Account Meaning – What is an Account ?

Account Meaning – What is an Account in Accounting terminology ?

Account meaning  – It is best described as  a summarized record of transactions , relating to a particular head (expense, income, asset or liability) at one place. It records  the amount of transactions , and  their effect  on other Accounts . Classification of accounts is an essential aspect of understanding the meaning of Account.

Account is usually drawn in a  ‘T’ form. It is divided into two major parts :

  • Debit ; and
  • Credit.

Account has Debit part on the left side of the Account , and Credit part on the right side of the account.

An Illustrative format of the T shaped account is as under :  –

 

Account Format

Account Name – How is it written and where is Account Name written ? 

The name of account is written at the top. The name could be  purchase account, wages account, creditors account etc.

Date of the transaction –  How is it written and where is date of the transaction written ? 

The date of the transaction is recorded in the date column. Transaction are recorded in the account date-wise. Transactions taking place earlier are recorded earlier and those which take place later or afterwards are recorded after earlier transaction;

Particulars column includes the name of the account, which is debited or credited.

J.F. represents Journal Folio  indicates, where the original entry was recorded in the journal books.

Amount Column : – The last column is amount column where the amount of the transaction is recorded.

CLASSIFICATION OF ACCOUNTS

There are two types of classification   : –

  • Traditional classification of Accounts
  • Modern classification of Accounts

 

What is Traditional classification of Accounts : – 

Under the Traditional classification, accounts are classified as Personal Accounts and Impersonal Accounts .

  • Personal Accounts are further classified into the following categories : – 
  • Natural
  • Artificial
  • Representative

Impersonal Accounts are further classified into the following categories : – 

  • Real 
  • Nominal

Example of various types of Personal and Impersonal accounts can be summarised in the Table below : – 

What is Modern classification of Accounts : – 

Under the Model classification, accounts are classified  into the following categories : – 

  • Asset Account ;
  • Liabilities Account ;
  • Capital Account ;
  • Revenue Account ; and
  • Expense Account.
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