What About Journal
Transactions of a business can be classified into the following three categories:
Transactions relating to persons or individuals – Personal accounts;
Transactions relating to property, assets or possessions Real accounts;
Transactions relating to incomes and expenses- Nominal accounts;
Real and nominal accounts are categorized as impersonal accounts.
Personal Accounts
Personal accounts record the dealings of a trader
with persons or firms. A separate account is opened for each such person or firm for recording transactions. The account of each person or firm is debited when it receives any benefit and is credited with any benefit such person or firm imparts.), For Example, Proprietor’s account, Suppliers’ accounts, receivers’ accounts (like Mohan’s A/c), bank account, any firm’s account, any government’s account, any institution’s account, Unexpired insurance account, Rent prepaid account, etc.
Real Accounts
The real accounts represent items which are more or less permanent. It deals with property, assets and possessions. A separate account is kept for each class of property such as furniture, cash, equipment, machinery etc. so that by recording particulars of each asset received or given away, the businessman can find value of each asset on hand on any particular date. For example, Accounts of things which can be touched, felt, measured, purchased, sold etc. like land account, building account, furniture account etc and also accounts of things which are difficult to touch in the physical sense but can be measured like: Goodwill, Trademarks and patent rights.
Nominal Accounts
They are used to define the nature of transactions
expenses and gains of traders. For Example if in a factory the manager gets salary, the commission agents get commission, the worker gets wages, in fact they all get cash. Cash is the real thing which exists and salary, commission,
wages etc., are only ways of describing the nature of head for which cash has been paid.
Thus, a separate account is opened for each head of expenditure or income such as rent, salaries, commission, cartage, etc. Each such account is debited when an expense or loss is incurred and is credited when there is any gain.
