🔍
How to Classify Accounts | Real, Personal & Nominal |Classification of Accounts|Letstute Accountancy - YouTube
Channel: unknown
[2]
In our previous sessions, we have seen the
basic terms/ concepts and principles of accounting.
[10]
Now our friend Peters grocery store business
is really doing well & on a daily basis, he
[19]
is dealing with many transactions so, in order
to keep organized records he wants to know
[24]
how this can be possible with the help of
this accounting concepts which will help him
[28]
to make his financial statements that will
give him a true & fair view of his business.
[38]
So in this session we are going to talk about
a very important topic
[49]
of accounting...
[51]
? Classification of accounts???
[54]
Well!
[55]
At some point we all must have had this problem
of not being able to find the right outfit
[61]
on time because of having a very messy/clumsy
wardrobe Right?
[68]
And we even might have gotten late for work
or school because of that?
[75]
How can this problem be fixed?
[77]
What if, we organize our wardrobe as different
drawers or compartments and label them neatly.
[87]
Now is it easier to find that black shirt
we were looking for?
[93]
In a similar way in accounting, if we jumble
up and record all our transactions in just
[112]
one account we would not be able to find the
right balances and the details of that particular
[121]
account
Suppose, we record different transactions
[125]
aimlessly... anywhere in our books
Can you locate all bank related transactions
[127]
easily/ and answer what will be the bank balance??
[128]
No
Because in this account all the bank related
[130]
transaction are jumbled-up...But if all bank
related transactions are recorded under a
[135]
separate bank account it will help us to easily
locate them and find the correct balance in
[142]
our bank account.
[144]
Therefore we group all transactions belonging
to one category in one account for eg.
[145]
we will maintain a separate cash account which
gives the detail about how much cash we have
[150]
received how much we have paid & how much
we have at the end of the year same way capital
[159]
account, Mr. X account, Salary Account etc
well, generally account is denoted by A/C
[171]
From this we can summarize or conclude that
An account is a systematic & summarized record
[180]
of similar kind of transactions pertaining
to particular person, property or any expense
[187]
& incomes
Having understood this first step... lets
[192]
move on to a very important and very basic
accounting concept...i.e.
[198]
Classification of accounts...
[202]
Just like we maintained different drawers
in a wardrobe & classified them into different
[207]
heads... in the same way, in accountancy we
will classify different accounts into two
[213]
types namely Personal and Impersonal
But why do we need to classify them??
[222]
Because, well classified accounts will help
us to make the correct entries & to prepare
[228]
sound financial statements
So coming to
[235]
The first category i.e.
[237]
Personal Account, Personal the word relates
to a person
[242]
So
We could have Davids account, Philips account
[246]
who is natural persons
But personal account also includes artificial
[259]
or legal persons as well...when we say artificial
person, in any company or organization the
[266]
decisions are made in the name of company
and not any particular person but The law
[273]
gives the company certain privelages/rights
to be considered as a person .they have a
[280]
separate legal identity ..Therefore all organizations
come under personal a/c.
[288]
It includes all public ltd, pvt ltd companies
firms co-operative societies etc...
[299]
For eg ABC Pvt ltd or blossom co- op housing
society etc.
[304]
There are also certain a/c like say... the
capital a/c which represents money brought
[311]
in by the owner...owner is a person so capital
a/c is representing a person actually .these
[322]
kind of accounts are also personal and we
call them representative personal a/c ..Similarly
[331]
there is debtor's a/c which represents all
the different persons owing money to the business...so
[337]
again debtor is a representative personal
account
[345]
Second category is IMPERSONAL ACCOUNT; anything
which does not fall into the personal a/c
[353]
is an impersonal a/c
It is further classified into two categories,
[358]
I. Real account
Real account relates to the companys properties
[367]
& assets which are owned by the business concern
Like, furniture, land, buildings, etc
[372]
Now assets are classified into two types of
assets i.e. tangible & intangible assets
[377]
Here tangible assets mean the assets which
have a physical existence i.e. which can be
[396]
seen, touched or felt, like furniture, and
machinery
[405]
& intangible assets mean the assets which
dont have a physical existence i.e. which
[413]
cannot be seen like goodwill, patents, trade
mark, franchise etc
[419]
II.
[420]
Nominal Account:
Nominal accounts relate to the income & expenditures,
[425]
profits & losses...
[426]
Like for example a salary account i.e. expense
of the business
[438]
Commission received account i.e. the income
of
[449]
the business.similarly rent paid, interest
received etc
[464]
These accounts are exist only in name i.e.
they cannot be seen or touched
[478]
Here we can summarize or conclude that
Income & Expenses account consist of all nominal
[491]
accounts coz the nominal account includes
all expenses losses incomes & gains
[493]
The Balance sheet i.e. the assets & liabilities
account consists of all personal & real accounts
[501]
Lets take a recap of what we have learnt
We have seen an account which is summarized
[507]
record of particular person, property or thing
which represents various transactions
[516]
Then we classified accounts into two personal
& impersonal...
[522]
Personal account is classified into three.....
[527]
Impersonal account is classified into two
7 min
[533]
So here is small exercise for u all to classify
these Accounts
[540]
1.
[544]
Joys account
2.
[548]
Cash account
3.
[552]
Capital account
4.
[557]
Interest paid
5.
[562]
Interest received
6.
[567]
Salary account
7.
[572]
Bank account
8.
[577]
Machinery account
9.
[581]
ABC Private Ltd
10.
[583]
Goodwill account
11.
[584]
Outstanding salary account
12.
[588]
Prepaid interest account
[589]
Here are the answers�.
[592]
So thats all for todays session...I hope u
all have enjoyed this session if u liked this
[594]
gives us a thumps up & if u have any quarrys
share it on comment box given below
[601]
For further sessions please subscribe to our
channel lets tute.com...... we all here to
[606]
help you to understand accounting in more
logical and interesting manner
[611]
Thank You...
Most Recent Videos:
You can go back to the homepage right here: Homepage