Real Accounts
• Nominal Accounts

Real Accounts 

They are the accounting elements of  Statement of Financial Position and are reported therein, to wit:

• Assets 

• Liabilities

• Equity

They are permanent accounts and are not closed at the end of accounting period. Thus, they are called open accounts.

Nominal Accounts

They are the accounting elements which comprise the Income Statement and they are the following:

• Revenues 

• Expenses

They are called temporary accounts because they are put to a zero balance or are closed at the end of accounting period.

Researched by:

Introduction to Elements of Financial Statements

Accounting Elements and their definition

Financial Statements portray the financial effects of transactions and other events by grouping them into broad classes according to their economic characteristics.

These broad classes are termed the elements of financial statements.

The following are the basic accounting elements mentioned in PAS No. 1:

The elements which directly related to the measurement of financial statements are as follows (Statement of Financial Position elements):

• Assets  – These are any tangible and intangible property owned by the business organization that has a monetary value.

• Liabilities  – These are amounts owed to outside creditors.

• Equity  – It is the residual claim against the assets of the business after the total liabilities are deducted. 

The elements directly related to the measurement of profit are the following (Income Statement elements):

• Revenues  – These are the gross earnings of the business as a result in selling of goods or rendering of services. 

• Expenses  – These are the costs incurred or consumed in the process of producing revenues. Other items of expenses, costs incurred, and/or losses that are directly related to the principal operations of the business.

Classification of Accounting Elements

Statement of Financial Position elements are classified as Real Accounts

While, Income Statement elements are classified as Nominal Accounts

...read more

Examples of Accounting Elements and their definition

Click each accounting elements to read examples and their definition.

• Asset elements and examples

• Liability elements and examples

• Equity elements and examples

• Revenue elements and examples 

• Expense elements and examples

Naming or identifying which account to be used 

A bookkeeper must remember that an Account Name or Account Title is the assigned name or title to a group of values in business transactions which have or bears the same / similar nature, function or character pertaining to one item only.

Meaning, a bookkeeper must assign a name or a title to a grouping of values pertaining to one item only.

Say, a coin, a paper money, checks, bank drafts, or money orders are received or paid. These items pertain to one item only and they are described as Cash. So, assign them the account name or title Cash. In other words, identify them as Cash Account. Other practitioners use the account name Cash and Cash Equivalents for Cash Account.

Another example, computers, adding machines, calculators, and filing cabinets pertain to one item only and can be represented as Office Equipment.

This naming process is called identification of accounts...read more

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