An account is one line of the ledger - a record that gathers all the transactions of a single type and shows their running total. Cash, salary expense and PAYE payable are each an account.
What it means
Accounts are the buckets transactions are sorted into. Each belongs to one of the five types - asset, liability, equity, income or expense - which determines how debits and credits affect its balance. Grouping transactions into accounts is what lets a business see, for example, total wages or total tax owed at a glance.
Where it fits in
Payroll posts to several accounts each run: a salary expense account, the bank account, and liability accounts for PAYE, UIF and net pay. The full set of accounts a business uses is listed in its chart of accounts, and their balances roll up into the general ledger.
Key rules
- A ledger record for one type of item, holding its running balance.
- Belongs to one of five types: asset, liability, equity, income, expense.
- The type sets how debits and credits move the balance.
- Listed in the chart of accounts and summed in the general ledger.
