TYPES OF ACCOUNTS

CLASSIFICATION OF ACCOUNTS

One classification of accounts is done on the basis of Financial Statements.
Accordingly, there may be the following types of accounts.

1) BALANCE SHEET ACCOUNTS which include:

Assets Accounts
Current Assets Accounts
Non-current Assets Accounts

Liabilities Accounts
Current Liabilities Accounts
Non-current Liabilities Accounts

Owners’ Equity Accounts
Share Capital Accounts
Retained Earnings Account

2) PROFIT AND LOSS ACCOUNTS which include:

Revenue / Sale / Income Accounts

Expenses / Cost Accounts


Another classification of accounts is done on the basis of the nature of account.

1) REAL ACCOUNTS

All properties owned by the business are Real Accounts, like Fixed Assets of Buildings, Furniture, and Currents Assets of Stocks.

2) PERSONAL ACCOUNTS

All accounts related to Debtors (Receivable from parties) and Creditors (Payable to parties) and Drawings account of Owners are examples to Personal Accounts.

Therefore, all Balance Sheet Accounts are either Real Accounts or Personal Accounts. At the year end the balances in these accounts are carried forward to the next year.

3) NOMINAL ACCOUNTS or TEMPORARY ACCOUNTS

All Profit and Loss Accounts are temporary accounts and are called Nominal Accounts. On the one hand, these may be Revenue Accounts like Sales of Goods, Income from Services, Rent Income, Interest Income, and on the other hand, these may be Cost and Expense Accounts like Cost of Goods Sold, Salary Expense, Rent Expense, etc.

All these accounts are closed at the year end and the Net Result of all these accounts is transferred to Balance Sheet in the Owner’s Equity.