For the purpose of analysis,and record,accounts are broadly classified in two categories which are follows:
- Personal accounts
- Impersonal accounts
1. Personal Accounts:
Personal accounts are those accounts which related to persons or firms with whom the trader deals. ex:customers,suppliers,money lenders,bank and the owner. Business may have many credit transactions with the above persons or firms.A separate account is to be prepared for each of them.
Ex:Rama account,Anand enterprises,state bank of India account,Insurance company account.
2. Impersonal Account:
Accounts which are not related to persons but which affect the business in general are called impersonal accounts.The impersonal accounts are further divided into three types.
- Real accounts
- Nominal accounts
- Valuation accounts.
i. Real accounts:
Real accounts are also called as property or Assets accounts.These accounts are accounts of assets and properties such as land,buildings,plant,furniture,machinery,cash,investments, etc.These assets maybe those in which the trader deals or they may be those with help of which he conducts his business.
ii. Nominal Accounts:
These accounts are also called as fictitious accounts. These are the accounts of incomes,expenses,gain and losses.
ex: wages paid,salaries paid,discount paid,commission received,rent received,purchases etc.
iii. Valuation Accounts:
These are the accounts of provision for depreciation and provision for doubtful debts. When accounts of fixed assets are maintained in the books of account at original cost,to reflect the actual book value of assets,a provision for depreciation account is maintained. In the balance sheet the provision for depreciation is deducted from the original cost of the asset on the assets side. Similarly if the debtors personal accounts are maintained with total amount due, a valuation account namely provision for doubtful debts is required to be maintained. In the balance sheet it is shown as deduction from the sundry debtors on the assets side of balance sheet to reflect the estimated realisable value.