What is a Book Account?

A book account is a record kept by a company or business pertaining to a specific customer over a period of time. This record contains all of the payments made, also known as credits, and the ones that are still outstanding, also known as debits, from the customer. The reason that a book account is necessary is that a business must be able to keep track of all of the money it is still owed, and it must be able to make sure those who owe the business don't get away with not paying. If there is a default from a particular customer, the business can present a detailed list of what that customer owes, also known as an account statement.

No matter the size of a business, it usually depends on prompt payment from however many customers it happens to serve. The list of these payments can become too overwhelming if all of the transactions with all of the disparate customers were regarded together. It makes more sense for a business to split the transactions up into individual records for each customer. A book account details all of the money received from an individual customer along with whatever is still owed.

Many business payments come in the form of credit, which occurs when a customer receives the goods or services from a business and then makes the payment at some date in the future. Depending on the size of the business, its daily operating expenses, and the reliability of the customer, credit arrangements can span several months or even longer. Keeping a book account on each individual customer allows a business to keep track of all of these different credit arrangements.

In a book account, the creditor is the business who has provided the goods or services and is owed money. The debtor is the person or entity that has received the goods or services and now owes payment to the creditor. Customers' accounts are represented by credits, which are payments that they have already made, and debits, which are payments still outstanding.

Proper bookkeeping can prevent a business from having to endure delinquent accounts. If a debtor holds out payment for too long a time, a business may present him with an account statement. This is derived from the book account and can take the form of a bill for monies owed or an invoice that details all of the pertinent transactions. Once an account statement is offered to the debtor, she must make the necessary payments or suffer the repercussions, which can include the business refusing to serve her any longer or even instigating legal action.