Meaning And Types Of Accounts

An account can be defined as a record in a double entry system that is kept for each class of asset, liability, revenue and expenses. The principles of double entry has been adequately explained. The next thing is the application of the system in principal book (ledger).

ALSO READ: Difference between accounting principles and accounting policies

TYPES OR CLASSIFICATION OF ACCOUNTS
Accounts are classified into the following:
  • Personal account
  • Impersonal account.
Meaning And Types Of Accounts?

PERSONAL ACCOUNTS
These are accounts for the names of individuals, firms, and business enterprises e.g Michael account, Lagbaja LTD, Fufu Enterprise, Debtors and creditors account, etc. There are 3 types of personal accounts, they are:
  • Natural personal accounts: Natural personal accounts is the simplest and easiest to understand out of all and includes all of God’s creations who have the ability to deal, who, in most cases, are people. E.g. Kumar’s A/C, Adam’s A/C, etc.
  • Artificial personal accounts:  These are types of Personal accounts which are created artificially by law, examples are corporate bodies and institutions, are called Artificial personal accounts. E.g. Pvt Ltd companies, LLCs, LLPs, clubs, schools, etc.
  • Representative personal accounts: These are types of Accounts which represent a certain person, individual or a group directly or indirectly. E.g. When wages are paid in advance to an employee – a wage prepaid account will be opened in the books of accounts. The wages prepaid account is a representative personal account indirectly linked to the person involved.

IMPERSONAL ACCOUNTS
These are accounts for properties, item of expenditures and income. Impersonal accounts can be divided into two, which are;
  • Real accounts: Real accounts are accounts for something we can see or move around us. They are accounts for assets e.g Land and building account, machinery account, etc.
  • Nominal account: These are accounts for expenses incurred, income received, losses and gains e.g rent account, discount received account, discount allowed account, insurance and interest account, etc.
RULES FOR DEBITING AND CREDITING
  • The account which "receives" is debited with the value that comes into the account.
  • The account which "gives" is credited with the value that goes out of the account. These rules can now be applied to the classes of account.

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