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Unit 2: Recording of Transactions

while in the summarizing process trial balance and final accounts (P&L A/c and Balance Sheet) Notes
are prepared.

2.1 Classification of Accounts

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 classified into two categories, viz. Real Accounts and Nominal
Accounts.

2.2 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 firm
and the individuals. Personal accounts can be classified into three categories on the basis of
individuals, viz.
1. Persons of Nature
2. Persons of Artificial 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 Artificial Relationship: Persons who are made out of artificial relationship
through legal structure.

Example: Organizations, corporate, partnership firm, 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
firm is totally structured through respective laws.

Example: LIC and SBI

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