Virtual Kollage: The nature of accounting

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The nature of accounting



NATURE OF AN ACCOUNT
Accounts
An account is a summarized record of all transactions that relate to a particular person or a specified item.  It is a historical record of events or transactions which have occurred within an accounting period. An account is opened for each specific set of transactions being assets, expenses, capital, liability or revenue. An account usually has two sides on which recordings are made. The left hand side is called debit side and the right hand side is called credit side. The format is shown below;

        (Debit Side)                                                Kwame’s Account                                           (Credit Side)
Date
Particulars
Ledger
Amount
Date
Particulars
Ledger
Amount


Folio



Folio







¢



¢
Jan 5
Sales
GL 34
100,000
Jan 11
Cash
CB 04
80,000











Uses of the columns in an account are as follows:
        i.   Date column shows the date on which a transaction occurs.
      ii.   Particulars column shows the corresponding accounts or the second account which is needed to complete the double entry. The double entry principle will be explained shortly.
    iii.   Ledger Folio column is used to indicate the ledger and the page number in the ledger in which the corresponding entry will be made.
    iv.             Amount column is used to record the amount involved with the transaction


Types of Account
Accounts can be classified into two categories. They are
  1. Personal Accounts and
  2. Impersonal Accounts

  1. Personal accounts are accounts in respect of individuals and or businesses. That is, they bear the name of persons or businesses. Examples are David’s Account, Abu’s Account, Uniliver Account, etc.


  1. Impersonal accounts are accounts which are not opened in the name of individuals or businesses. They do not bear the name of persons. They are subdivided into Real Accounts and Nominal Accounts

    1. Real accounts are impersonal accounts which are kept is respect of property of all kinds or tangible property such as stocks, motor vehicles, land and buildings, furniture, cash, etc.

    1. Nominal accounts are opened for expenses and losses or income and gains.
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