How to tell the difference between an Account and a Contact
It is important that you select the correct action that is specific to the record you are required to create.
Accounts - Companies and Organizations
Contacts - Individuals that work for companies and organizations, or sole traders and private individuals.
The easiest way to make sure you are adding a the correct record is to look at the window name located in the top left hand corner of the open dialogue box, and check the Class field.
The add contact window also has two separate fields for the first and last name, opposed to an account which only has one field for the name.