TOPIC 3: CLASSIFICATION OF ACCOUNTS | B/KEEPING FORM 1
Classification of Accounts
- Personal accounts
- Impersonal
- Real accounts
- Tangible accounts
- Intangible accounts
Difference between Personal and Impersonal Account
Differentiate between personal and impersonal accounts
account related to any artificial person like M/s ABC Ltd, M/s General
Trading, M/s Reliance Industries, etc., is called as an Artificial Personal Account.
Representative
personal account represents a group of account. If there are a number
of accounts of similar nature, it is better to group them like salary
payable account, rent payable account, insurance prepaid account,
interest receivable account, capital account and drawing account, etc.
Identify the possessions of the business
Every
Business has some assets and every asset has an account. Thus, asset
account is called a real account. There are two type of assets:
- Tangible assets are touchable assets such as plant, machinery, furniture, stock, cash, etc
- Intangible assets are non-touchable assets such as goodwill, patent, copyrights, etc.
Nominal Accounts
A debtor
is an entity or person that owes money to another party. Thus, there is
a creditor and a debtor in every lending arrangement. The relationship
between a debtor and a creditor is crucial to the extension of credit
between parties and the related transfer of assets and settlement of
liabilities.
