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
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 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 : –
Impersonal Accounts are further classified into the following categories : –
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.