Classification of Accounts:

The term Account is a record in summarized and classified form of all business transaction that take place between particular person or persons thing or things specified.

For example: During a month we purchase goods for six times from usman. In order to know the total amount due to him we must put all these transaction under due head or group called usman’s account and add together .on the other hand to know our total purchases of goods during this period we must also put all these purchases under another groped called purchases account ,similarly we pay for salary rent postage etc on different dates to different parsons to know the total amount of expenditure made on each item they must be classified in respective groups such as salary rent postage etc .such a group is called an account.it is a summary of transaction relating to a particular person or a specified thing. Account is the root of accounting.

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Classification of Accounts:

The accounts are classified into Two main group.

1. Personal Accounts
2. Impersonal Accounts

1. Personal Accounts:

Accounts relating to persons or firms are called personal accounts. Personal account can take the following forms:

1. Natural person’s Account: For example Usman’s Account, Adnan’s Account etc
2. Artificial person’s Account and body of person’s accounts: for example, MCB bank, Osaka tapes Ltd. etc
3. Representative personal Account: When an account represents certain person or persons then it is called a representative personal account. In books the names of the actual parties’ appear. But since they are of the same nature and many in number the amount standing against these accounts are added and put under one common title. For example  if a business is not able to pay salary for the last two month too workers the  workers will be treated as creditors of the business. The amount due to these employees will be added and put under one common title “salaries outstanding Account” Thus the salary outstanding is a personal account.

Unexpired insurance, prepaid rent and interest outstanding or received in advance are example of personal account of this nature.

2.  Impersonal Accounts:

Impersonal accounts includes the following two accounts:

1. Real or property Account:
2. Nominal or Proprietary Account:

1. Real or property Account: Are those which keep records of properties or things owned by a trader e.g Machinery a/c Land a/c, Cash a/c, Building a/c etc. These accounts have existence and they are tangible therefore called real account.

1. Nominal Account:  Are those that record expenses m gains and losses such as salary a/c, wages a/c rent a/c repair a/c interest a/c discount a/c etc. these accounts have no existence except mere in name and are therefore called nominal they are also called proprietary being related to the proprietor of the business.