ACCOUNT

DEFINITION OF ACCOUNTS

An account is a formal record, in the ledger, of all transactions relating to changes in particular item. It is a Used to convey information on transaction.

Classification of Accounts

Accounts can be classified in two ways: (a) Traditional Classification; (b) Modern classification.

TRADITIONAL CLASSIFICATION OF ACCOUNTS

The three types of accounts maintained for transactions with parties are as follows.

1.Real Accounts: They are the accounts of all assets used in the business or belonging to the business. Rule of Real Account is Debit what comes in credit what goes out.

2.Personal Accounts: They are the accounts of the all natural and artificial persons.Rule of personal Account is Debit the receiver credit the giver.

3.Nominal Accounts: They are the accounts of the all income and expenses and gains and losses suffered in business. Rule of Nominal Account is Debit all expenses and losses Credit all incomes & gains.