- Accounting Basics Tutorial
- Accounting - Home
- Accounting - Overview
- Accounting - Process
- Accounting - Basic Concepts
- Accounting - Conventions
- Accounting - Accounts' Classification
- Accounting - Systems
- Financial Accounting
- Financial Accounting - Journal
- Financial Accounting - Ledger
- Financial Accounting - Books
- Financial Accounting - Depreciation
- Cost Accounting
- Cost Accounting - Introduction
- Cost Accounting - Advantages
- Cost Accounting - vs. Financial A/c
- Cost Accounting - Cost Classification
- Cost Accounting - Elements of Cost
- Cost Accounting - Cost Sheet
- Cost Accounting - Cost Control
- Cost Accounting - Cost Reduction
- Cost Accounting - Budgeting
- Cost Accounting Techniques
- Cost Accounting - Marginal Costing
- Cost Accounting - Standard Costing
- Cost Accounting - Variance Analysis
- Cost Accounting - CVP Analysis
- Management Accounting
- Management A/c - Introduction
- Management A/c - vs. Cost A/c
- Management A/c - vs. Financial A/c
- Management A/c - Cash Flow
- Management A/c - Ratio Analysis
- Management A/c - Useful Ratios
- Management A/c - Working Capital
- Accounting Useful Resources
- Accounting Basics - Quick Guide
- Accounting Basics - Useful Resources
- Selected Reading
- UPSC IAS Exams Notes
- Developer's Best Practices
- Questions and Answers
- Effective Resume Writing
- HR Interview Questions
- Computer Glossary
- Who is Who
Accounting - Classification of Accounts
It is necessary to know the classification of accounts and their treatment in double entry system of accounts. Broadly, the accounts are classified into three categories:
- Personal accounts
- Real accounts
- Tangible accounts
- Intangible accounts
Let us go through them each of them one by one.
Personal accounts may be further classified into three categories:
Natural Personal Account
An account related to any individual like David, George, Ram, or Shyam is called as a Natural Personal Account.
Artificial Personal Account
An 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
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.
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.
Accounting treatment for both type of assets is same.
Since this account does not represent any tangible asset, it is called nominal or fictitious account. All kinds of expense account, loss account, gain account or income accounts come under the category of nominal account. For example, rent account, salary account, electricity expenses account, interest income account, etc.