Meaning and Kinds

The object of bookkeeping is to keep a complete record of all the monetary transactions that take place in business.

Every business holder deals with

1. a number of persons, firms etc..

2. possesses assets like cash, goods, furniture, buildings & etc…

3. Paid Expenses and Income Received: such as salaries, rent, wages  and  income such as commission, discount, etc…

From the above reasons, every business necessary to keep the following accounts.

Personal Accounts:

These include accounts of (a) natural persons in varied capacities like suppliers and buyers and goods, lenders and borrowers of loans, investors of capital, e., (b) legal or notional persons like incorporated companies assuming the status of a banker, insurer, etc., government and semi-government institutions, clubs, association, unions, etc.

Ex.: Natural Persons: Xyz Account, Maharaj Account, etc.

Real Accounts:

Accounts relating to properties or assets are known as ‘Real Accounts’. Every business needs assets such as machinery, furniture, etc., for running its activities. In bookkeeping, a separate account is maintained for each asset. Furniture Account, Machinery Account, Buildings Accounts, etc., are some examples of real accounts. Real accounts can be classified into two. They are:

i. Assets: Assets are meant for use in business, e.g., Land and Buildings, Plant and Machinery, Furniture and Fittings, etc.

ii. Goods: These are meant for resale. The trader buys goods, sells goods, returns defective goods to his suppliers and also receives defective goods from his customers.

Real accounts can also be broadly classified as ‘tangible’ (capable of being seen and touched) and ‘intangible’. Tangible properties are subdivided into ‘physical’ resources like buildings, inventories and ‘non-physical’ resources like securities, accounts receivable. Intangible items may be ‘valuable’ like goodwill, trade mart, etc., which has exchange values, or ‘fictitious’ (worthless) like registration cost of a partnership firm.

Nominal or Fictitious Accounts:

Nominal accounts relate to such items, which exist in name only. These items pertain to expenses and gains like interest, rent, commission, discount, salary, etc. A separate account is opened for each head of expense or income.

An account has two sides, the left hand side is known as ‘Dr.’ or ‘Debit side’ and the right hand side is known as ‘Cr.’ Or ‘Credit side’. The benefits received by the account are recorded on the left hand side and the benefits imparted by the account are recorded on the right hand side.