The classification of accounts

and the division of the

ledgers
 Classification of accounts
• There are two classes of accounts:

Personal
Accounts accounts
Impersonal
accounts
 Personal accounts
• Personal accounts are those for persons

Personal Accounts

Trade Payables Owner's capital and

Trade receivables
drawings account
 Impersonal Accounts

• Are all accounts other than personal accounts

Impersonal
Accounts

Accounts with
Nominal
debit
Accounts
balances
Accounts with debit balances

Asset Account

Non – current
Current assets
assets
 Nominal Accounts

Nominal accounts

Expenses Revenue
Accounts accounts
 Expenses accounts
• Examples:
• Wages accounts, salaries account, electricity account, rent payable
account etc.

• These expenses are revenue expenditure.

• These are the expenses incurred in running the day to day basis

• All these expenses have a debit balances

 Revenue accounts
• Examples:
• Rent received, Discount received,
commission received, etc.
• These are accounts with credit balances.
• These accounts record the revenue of the
business
 Division of the ledger
• The ledger is usually divided into three:

Sales ledger Purchase ledger General ledger

• Names of all • All that is not

customers • Names of all
the name of a
suppliers
customer or a
supplier
 Note to remember

• Cash book is also a ledger where all cash and

bank transactions are recorded
 Modern ways to remember the
classification of accounts
• A simple tip to remember the classification of accounts:

• Remember them as five elements into which the accounts are divided:

• These are:
Assets, Capital , Liabilities, Income and Expenses

• All accounts will belong to one of the following 5 elements only

 Five elements of accounts
• Now let us try to classify some accounts into the five elements:
• Wages – Expenses
• Capital – capital
• Rent received – Income
• Machinery – Assets
• Loan – Liabilities