The Correct Definition Of An "Account" Includes Which Of The Following?

The correct option of this multiple choice question (mcq) is option B as it represents the correct definition of an Account. Basically, there are five types of accounts Assets, Liabilities, Equity, Revenues and Expenses. In fact, the whole accounting system is starting with the recording of Business Transactions in which these accounts involved. It shows the increase and decrease in assets, liabilities, equity, revenues and expenses of a business in the accounting period. For example, if Mr. A started business cash $1,000, then in this transaction, there are two accounts involved. One is Cash a/c, which is an asset a/c, and other one is capital a/c, which comes under owner’s equity a/c. Cash a/c shows increases of $1,000 and capital a/c also shows increases of $1,000.

The increase and decrease in an account show the debit and credit in T-Account according to the Rules of Debit And Credit. The increase and decrease in Assets and Expenses indicate debits and credits and the increase and decrease in Liabilities, Equity and Revenues shows credits and debits in their respective T-Accounts. For example, if the owner made initial investment of $5,000 to start a retail business, then we debit cash account and credit capital account as both of these accounts are increasing i.e., cash is coming into the business and owner’s investment is also coming into the business.

Accounts are shown in journal, ledgers, trial balance, income statement, balance sheet, statement of retained earnings and cash flows statement. These are also shown on Charts of Accounts.

The option A and C are incorrect as these show source documents (receipt & purchase order) which are used to support business transactions.

The option D is also wrong option here a bank report as it is just a summary of transactions related to checks / cheques written and deposited to reconcile these transactions with bank statement but not represent an account.