Question

Name the category of accounts that are balanced under traditional or modern classification? ​

Answer 1

Answer:

According to traditional approach, the accounts are classified into four types – personal accounts, real accounts, nominal accounts, and valuation accounts.

Answer 2

ANSWER :

Recording of Transactions refers to the process of entering the transactions in the books of accounts. As the transactions are recorded in the respective accounts heads, after applying the rules for debit and credit, the account heads are required to be classified.

There are two approaches for classification of accounts. These are :

[a] Traditional Approach or English Approach

[b] Modern Approach or American Approach

[a] Under Traditional Approach or English Approach accounts are classified into three main categories :-

• [1] Personal Accounts : Accounts heads pertaining to persons, firms, companies, organizations etc. are called Personal Accounts. For example : Ram's A/C, Gauhati Commerce College A/C etc.

• [2] Real Accounts : Accounts heads recording transactions relating to tangible things are known as Real Accounts. For example : Machinery A/C, Cash A/C etc.

• [3] Nominal Accounts : Accounts heads recoding transactions relating to losses, expenses, incomes and gains are known as Nominal Accounts. For example : Wages A/C, Rent A/C etc.

[b] Under Modern Approach or American Approach accounts are classified into five main categories :-

• [1] Assets Account : Assets account are the accounts of assets and properties of the business entity. These include land, building, plant, machinery, patents, cash in hand, cash at bank, debtors etc.

• [2] Liabilities Account : Liabilities accounts are the accounts pertaining to the liabilities of the business entity. These include lenders, creditors, outstanding expenses, bank overdraft etc.

• [3] Capital Account : Capital is the amounth with which the business is started. It is the account of the owner who invests money in the business as capital.

• [4] Revenue Accounts : Revenue accounts are the accounts of income and gains. These include sales, discount received, interest received, commission received etc.

• [5] Expense Accounts : Expenses accounts are the accounts of expenses incurred and losses sufferef by the entity. These include purchases. wages paid, rent paid, depreciation charged etc.