Accountancy is book-keeping. Almost all of the traders, shopkeepers, businesses keep a record of all their financial transactions at all the times. An Account can be called as a collection of the incomes and expenses, the assets and liabilities and the equity as written besides each other and represented by individual ledger pages. A ledger is a record of accounts. It is kept updated, and changes in these entities are recorded by the credit and debit entries. Some of the common accounts examples can be mortgages, loans, payroll, sales, wages etc. Accounting services are very important as it helps us to determine our taxes. It even helps us in getting housing loans, mortgage loans etc.
Keeping records of these accounts started way back around 2600 BC, written on small clay slabs with a stylus. Since then, all this process has evolved and changed very much and now in today’s world, Accountancy has become very important. Basically, accounts are divided into 3 types:
- Real Account
- Personal Account
- Nominal Account.
The account which does not close at the end of the accounting year is called as the Real account. The balances keep on continuing over to the next accounting year. A real account can also be called to the physically tangible things like furniture, plants, and machinery etc and some intangible things like Patents, Goodwill, and Copyrights etc. These intangible things mostly do not have any real physical existence.
A Personal Account is related to companies, firms, and individuals, businesses, legal entities etc. some of the examples are bank accounts, creditors, debtors, capital, accounts of credit customers etc.
There are 3 sub-types in the Personal Account category:
1. Natural Personal Accounts. It is very simple to understand, mostly includes the bank savings accounts of individuals
2. Artificial Personal Accounts. These are created by law such as institutions and corporate bodies. e.g. LLCs, LLPs, schools, clubs etc.
3. Representative Personal Accounts. These represent a certain group or person directly or indirectly. eg. if a person has been paid wages in advance, a wage prepaid account will be opened. This is a representative personal account linked to the person indirectly.
The word Account is abbreviated as either A/C or Acc. The Personal Account type of Bank accounts also has some subtypes in it. Namely, the savings account, joint account etc. There are many advantages of Accounts:
- We get to keep a complete and systematic record of all the transactions we do.
- We get to know the true value of the business.
- These accounts which are kept in book-keeping are a great way to have evidence in the court of law.
- We get to compare the accounts of different firms; companies etc and get to know about our position relative to them.
- Accounts help us in the effective management of the business.
These and many other benefits of accounts are there to us. Everyone should have at least the basic knowledge about accounts, as at some point of time in their life everyone comes in contact with accounts, whether it is of any type.