Accounting Classification of Accounts - Accounting Basics

How accounts are classified in Accounting?

The accounts are broadly classified into three categories:

  • Personal accounts
  • Real accounts
    • Tangible accounts
    • Intangible accounts
  • Nominal Accounts

Personal Accounts

Personal accounts are classified into different categories as follows:

Natural Personal Account

The account that is related to any individual such as Shyam, Ram, Sheela is called as a Natural Personal Account.

Artificial Personal Account

The account that is related to artificial person such as M/s ABC Ltd, M/s General Trading, etc is called as Artificial Personal Account.

Representative Personal Account

A group of accounts is represented by Representative Personal account. Similar nature of accounts can be grouped such as salary payable account, rent payable account, insurance prepaid account etc.

Real Accounts

Each asset of a business has a account and the asset account is known as a Real account. Real accounts are of two types:

  • Tangible assets are those which can be touched and felt such as plant, machinery, furniture, stock, cash, etc.
  • Intangible assets are those which cannot be touched such as goodwill, patent, copyrights, etc.

For both types of assets, the accounting treatment is the same.

Nominal Accounts

The account which does not represent any tangible asset is known as nominal or fictitious account. Accounts such as expense account, loss account, gain account or income account are considered as nominal account. For instance, salary account, rent account, interest income account, etc.

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