Types of Personal Accounts and Other Accounting Terms Explained

One of the three categories of accounts used in accounting are personal accounts, sometimes known as individual accounts. Real accounts and nominal accounts are the other two categories. Transactions involving people or things, such clients, suppliers, or creditors, are entered into personal accounts. Let’s examine each of the three personal account categories more closely.

1. Natural Individual Accounts Natural personal accounts are those that have a connection to people. These accounts include those of clients, vendors, debtors, creditors, and staff members. These accounts are based on the organic connection that exists between the person and the company. For instance, a customer account will be used to document any transactions involving a specific customer, including sales made to the customer, payments the customer has made, and any unpaid balances.

2. Man-made Personal Accounts Accounts linked to artificial or legal entities are referred to as artificial personal accounts. Accounts of businesses, partnerships, sole proprietors, and other legal entities are among them. These accounts are based on the business’s and the entity’s contractual obligations. A company account, for instance, would be used to document any transactions involving a specific company, such as sales made to the company, payments the company made, and any unpaid balances.

3. Personal Accounts of Represented Persons Accounts linked to business representatives are referred to as representative personal accounts. Accounts of agents, brokers, commission agents, and factors are among them. These accounts are used to track activities involving the representative, including commissions received, fees levied, and any unpaid amounts. Additional Accounting Terms Explanations

Goodwill: As the gap between a company’s purchase price and its net asset fair value, goodwill is an intangible asset. When a company is sold for more than its net assets are worth, goodwill is created. Goodwill is listed as an asset on the balance sheet and is periodically tested for impairment. Drawings: Drawings are the sums of money or items that a business owner takes out for their own purposes. Drawings are not regarded as a business expense and are reported in the owner’s equity portion of the balance sheet. Real accounts are those that are associated with assets, obligations, and equity. Transactions involving tangible and intangible assets, liabilities, and equity are recorded using these accounts. Cash, inventories, accounts payable, and owner’s equity are a few examples of actual accounts. Machinery Account: Because it relates to a physical item, machinery account is a real account. The acquisition, sale, depreciation, and repair of machinery are all recorded in the machinery account. Machinery is accounted for on the balance sheet as a long-term asset and is subject to yearly depreciation.

In conclusion, anyone interested in accounting or running a business must comprehend the many categories of personal accounts as well as other accounting jargon. You may make knowledgeable judgments regarding your company and guarantee accurate financial reporting by being aware of these terms and their definitions.