What are Accounts?

Accounts are the financial records of a business. All business transactions are recorded in the accounts, which are then aggregated into the financial statements. The accounts may be examined on an annual basis by auditors, to determine whether an entity's financial statements present fairly its financial results and condition. Depending on the applicable government regulations, a business will probably need to archive its accounts for a number of years, in case there is a tax audit or lawsuit that will require access to the accounts.

Advantages of Accounts

It is essential for a business to have a system of accounts (also known as a general ledger), for the following reasons:

Essential for recordkeeping. Accounts are essential for the proper recordation of business transactions. Without them, there would be no way to organize a jumble of transactions in any meaningful way.
Used to produce financial statements. With a system of accounts, a business can readily aggregate its transactions into a set of financial statements that reveal its financial results, financial position, and cash flows.
Performance measurement. Accounts provide a clear picture of financial performance over time, allowing businesses to measure their growth.