The term account has several different possible meanings. It is used extensively in the world of business, and also in non-commercial situations. In non-business English it can mean a report or description of something that happened or an experience, as in “his account of what happened during the car chase was amazing.”
In Banking: accounts refer to ongoing financial relationships between customers and their bank, in which debts and deposits are held and processed.
Bank accounts are arrangements that customers have with their bank whereby they may deposit and withdraw funds, and in some cases be paid interest. When online or looking at your ATM screen, the question ‘Do you want to see your account statement’ is asking whether you want to see a list of your recent transactions.
In Accounting: account is a chronological record of changes in value of a company’s, organization’s or any entity’s assets, liabilities, plus the owner’s equity, each of which has entries in separate pages in the ledger.
Account has several meanings: (Top) An arrangement with your bank. (Bottom) An arrangement between a supplier and customer/client. (Right) A ledger in accountancy.
These entries, often called postings, become part of a book of final entry or ledger. Examples of typical financial accounts are accounts receivable, sales, loans, mortgages, PP&E (Property, plant & equipment), wages, payroll, and common stock. When a company’s accounts are inspected, that is called an audit.
In Commerce: an account is a continuing relationship between a supplier (seller) and buyer in which payment for goods or services received is made at a later date – in the UK, USA, Western Europe and most advanced economies typically within 30 days. Large companies and government departments may ask for longer credit terms. In business, customers who have accounts, special relationships, or an arrangement, is called a client.
When you have a new customer, your instinct is to set up an account which offers terms, such as later payment. However, you will probably first check whether the company is reliable, i.e. good for it. You might do this by using the services – which you have to pay for – of a reputable credit agency such as Experian.
You can also write to your customer’s bank manager and ask him or her whether they are good for a specific amount of credit – ask the customer’s permission first. You will receive a letter, which will not directly say a flat ‘Yes’ or ‘No’, but will provide enough subtle information for you to make an informed decision.
According to etymonline.com, the English word account comes from Old French ‘acont’, which came from Latin ‘computare’ and ‘computus’.
Individual people may have a commercial account, as with Amazon.com, your local corner shop (if they deliver newspapers to your home), or maybe a taxi company if, for example, they take your kids to school every day.
Trust is crucial for an account to succeed
The most necessary feature for accounts to exist is trust – both by the customer and supplier. The supplier needs to trust that his or her customer will pay, and mostly on time or not too late, while the customer trusts that the goods or services provided are delivered on time and of good quality.
According to experian.co.uk, an entity’s business credit score is a number typically between zero and 100 – the higher the number the lower the risk. The following factors are taken into account when calculating a firm’s or other entity’s business score:
– How much is currently owed to other businesses or accounts.
– Payment history. Any late payments on account to which money is still owed will be recorded and will probably lower the credit score. A late-payment pattern may also be bad for the score.
– Information available from public records such as court judgments and bankruptcies.
– Credit history length. A credit history of just 3 months will bring the credit score down, compared to one 10 years long, even if in both cases bills are paid on time.
A business account may be a bank account for a company or trading individual, or a commercial account between seller and buyer.
Verb ‘To Account’
As a verb ‘to account has several different meanings:
– Consider or regard in a specific way: as in “His intervention could not be accounted a success.”
– To give an explanation: “How do you account for the accident?” (followed by ‘for’)
– To cause: as in “The slippery road accounted for the rise in accidents yesterday.” (followed by ‘for’)
– To impute or assign: as in “The many virtues accounted to her.” (followed by ‘to’)
Video – What is an account?
This video, with a synthetic voice narrative, explains clearly and slowly all the meanings of the word ‘account’.