BALANCED ACCOUNT Meaning and
Definition
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A balanced account refers to a financial record or statement that presents an accurate and fair representation of an individual's or organization's financial transactions and position. It signifies that the debits and credits in an account have been reconciled, ensuring that the total value of entries on both sides is equal.
In bookkeeping, maintaining a balanced account is crucial as it ensures accuracy, integrity, and transparency in financial reporting. It involves meticulous recording and organizing of all monetary inflows and outflows, along with their corresponding classifications, such as assets, liabilities, revenue, and expenses.
To achieve a balanced account, an accountant or bookkeeper undertakes a systematic process of double-entry bookkeeping, where every transaction is recorded in at least two accounts in equal amounts. This method allows for the creation of a balanced equation: assets = liabilities + equity. By following this principle, the accountant ensures that debits and credits are properly allocated within accounts, maintaining equilibrium.
Moreover, a balanced account is an essential foundation for the creation of accurate financial statements, such as the balance sheet, income statement, and cash flow statement. These statements provide crucial information about an entity's financial health, performance, and liquidity. A balanced account contributes to the credibility and reliability of these statements, thereby aiding investors, creditors, and regulators in making informed decisions.
In summary, a balanced account is an accurate representation of financial transactions, ensuring that debits and credits match, and it serves as a reliable basis for creating various financial statements.
Common Misspellings for BALANCED ACCOUNT
- ballance account
- balence account
- valanced account
- nalanced account
- halanced account
- galanced account
- bzlanced account
- bslanced account
- bwlanced account
- bqlanced account
- bakanced account
- bapanced account
- baoanced account
- balznced account
- balsnced account
- balwnced account
- balqnced account
- balabced account
- balamced account
- balajced account
Etymology of BALANCED ACCOUNT
The word "balanced account" is a phrase that combines two distinct words, each with their own etymology.
The term "balanced" comes from the verb "balance", which originated from the Latin word "bilanx" meaning "having two scales". In Latin, "bilanx" was derived from the combination of "bis" meaning "twice" and "lanx" meaning "dish" or "scale". Therefore, the concept of "balancing" refers to the act of comparing and adjusting the weights on both sides of a scale to achieve equilibrium or equality.
The word "account" derives from the Latin noun "computus" meaning "reckoning" or "account". It then evolved into "accounta" in Old French, which later became "account" in Middle English. The term refers to a written or oral record of financial transactions or events.
