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 the debit side and the right-hand side is called the 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.

2. 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.

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

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