Meaning of account:
An Account is a record of summarized business transaction for a person, asset or gain/ loss. Each company keeps a record of its business transactions so that at the end of the period it may be able to know its financial position.
For a public limited company in India, it is mandatory to disclose its annual accounts in form of financial statements. It is done for the sake of investors and other stakeholders, who are also interested in relevant information related to expenditure and revenue of the firm.
Every account has two sides known as debit and credit. When a transaction takes place, it either increases debit side or decreases credit side and vice – versa. Here, it should be kept in mind that both sides of an account always remain equal.
Types of account:
Accounts can be divided in three parts based upon the nature of transaction:
Personal accounts are related to any person or organisation.
Ram a/c, XYZ ltd a/c etc.
These are the accounts which are related to any asset like property, good, furniture etc.
Cash a/c, bank a/c, etc.
Nominal accounts are related to expenses, gains and loss.
Rent a/c, salaries a/c, discount a/c etc.