The object of book keeping is to keep a complete of all this transaction that place in the business. To achieve this object, business transaction have been classified into three categories.
1. Transactions relating to persons.
2. Transactions relating to properties and assets.
3. Transactions relating to income and expenses.
The accounts falling under the first heading are known as personal accounts. The accounts falling under the second heading are known as real accounts. The accounts falling under third heading are called nominal accounts. The accounts can also be classified as personal and impersonal.
1. Personal accounts
Accounts recording transaction with a person or group of persons are known as personal accounts. Theses accounts are necessary, in particular, to record credit transaction. Personal accounts are of the following types.
A. Natural persons
An account recording transactions with an individual human being is termed as a natural persons personal account. Eg. Kamal's account, mala's account.
B. Artificial or legal persons
An account recording financial transaction with an artificial person created by law or otherwise us termed as an artificial person, personal account, eg firms accounts
C. Groups/ representative personal accounts
An account indirectly representing a person or persons is known as representative personal accounts. When accounts are of similar nature and their number is large, it is better to group them under one head and open a representative personal accounts.
The rule for personal accounts
Debit the receiver
Credit the giver
2. Real accounts
Accounts relating to properties or assets are know as real accounts. A separate account is maintained for each asset. Eg. Cash machinery, buliding etc. Real accounts can be further classified into tangible and intangible.
A. Tangible real accounts
These accounts represent assets and properties which can be seen, touched, felt, measured, purchased, and sold eg machinery account cash account, furniture account.
B. Intangible real accounts
These accounts represent assets and properties which can not be seen touched or felt but they can be measured in terms of money. Eg. Goodwill accounts, patents account.
The rule for real accounts
Debit what comes in
Credit what goes out
3. Nominal accounts
Accounts relating to income, revenue, gain expenses and loss are termed as nominal accounts. These accounts are also known as fictitious accounts as they do not represent any tangible asset. A separate account is maintained for each head or expense or loss and gain or income.wages account.
1. Transactions relating to persons.
2. Transactions relating to properties and assets.
3. Transactions relating to income and expenses.
The accounts falling under the first heading are known as personal accounts. The accounts falling under the second heading are known as real accounts. The accounts falling under third heading are called nominal accounts. The accounts can also be classified as personal and impersonal.
1. Personal accounts
Accounts recording transaction with a person or group of persons are known as personal accounts. Theses accounts are necessary, in particular, to record credit transaction. Personal accounts are of the following types.
A. Natural persons
An account recording transactions with an individual human being is termed as a natural persons personal account. Eg. Kamal's account, mala's account.
B. Artificial or legal persons
An account recording financial transaction with an artificial person created by law or otherwise us termed as an artificial person, personal account, eg firms accounts
C. Groups/ representative personal accounts
An account indirectly representing a person or persons is known as representative personal accounts. When accounts are of similar nature and their number is large, it is better to group them under one head and open a representative personal accounts.
The rule for personal accounts
Debit the receiver
Credit the giver
2. Real accounts
Accounts relating to properties or assets are know as real accounts. A separate account is maintained for each asset. Eg. Cash machinery, buliding etc. Real accounts can be further classified into tangible and intangible.
A. Tangible real accounts
These accounts represent assets and properties which can be seen, touched, felt, measured, purchased, and sold eg machinery account cash account, furniture account.
B. Intangible real accounts
These accounts represent assets and properties which can not be seen touched or felt but they can be measured in terms of money. Eg. Goodwill accounts, patents account.
The rule for real accounts
Debit what comes in
Credit what goes out
3. Nominal accounts
Accounts relating to income, revenue, gain expenses and loss are termed as nominal accounts. These accounts are also known as fictitious accounts as they do not represent any tangible asset. A separate account is maintained for each head or expense or loss and gain or income.wages account.
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