Types of Accounts- Traditional and Modern Classification

Topics: Asset, Balance sheet, Debt Pages: 2 (260 words) Published: August 28, 2013
Traditionally Accounts were of 3 type:-
1. Personal Accounts- All individual & artificial accounts. Individual accounts like Ram's a/c, Rakesh's a/c. Artificial A/cs like M/s Sultan chand's a/c, HDFC Bank's a/c etc. and outstanding and prepaid accounts fall under this. Rule- Dr. the receiver

Cr. the giver
2. Real Accounts- All assets, tangible & intangible come under this. Tangible assets like land & building, plant & machinery, furniture etc. and Intangible assets like goodwill, patents, trademarks etc. Rule- Dr. what comes in

Cr. what goes out
3. Nominal Accounts- All expenses, losses, incomes and gains come under this. Rent, wages, salaries, interest, bad debts etc. are some examples. Rule- Dr. all expenses & losses
Cr. all incomes& gains

As per modern approach Accounts are of 5 types:-
1. Assets A/c- All tangible & intangible assets.
Rule- Dr. the increase
Cr. the decrease
2. Liabilities A/c- deals with the financial obligations of the firm. examples- long term loans, creditors, o/s expenses etc. Rule- Dr. the decrease
Cr. the increase
3. Capital A/c- deals with the account of the owner of the company. Rule- Dr. the decrease
Cr. the increase
4. Revenue A/c- deals with the amount charged for the goods sold or services rendered and other incomes. examples- dividend rec. royalty rec. sales a/c etc. Rule- Dr. the decrease
Cr. the Increase
5. Expenses A/c- deals with the expenses incurred in the process of earning revenue. examples- purchase a/c, discount allowed, loss by fire etc. Rule- Dr. the increase
Cr. the decrease.
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