Classification of accounts with examples

An account is a page in a ledger. Accounts can also be found in the proper journal. Business transactions are usually posted to their relevant accounts with evidence in the source documents. To understand the accounts in any organization, we have explained them below along with their classifications. We also provide examples.

1. What's an account?

An account is a page in a ledger that shows the treatment of a transaction in a summarized format. An account is usually detailed enough to help accountants understand the historic events of every business event. It contains both the qualitative and quantitative aspect of a business transaction. 

There are several accounts that make up the accounting system of any organization. These are usually classified into several parts as explained later in this article. This system makes up the chart of accounts of the organization. With them in a ledger, a trial balance can be prepared. After which the financial reports are prepared.

2. Classification of accounts with examples

Accounts can be classified into two broad categories. These are personal and impersonal accounts.

2.1 Personal Accounts

They are accounts of persons. It doesn't matter if the person is an artificial or physical being. An artificial person is a company, business name, non profit organizations and government parastatals. While a physical person is the name of a human being. The name of a dog cannot be included in a personal account because by law you cannot make a contract with an animal.

2.1.1 Examples

Examples of personal accounts are:

Debtors a/cs in the account receivables ledger such as Tobi a/c, Ejiro Micheal a/c. If the company uses a B2B model. That is sold to other businesses. Then, its debtors are mostly artificial persons or institutions. Examples will include Nestlé Nigeria Plc, Dangote Sugar, Olamide & co business enterprises and so on. Another example of personal accounts are those of government parastatals of the business that are into the B2G model.

Creditors accounts also fall under here and may also be the name of an individual, businesses, nonprofits organizations and government parastatals. For example, the government may provide grants or low interest loans to businesses. Therefore, the account will be opened in the business’ ledger.

Bank accounts of the business fall under personal account. This includes Zenith bank a/c, First Bank, Access Bank and any other bank a/cs the business owns. Note that this is part of a cash book. However, cash a/c is not classified as a personal account.

2.2 Impersonal accounts

This is the account for non persons transactions. Most of them are found in the general ledger of any business entity. It is subdivided into real, nominal and intangible accounts.

Real accounts are non-personal items that can be seen and touched. Such as motor vehicles and factory plants. Business cash falls under here. They are mostly tangible assets. On the other hand, nominal accounts are income and expenses accounts of a business. Intangibles are items that cannot be seen or touched. It is known to exist but they cannot be seen naturally. 

2.2.1 Examples

Examples of a real account property, plant and equipment account in the general ledger. For a normal account, we have sales a/c, utility bill a/c. Lastly, intangible accounts include goodwill a/c and patent right a/c.

3. Conclusion

Note that the classification of accounts is different from a chart of accounts. We have explained the charts in this article. From the above explanation you have learned of personal and impersonal a/CS and their examples. While you can identify personal accounts as the names of persons, impersonal types are for non persons such as furniture and fittings.