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The Account

Each time a business performs a transaction, a change is made in one or more elements of the equation "assets equal liabilities plus proprietorship." Regardless of the number of transactions, the results of all changes must be ascertained in order to prepare an accurate balance sheet and an accurate income statement at the end of the fiscal period. To accomplish this, each transaction must be recorded as it occurs. The account is the method used to record these individual transactions, and it is from this word that the subject of accounting receives its name.

The Account Record

The account is the record of each item entered on the balance sheet and on the income statement—that is, the increases and decreases that occur. In its simplest form, the account provides (1) the name of the customer, (2) transactions decreasing the amount of proprietorship, and (3) transactions increasing the amount of the same item.


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