CLASSIFICATION OF ACCOUNTS

Accounting is the art of recording, classifying and summarizing transactions and interpreting the results thereof.

To understanding accounting properly, it is necessary to know first, the different types of Accounts.

Classification of Accounts

1) Personal Accounts
These are the accounts which relate to persons, such as Customers Account, Suppliers Account etc. Personal accounts include both real accounts (Human beings) and artificial persons (Bank, Company etc)

2) Impersonal Accounts
Accounts which are not personal are called impersonal accounts. These can be further sub-divided into two categories: Real Accounts and Nominal Accounts.

Real Accounts
These can be tangible (i.e. can be touched and seen) or intangible (i.e. cannot be touched and seen). As a result they are further divided into:

Tangible Real Accounts. These accounts relate to things that can be touched, felt, measured etc. such as Cash Account.

Intangible Real Accounts. These accounts relate to things that cannot be touched but can be measured in terms of money, such as a Patents Account.

Nominal Accounts
These accounts deal with expenses and losses, incomes and gains. They explain the nature of the transactions i.e. whether the particular transaction will result in an expense/loss or in an income/gain.