In accounting, account titles are the names given to the various categories used to keep track of a businesses finances. For any and every transaction, these accounts are updated to reflect what happened in an organized and consistent manner.
The account titles are found on the business’ general ledger, which is a running list of all these transactions. When compiled by an accountant, the general ledger accounts combine to form the company’s financial statements.
For example, let’s say a business pays cash to buy new inventory from its suppliers. The bookkeeper credits (adds) the inventory account on the general ledger for the cost of that new inventory. That updates the books to show that new inventory has been purchased and is now owned by the company.
Likewise, the accountant will debit (subtract) the same amount from the cash account on the general ledger. That indicates that the company paid for the new inventory with cash, and therefore, the company’s cash balance has decreased by the cost of the new inventory.
There are a near endless possibility of account titles used by the millions of business around the world. However, we can consolidate that list to the most common accounts, which are organized below by each’s location on the financial statements.
Common Account Titles: Income Statement
Common Account Titles: Balance Sheet
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