Types or Classification of Accounts/Ledger Accounts

Types/Classification of Ledger Accounts in both the Approaches of Financial Accounting.

Commonly, there are two Accounting Approaches are used in Financial Accounting for classification of Ledger Accounts.

  1. Traditional/British Approach

  2. Accounting Equation/Modern/American Approach

Traditional and Modern Accounting Approach

According to Traditional/British Accounting Approach Ledger Accounts are classified/divided into three types.

  1. Personal Account

  2. Real Account

  3. Nominal Account

Personal Account

Personal Accounts are also sub-divided into three types.

  • Natural Personal Account

  • Artificial Personal Account

  • Representative Personal Account

Natural Personal Accounts are the Accounts of any Individual person such as Ram A/c, Hari A/c, Geeta A/c, Sita A/c, Joseph A/c, James A/c, Anthony A/c, Angel A/c etc. which has no need to declare as a person by any Court of Law. By nature they are considered as person since birth name given by their parent/guardian. 

Artificial Personal Accounts are the Accounts of group of persons which is formed by some individuals/entities for doing a work/business, like Hindu Undivided Family(HUF), Body of Individuals(BOI), Association of Persons(AOP), Partnership Firms, Limited Liability Partnership(LLP) 

    Public Limited Company such as  

    Bharat Petroleum Corporation Limited, Indian Oil Corporation Limited, Bharat Heavy Electricals            Limited,  Tata Steel Limited, Hindustan Unilever Limited, Reliance Industries Limited etc. 

    Private Limited Company such as  

    Parle Products Private Limited, Mahavir Food Products Private Limited, Green Life Private Limited,     Aamir Khan Productions Private Limited etc.

Representative Personal Accounts are the Accounts, which are mentioned to represent any Natural Personal Account/Artificial Personal Account like Outstanding Expenses A/c(Salary Payable A/c,Wages Payable A/c, Telephone Expenses Payable A/c etc.), Prepaid Expenses A/c, Income Tax Payable A/c, GST Payable A/c, VAT Payable A/c, Interest Payable A/c etc.

Real Account

Real Accounts are the Accounts of Assets and Properties such as 

Land and Building, Plant and Machinery, Furniture & Fixtures, Investment, Cash, Inventories(Stock) etc.

Nominal Account

Nominal Accounts are the Accounts of 

Expenses and Losses such as 

Purchases,Salary Paid,Wages Paid,Travelling Expenses,Printing & Stationeries,Advertisement Expenses,Interest Paid,Discount Allowed,Depreciation etc.

Incomes and Gains such as 

Sales, Service Charges Received, Interest Received, Discount Received, Commission Received etc.

According to Accounting Equation/American/Modern Accounting Approach Ledger Accounts are classified/divided into five types.

  1. Asset Account

  2. Liability Account

  3. Capital Account

  4. Income/Revenue Account

  5. Expense/Expenditure Account

Asset Account 

Asset Accounts are the Accounts of 

Fixed Assets : Land and Building,Furniture and Fixture,Plant and Machinery etc.

Current Assets : Cash,Stock,Sundry Debtors,Loans and Advances etc.

Liability Account

Liability Accounts are the Accounts of

Secured Loans : Bank Loans,Loan against Mortgage/Security Deposit etc

Unsecured Loans : Loan from Bank or other person without any Mortgage/Security Deposit

Other Payable : Sundry Creditors,Expenses Payable/Outstanding Expenses,Provision for Income Tax etc.

Capital Account

Capital Accounts are the Accounts of 

Owner/Proprietor/Partner's equity : Amount of Investment by the Owner/Proprietor/Partner

Capital Account is also treated as Liability Account,because it is a payable amount of Business

Income/Revenue Account

Income/Revenue Accounts are the Accounts of 

Sales : Sale of Goods,Sales of Services.

Other Income : Interest Received,Commission Received,Discount Received etc.

Expense/Expenditure Account

Expenses/Expenditure Accounts are the Accounts of

Purchases : Purchase of Goods,Purchase/Receipt of Services.

Other Expenses : Salary & Wages Paid,Bonus,Carriage &Freight,Travelling Expenses etc.

<<Previous | Next >>

Table of Contents

 

Comments

Post a Comment

Popular posts from this blog

Ledger Account and Account Head

Image
Meaning of Ledger Account and Account Head in Financial Accounting with example.  Ledger Account : A ledger Account is a summarized statement of transactions related to a particular Person, Asset/Liability, or Income/Expense for a particular period showing opening and closing balance. A Ledger Account is posted from the Journal Register or Journal Book,commonly in a date wise ascending order. The transaction date of Ledger Account is same as the transaction date of Journal Register. In practical,Accountants omit Recording of Journal Register and post Ledger Account directly from Primary documents like Credit Voucher,Debit Voucher,Purchase Invoice,Sales Invoice,Bank Payment Acknowledgement,Bank deposit slip or Pay-in-slip etc. to avoid more time consumption. Name and Address of the Business Organization is mentioned on the top of the Ledger Account. Below the Name and Address of Organization, Name and Address of other party Ledger Account is mentioned in case of Personal Accounts like S
Read more

Journal in Financial Accounting

Image
Meaning of Journal in Financial Accounting with Example Journal is a first Accounting Record Book,in which all the transactions of a business organization are recorded in chronological or orderly manner i.e ascending date wise order from the primary Accounting documents like Credit Voucher,Debit Voucher,Purchase Invoice,Sales Invoice,Bank Payment Acknowledgement,Bank Deposit Slip or Pay-in-Slip etc. Due to the first entry of Original transactions in Journal, this is also called the "Book of Original Entry" For recording the Journal Book or Journal Register,one has to follow/understand the below mentioned three topics. Types or Classification of Accounts - For details about types of Account click here   Debit and Credit Rule - Click here to know details.  Rules of Double Entry System of Book Keeping - For details about Rules of Double Entry System of Book Keeping click here      Sample format of Journal in Financial Accounting Journal consists of Five Columns Date : This c
Read more

Double Entry System of Book-Keeping in Financial Accounting

Image
What is Double Entry System of Book Keeping in Financial Accounting ? A simple Understanding on Definition/Explanation/Outline/meaning of Double Entry system of Book-keeping in Financial Accounting with example Double Entry System of Book-keeping in Financial Accounting is a system, which means each and every Business Transaction affects or involves at least two Account. One is Debit Account and the other is Credit Account It may be more than two Accounts in a Business Transaction If only two Accounts are found in a transaction one Account will be Debited and the other Account or opposite Account will be Credited. If more than two Accounts are found in a transaction the Debit total amount must be equal to the Credit total Amount. Each and every business transaction in Double entry system of Book-Keeping is based on Traditional Approach and Accounting Equation Approach In both the above approaches, Journal Entry for a particular business transaction is same.           a)    Traditiona
Read more