What is an 'Account'

In banking, an account refers to an arrangement by which an organization, typically a financial institution such as a bank or credit union, accepts a customer's financial assets and holds them on behalf of the customer at his or her discretion. Types of accounts include savings accounts, which are designed to help customers accumulate liquid assets; checking accounts, which make it easier for customers to use liquid assets to pay debts and buy goods and services; and retirement accounts, which allow customers to earn higher interest rates on money saved for old age.

"Account" can also refer to a statement summarizing the record of transactions in the form of credits, debits, accruals and adjustments that have occurred and have an effect on an asset, equity, liability, or past, present or future revenue.

BREAKING DOWN 'Account'

The Knights Templar were the first to hold assets on behalf of others and make loans on those assets. As such, the Knights Templar are credited with creating the foundations of today's banking system. Accounts were first created so that people could borrow to travel to the Holy Land, and hold and amass wealth that was often stolen during the Crusades.

Today, people open transaction (checking), savings and other bank accounts in order to more securely manage liquid assets, as assets held in accounts with a financial institution are less vulnerable to theft than cash and are insured by the Federal Deposit Insurance Corporation (FDIC) in the United States. Bank accounts allow holders to write checks or use debit or ATM cards to make purchases and cash withdrawals against the balance in the account.

Many people also use credit accounts to borrow money for purchases major and minor. Common credit accounts include revolving credit accounts, like credit cards and lines of credit, and installment loan accounts like car loans or mortgages. Financial institutions charge account holders interest for the privilege of borrowing money in this manner.

Account Statements

This statement of transactions is the record of the growth and development, or the shrinking and amortization, of almost anything quantifiable. Financial institutions issue account statements to holders on a regular basis; these contain a summary of debits and credits within a given statement period. Countries, corporations and other entities use financial accounts, current accounts, capital accounts and others to measure and track payments, transfers, trade and assets of all kinds, including liquid assets, trademarks, drilling rights, intellectual property, goods produced and more.

RELATED TERMS
  1. Account Statement

    An account statement is a periodic summary of account activity ...
  2. Account Balance

    An account balance is the amount of money in a financial repository, ...
  3. Accounting

    Accounting is the systematic and comprehensive recording of financial ...
  4. Account Activity

    Account activity generically applies to whenever a movement of ...
  5. Linked Savings Account

    A linked savings account is a savings account that is connected ...
  6. Bank Statement

    A bank statement is a record summarizing all transactions in ...
Related Articles
  1. Personal Finance

    Handling High-Yield Savings Accounts

    Is a high-yield savings account right for you? Read on to find out what they have to offer.
  2. Small Business

    Best Checking Accounts For Small Businesses

    What you need to know to choose the best checking account for your small business – and where to look.
  3. Personal Finance

    What Else Banks Can Help With (Besides Banking)

    As competition increases and technology advances, banks, credit unions and savings institutions are offering more services intended to attract customers.
  4. Personal Finance

    Accountant: Job Description & Average Salary

    Discover what the job description of an accountant entails, along with education and training, salary and skills necessary for success.
  5. Investing

    What is Accounting?

    Accounting is the recording of financial transactions of a business or organization. It also includes the process of summarizing, analyzing and reporting these transactions in financial statements.
  6. Investing

    Best Checking Accounts for Small Businesses

    Accounts with big banks offer frills, such as mobile and text-based banking but for smaller businesses, local banks and credit unions can save money.
  7. Personal Finance

    4 Personal Financial Tips for Young Professionals

    Young professionals should consider these four tips to establish a solid financial foundation.
  8. Personal Finance

    10 Bank Promotions That Pay You to Open an Account

    Find out which banks are running cash promotions and will pay you just for opening a new account.
  9. Personal Finance

    Best Checking Accounts For Couples

    Being a couple, especially if you both have jobs, can help you qualify for benefits and fee waivers that would be tougher to get on just one salary.
RELATED FAQS
  1. How liquid are money market accounts?

    Understand the characteristics that distinguish money market accounts from checking, savings account and money market funds ... Read Answer >>
  2. What is the difference between the current account and the capital account?

    Learn how to differentiate between the capital account and the current account, the two components of the balance of payments ... Read Answer >>
  3. What's the difference between the current account and the capital account?

    Both accounts relate to the balance of payments of a nation. One considers goods and services currently produced, the other ... Read Answer >>
Trading Center