Definition of an Asset Account
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. A company will likely have an asset account for each of its resources that were acquired in a transaction. For example, if the company has only one checking account, the account would have been opened when the company made its first deposit. This would have been accomplished with a debit to the account Cash: Checking Account. When a check is written on this account, the account Cash: Checking Account will be credited for the amount of the check. Generally, the balances in the asset accounts will be debit balances.
Examples of Asset Accounts
Some examples of asset accounts include Cash, Accounts Receivable, Inventory, Prepaid Expenses, Investments, Buildings, Equipment, Vehicles, Goodwill, and many more. Their normal 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 Permanent or Real Accounts
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 to become the beginning balance of the next accounting year.