Understanding the term ACCOUNT and its various statements

Abbreviations

1. SOM - Statement of Movements
2. SOOI - Statement of Outstanding Items
3. OBJ - Opening Balance Journal

What does the term ACCOUNT mean?

Firstly an ACCOUNT is an idea and not a thing. It is:

1. An idea - a line on a chart
2. A balance that represents the debt between two companies

There is a real thing called statement of account, of which there are two kinds - Statement of outstanding items and Statement of movements.

Two important aspects:

1. Account HAS a statement
2. Account IS a balance

How many types of ACCOUNTS can be there?

Two types:

1. Open Item Account - which is a balance at a point of time for which you can obtain a SOM or SOOI. Open Item Account has everything the Balance Forward Account has.
2. Balance Forward Account - which is a balance at a point of time for which you can obtain a SOM.

What does the SOM contain?

1. Opening Balance (may be zero also) at a point of time
2. List of Transactions
3. Closing Balance at a point of time

What does the SOOI contain?

1. List of Outstanding Items / Transactions

How does an Opening Balance Journal affect the SOM?

An OBJ will amend / create an opening balance line in the SOM of either Open Item Account or Brought Forward Account

How does an Opening Balance Journal (OBJ) appear in an Open Item Account?

1. Statement of movement: An OBJ will amend / create an opening balance line in the SOM of an Open Item Account.
2. Statement of Outstanding Items: An OBJ will show as an outstanding item in the SOOI.

How does an Opening Balance Journal (OBJ) appear in a Brought Forward Account?

1. Statement of movement: An OBJ will amend / create an opening balance line in the SOM of a Brought Forward Account.