CLASSIFICATION OF ACCOUNT

CLASSIFICATION OF ACCOUNT

1. Personal Account
2. Real Account
3. Nominal Account

1. Personal Account

Personal account recorded the dealings of trader with personal of firms. A separate account is opened for such person or firm for recording transaction. The account of each person on firm is debited when it receiving any benefit and is credited with any loss such person of firm important for example, proprietors account suppliers account. Receivers account bank account any firms account any government account any institution account unexpired insurance account rent prepaid account etc.

Example :- Ram a/c , ABC Pvt. Ltd. a/c , Bank a/c, etc.

2. Real Account

The real account represent item which are more or loss permanents. It deals with property assets and possession. A separate account is kept for each class of property, such as furniture, cash, and equipment. Machinery etc. so that by recording particulars of each asset received or given away. The business man can find value of each asset on hand on any particular date. Example, Account of thing which can be touché felt measured, purchased, sold etc. like land account building account furniture account etc. and also account of thing which are difficult to touch in the physical sense but can be measured like goodwill trademarks and Paden right.

Example :- Building a/c, Furniture a/c, Land a/c, Trademark a/c, Patent a/c, Goodwill a/c.

3. Nominal Account

they are used to define the nature of transaction is expenses and gains of traders. For example if in a factory the manager gate salary the readmission agenda get commission, the worker gets wages in fact they all get cash is the real thing which exists and salary commission, wages etc. are only ways of describing the nature of heads for which cash has been paid. Thus a separate account is opened for each head of expenditure or income such as rant, salaries commission etc. each such account is debited when expense or lass in incurred and is credited when there in any gain.

Example :- Rent a/c, Salary a/c, wages a/c, Interest a/c.

Examples of Different Types of Account

Rules of Debit Credit

Each transaction has two aspects, one aspects is the receiving or the debit aspect another aspect is giving or the credit aspect

Rules of Journal Entries

Personal Account:- Debit the receiver and credit the given.

Exp:- Paid to Mohan Rs. 5000

  Mohan a/c . . . . . . . . Dr.   5000  —-

  To cash a/c         —-     5000

  (Being cash paid to Mohan) 

Real Account:- Debit what comes in and credit what goes out.

Exp: – Purchase machinery Rs. 10,000 

  Machinery a/c   Dr.  10,000  —-

  To Cash  —-      1,000

  (Being machinery purchase for cash)

Nominal Account:- Debit all expenses and loss and credit all income and gains (profit).

Exp:- Paid salary Rs. 2000.

  Salary a/c Dr.  2000            —-

  To Cash  —-          2000

  (Being salary paid)