In previous post we discussed about Object ,Importance and utility of book-keeping
we have seen whatever the size of business may be, every business has dealing with...
a) Persons or Institutions
b) property or things and;
c) Services or uses i.e. expenses and income .
Thus all the transactions of any business are in report of these three elements only and hence account are also classified into three categories..
1) Personal Account
2) Real Account
3) Nominal Account
1) Personal Account -
Accounts representing persons, firms, Companies, Associations, Clubs or any other institutions. with whom the business deals are called personal accounts.
Personals accounts may be classified as under....
a) Natural persons Account-
Account relating to human beings such as Patil, shaikh, Pathan, Dethe, Kulkarni etc.
b) Artificial persons and body of persons accounts -
Account relating to deity , company, firm, co-operative society, bank, school, club etc.
c) Representative Personal Account-
These account represent persons . However instead of opening individual account of each person , the amounts due to various parties are grouped under the same head of expense or income . i.e. Salaries due to numbers of workers but not paid is shown under the heading 'Outstanding salaries Account '. Similarly interest due to business from various parties but not received is shown under the heading 'Outstanding interest account . thus outstanding salaries A/C or outstanding Interest account is a representative account. Similarly income received in Advance a/c or expenses prepaid A/c is a representative personal account.
2) Real account-
Accounts relating to various classes , properties or thing or possessions, such as building , furniture , machinery , goods , cash etc are called real accounts.
This accounts called real accounts because they represent something really existing i.e. some tangible things, (however, accounts of some tangible assets like goodwill, trade marks, copyrights also come under this category.)
3) Nominal Accounts -
Accounts representing expenses /losses and income gain such as salaries, rent , commission, interest, discount, advertisement. etc are called nominal accounts.
The nominal accounts are so called , as opposed to real, accounts because they exist in name only and they don't represent any tangible thin.They represent only services or uses or something intangible. In the case of nominal accounts no tangible thing or property exchanged. for money or other tangible thing . If a book is purchased a book e.g tangible thing is received in exchange of money/ cash. But if rent paid no tangible thing is received in exchange of cash. similarly if interest is received i.e cash is received for interest no tangible thing is required to be given in return . In the first case cash is received for use of our money by the other party.
As opposed to personal accounts , real accounts, and nominal accounts together are called impersonal accounts. The classification of accounts can be shown by way of chart as under...