According to modern approach, accounts are classified into
six categories: (1) Assets Account; (2) Liabilities Account; (3) Capital
Account; (4) Revenue Account; (5) Expenses Account; and (6) Withdrawal Account.
Assets Account: These accounts are accounts of assets and
properties such as land, building, plant, machinery, patents, cash investments,
inventory, etc.
Liabilities Account: These
accounts are accounts of lenders, creditors for goods, creditors for expenses,
etc.
Capital Account: It is the account of the proprietor/partner
who invested money in the business.
Revenue Account: These are account of incomes and gains. Examples are: sales, discount received,
interest received, etc. These accounts
accumulate data required for preparation of Trading, Profit and Loss Account.
Expenses Account: These are accounts of expenses and
losses. Examples are purchase, wages
paid, depreciation, rent, rates and taxes, etc.
Like Revenue Account, these accounts accumulate data required for
preparation of Trading, Profit and Loss Account.
Withdrawal Account: It is the account related to drawings by the
proprietor/partners.
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