In accounting and bookkeeping an asset account is a general ledger record for sorting and storing the debit and credit amounts from a company's transactions. The balance in an asset account will be part of the amounts reported on a company's balance sheet. For example, a company will likely have an asset account for each of its bank accounts. Therefore, when checking account #1 is opened and when money is received for this bank account, the company will debit the account Cash: Checking Account #1. When a check is written on this account, the account Cash: Checking Account #1 will be credited for the amount of the check.
Generally the asset accounts will have debit balances. Hence, assets such as Cash, Accounts Receivable, Inventory, Prepaid Expenses, Investments, Buildings, Equipment, Vehicles, Goodwill, and more are expected to have debit balances. The debit balances will be increased when the asset accounts are debited, and decreased with a credit entry. An exception is a contra asset account. Contra asset accounts such as Allowance for Doubtful Accounts and Accumulated Depreciation are expected to have credit balances.
Asset accounts are referred to as permanent or real accounts since they are not routinely closed. Instead, an asset account's balance at the end of an accounting year will automatically get carried forward and will be the beginning balance of the next accounting year.
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