Cash Account as a Real Account

Real accounts are those accounts that represent tangible assets or properties that hold monetary value. Cash account is a type of real account that records all the transactions related to cash, including cash received and cash paid. It is considered as one of the most important accounts in accounting as it reflects the liquidity position of a business.

Reasons why Cash Account is a Real Account

1. Tangible Asset: Cash is a tangible asset that a business owns and possesses. It is a physical asset that can be counted, verified, and audited.

2. Monetary Value: Cash holds monetary value, which means it can be exchanged for goods and services. It is a liquid asset that a business can use to meet its short-term obligations.

3. Permanent Account: Cash account is a permanent account, which means it remains open throughout the life of a business. All the transactions related to cash are recorded in this account, and the balance of the account is carried forward to the next accounting period.

Conclusion

In conclusion, a cash account is a real account as it represents a tangible asset that holds monetary value. It is an essential account in accounting that reflects the liquidity position of a business. By keeping track of all the cash transactions, a business can easily manage its cash inflows and outflows and make informed financial decisions.