Page 19 - DCOM101_FINANCIAL_ACCOUNTING_I
P. 19

Unit 2: Double Entry System




          8.   Possibility of comparative study: Under this system, it is possible to prepare comparative   Notes
               statement and also compare the previous year’s results with the current year’s result and
               take corrective steps as and when necessary to improve the operational results.
          9.   Reliable information: Under this system information received is reliable.


          2.3 Classification of Accounts

          Before knowing about the journal entries and ledger posting we should know about the different

          types of accounts and their accounting treatment. For classification, the entire process of
          accounting brought under three major segments; which are broadly grouped into two categories,
          viz. Personal accounts and Impersonal Accounts. The Impersonal accounts are further classifi ed
          into two categories, viz. Real accounts and Nominal accounts.


                                           Accounts


                           Personal Accounts             Impersonal Accounts



                Persons      Persons of     Persons of
                of Nature  Law Relationship  Representations   Real Accounts  Nominal Accounts



          2.3.1 Personal Account

          It is an account which deals with a due balance either to or from these individuals on a particular

          period. It is an account that normally reveals the outstanding balance of the firm to individuals.
                Examples:  1.  Outstanding balance to suppliers
                         2.  Outstanding balance from customers.

          This is the only account which emphasizes the future relationship in between the business fi rm

          and the individuals. Personal accounts can be classified into three categories on the basis of
          individuals, viz.
          1.   Persons of nature
          2.   Persons of artifi cial relationship
          3.   Persons of representations
          Let us understand each of them one by one.
          1.   Persons of Nature: Persons who are nothing but outcome of nature i.e. almighty
          2.   Persons of Artifi cial  Relationship: Persons who are made out of artifi cial  relationship
               through legal structure.


                 Example:  Organizations, corporate, partnership fi rm, etc.
               The companies and partnership firm are governed by the Companies Act, 1956 and the

               partnership act. The relationship among the owners of the company or partners of the fi rm
               is totally structured through respective laws.

                 Example:  LIC and SBI




                                           LOVELY PROFESSIONAL UNIVERSITY                                    13
   14   15   16   17   18   19   20   21   22   23   24