What are the Types of Accounts?

1. What is an account? An account is a specific record in a company's financial ledger or balance sheet. Accountants, financial professionals and bookkeepers can use accounts to record important financial information, report daily transactions and determine the exact amount of money a company has on hand at any given time. For example, when a company makes a sale, the number of revenue accounts, or the number of accounts used to record the company's revenue, increases. When a company purchases something, an expense account reflects the cost added to the company. These various Accounts Receivable Processing in Virginia help businesses manage and understand their cost and revenue activities. Businesses commonly use different types of accounts to keep track of financial information and current value. It may include assets, expenses, income, liabilities and capital accounts. Each account can be used for a different purpose and maintained on an ongoing basis in the financial ledger or balance sheet. According to the double entry system of ledgers, three types of accounts help in recording the journal entries without error. Each account type has rules for identifying its debit and credit sides, known as accounting golden rules. The accounts are as follows: ● Personal account ● A real account ● Nominal account Personal account Ledger accounts that contain transactions for individuals or other entities that do Business Accountants in New Jersey directly with your business are called personal accounts. Examples of personal accounts include payroll accounts for customers, suppliers, and employees, and drawing and capital accounts for employers. The golden rule of personal accounts is to take the money to the recipient and deposit it to the giver. Example: Paying salary to employees In this example, the recipient is an employee and the giver is a business. So, in the journal entry, the salary account of the employee is debited and the cash/bank account is credited. A real account Ledger accounts that contain transactions relating to the assets or liabilities of a business are called real accounts. Accounts of tangible and intangible nature fall under this account category: machinery, buildings, goodwill, patents etc. These account balances are not zero at the end of the financial year unless assets are sold or sold. Payment for liability, closure or seizure of business.

2. These accounts appear in the balance sheet and the balances are carried forward to the next financial year. The golden rule of true accounts is to debit what comes in and credit what goes out. Example: Debt repayment In this transaction, cash goes out and the debt is settled. Therefore, the journal entry will debit the loan account and credit the bank account. Nominal account Transactions related to income, expenses, profit and loss are recorded in this section. These parts are not actually in physical form, but they exist in reality. For example, when buying and selling goods, only two components are directly affected: money and inventory. However, separately, we may incur gains or losses as a result of such transactions and we may incur some expense in effecting such transactions. These secondary components come under the nominal category and the accounts in the income statement appear in this category. The golden rule of nominal accounts is to record all expenses and losses on the debit side and all income and profits on the credit side. Examples of nominal accounts are: Transportation Expense Account and Salary Account. At USM-SBC we offer a wide range of accounting services to help businesses thrive. In addition to our exceptional payroll services, we provide professional bookkeeping services, tax return preparation, sales tax management, and accounts payable and receivable solutions. Visit our website to explore our comprehensive accounting services and discover how we can support your business's financial success.