Personal Accounts and its Types
Types of Account ( Personal Account)
- Personal Accounts
- Real Accounts
- Nominal Accounts
Personal Accounts
Personal Accounts: Accounts recording transactions with a person or group of persons are known as personal accounts. These accounts are necessary, in particular, to record credit transactions. Personal accounts are of the following types:
- Natural Persons
- Artificial or Legal Persons
- Group/Representative Personal Account
(a) Natural persons: An account recording transactions with an individual human being is termed as a natural persons’ personal account. eg., Kamal’s account, Malik’s account, Sharma’s accounts. Both males and females are included in it.
(b) Artificial or legal persons: An account recording financial transactions with an artificial person created by law or otherwise is termed as an artificial person, personal account, e.g. Firms’ accounts, limited companies’ accounts, educational institutions’ accounts, Co-operative society account.
(c) Groups/Representative personal Accounts: An account indirectly representing a person or persons is known as representative personal account.
For example:-
If a business is not able to pay salary for the last two month to the workers, then the workers will be treated as creditors of the business. The amount due to these employees will be added and put under one common title “Salaries Outstanding Account”. Thus the salary outstanding is a personal account.
When accounts are of a similar nature and their number is large, it is better that group them under one head and open a representative personal accounts. e.g., prepaid (insurance, rent) and outstanding (salaries, rent, wages) etc.
When a person starts a business, he is known as proprietor. This proprietor is represented by capital account for all that he invests in business and by drawings accounts for all that which he withdraws from business. So, capital accounts and drawings account are also personal accounts.