Final answer:
A running balance account is a ledger with an additional column for the real-time ending balance of an account after each transaction. It provides an immediate view of the current account balance, unlike the traditional T-account that separates debits and credits without a running balance.
Step-by-step explanation:
The account being described is a type of ledger known as a running balance account, which is a more detailed version of the traditional T-account. Unlike the standard T-account, which is used to record debits and credits in separate columns without automatically calculating a running balance, a running balance account adds an additional column for the ending balance after each transaction. This setup provides a quick reference for the account's balance at any given point, making it easier to track financial movements.
Oftentimes, balance sheets utilize a two-column T-account format to represent assets and liabilities. This traditional method, while effective for certain purposes, does not offer the continuous balance tracking that a running balance account does. In practice, a running balance ledger might be used in various financial contexts, including business bookkeeping and personal finance management, where real-time balance information is advantageous.
To illustrate, consider a hypothetical business where entries for each transaction, such as sales (credits) and expenses (debits), are made into the account. After each entry, the ending balance is calculated and noted in the far column, so the business owner can see the current account balance immediately following the transaction. This contrasts with the standard T-account approach, where one would need to sum up the entries in the debit and credit columns to determine the account balance.