DEFINITION of Absorbed Account

An absorbed account is an account that has been combined with or that has been merged into another related account. Accounts are often absorbed into existing accounts as a way of simplifying the accounting process. Accounts for similar items under the same line of business can be easily combined. Once an account has been absorbed the original account will cease to exist, although a paper trail will remain to show how funds have been moved.

BREAKING DOWN Absorbed Account

An absorbed account is an account that is merged with another account to simplify the accounting process. Accounts are simply a way for a company or individual to separate finances into manageable categories, so it is not surprising that a separation or category that made sense at one time can become obsolete. When this happens, the obsolete account is absorbed into an area where it fits better. Rather than being a unique account, the absorbed account is combined with another existing account. When this is done at a business, the accountant or bookkeeper records and reconciles the changes.