What is the difference between active and passive accounts in accounting?

Business transactions change the assets and liabilities of a company in different ways. To clearly display the various business transactions, they are recorded in accounts. These are fundamentally divided into asset and liability accounts.

The balance sheet provides an overview of the assets and liabilities of a company. For this purpose, the balance sheet is divided into an asset side and a liability side (cf. blog post). Business transactions now continuously change the assets and liabilities of the company. In order not to create a new balance sheet for each business transaction, similar processes are summarized in one balance sheet item. In practice, an account is maintained for each balance sheet item in which the increases and decreases caused by business transactions are recorded. The accounting of increases and decreases follows certain rules, depending on whether the account is on the asset side of the balance sheet (asset account) or on the liability side (liability account).

Opening and closing balance

‍The opening balances come from the opening balance sheet, with which a new accounting period is opened. The new fiscal year begins on January 1st for most companies. The closing balances result from the difference in the individual accounts. They must balance the debit and credit sides and are transferred to the closing balance sheet. The closing balance sheet is like a snapshot of the total assets and liabilities of a company. It is usually prepared at the end of a fiscal year (December 31), but can also be prepared as an interim balance sheet during the year.

From the graphic, it is evident that the accounting rules for asset and liability accounts are mirrored. It is important to note that every business transaction causes a debit and a credit entry. For this reason, the sum of the debit entries also equals the sum of the credit entries.

Typical asset accounts include, for example, cash, bank, postal, movable assets, receivables, or vehicles. On the other hand, loans, creditors, or equity are classic liability accounts.

‍Journal entries

‍In the double-entry bookkeeping system, every business transaction in the company is recorded in two different accounts. To keep track of many business transactions, the individual business transactions are recorded in abbreviated form and in chronological order in the journal with a journal entry. The journal entry is the instruction on which two accounts are affected by the business transaction. First, the account in which the debit entry is made is listed. This is followed by the account where the amount is entered on the credit side. For example, if a customer pays their bill over the internet to the company's bank account, this business transaction leads to the following journal entry (the slash stands for "to"):Bank / Debtor    CHF 350.- (amount)

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