ELEMENTS OF ACCOUNTS:

ELEMENTS OF ACCOUNTS:

                Accounting is the art of collecting, separating, analyzing and recording the financial transactions of the business in a certain economic period. There are two different methods or system to record the accounting transactions, one is Double Entry system and the other one is single entry system. Double Entry System is used by corporate accounting business and MNCs. Single Entry System is use by Nonprofit or Charitable Organizations.

                There are three elements of the accounting transactions and every business financial transaction must be fall in one of them. These Elements are Personal Accounts,  Real Accounts and Nominal Accounts. The Further explanation regarding these accounts are as follows:

Personal Accounts:

                That means those Accounting Transactions which fall in a specific category which deals or effect with the persons or some organizations.

                For Example there is an accounting transaction between  two persons of sale and purchase of goods and the mode of the transaction is through Bank Account or through Cash. That’s the reason we write the Person's Name. Like Mr. Joseph received Salary from his Company British Airways so the Accounting entry will be as follows:

                                - Mr. Joseph Account.  

                                 -British Airways Payroll.

                                 

Real Accounts:

                That Represent the real or tangible aspects of accounts. That means the things we can touch that came under this element of account. Like Blinding, Machinery, Equipment’s and  Stock.

                For Example Gary Traders Company Purchased a real asset that is a real account and the accounting entry will be:

-          Building or Land Account.

Nominal Accounts:

                This Kind of Accounts deals with the Income, Expenses,  Revenue, Profits, Costs  or loss and gains.

                For Example British Airways issued salaries to its employees in this case the accounting entry will be  with nominal account element like this.

-          Salaries Account.

-          Accounts Payable Accounts.

These are the three main common elements of the accounts and every accounting transaction belongs to these three elements.