What are accounts?

Accounts are records of information, specifically information on a company’s business transactions. They’re also referred to as a company’s books. That’s why engaging in deliberately dodgy accounting practices is often referred to as ‘cooking the books’. 

Keeping accounts is good business practice. It allows executives to see how well their company is doing, make decisions about things like pricing, and plan ahead. If the books show that lots of profit was made that year, it may make sense to expand the business. If the books show lots of losses, it might instead mean looking for ways to cut back costs with things like layoffs. 

However, most companies are also obliged to keep accounts by governments. That’s because implementing various laws and regulations (rules created by governments or other authorities) requires knowing the sort of information that accounts record. A big example of this is taxes, which are often put on things like profits. Without accounts, a company doesn’t know how much profit they made, so the government doesn’t know how much tax to charge them. 

If you’d like to learn more about what’s in accounts, you can read our explainer on the subject:  What information is included in a company’s accounts?