There are many different account types depending on a person's financial needs. Account types refers to the particular purpose or structure of a financial account. There are distinctions between accounts in the business world as well as in the personal financial world.
In the business world, two major account types are accounts payable and accounts receivable. Accounts payable refers to money a company owes to suppliers, staff and others to whom payments are due. For example, if a company buys material A to manufacture its end product and has not paid for material A yet, the debt owed to the company that produces material A would be listed on accounts receivable. Accounts payable, on the other hand, is a list of money owed to the company by customers and others to whom the company has extended credit.
In the world of personal finance, when the term account types is used, it usually refers to the particular nature or type of account an individual has opened up. Checking accounts and savings accounts are two major types of accounts, each of which serve different purposes. Brokerage accounts and retirement accounts are also types of accounts commonly referred to and which have importance in the personal finance world.
Checking accounts and savings accounts may be held with the same bank and may be linked to each other, although they are different account types. The purpose of a checking account is to hold money meant to be spent or used to pay bills. An individual may have his paycheck deposited into his checking account and may then draw from that money to pay his bills and living expenses. Checks can be written, automatic payments issued, and a debit card linked to this type of account.
A savings account, on the other hand, is designed to save money for a long-term goal or purpose. Usually, there is a limit to the number of withdrawals that can be made from a savings account on a monthly or annual basis. No checks can be written, and there is no debit card to withdrawal money, so a person usually must go to the bank or make a special request to take money from a savings account.
Retirement accounts and brokerage accounts, on the other hand, are account types used to hold money that is meant to be invested and/or meant to be used to save for the long-term future. Brokerage accounts can be managed by stock brokers who help a person invest money or can be managed by the investor himself. Retirement accounts as well may be managed by an employer, such as a 401(k), or may be opened by the investor in the form of an individual retirement account (IRA).
