Classification of accounts

Question 1

definition account

Answer 1

= specific location for recording transactions

Question 2

3 categories of accounts

Answer 2

1. personal accounts= accounts of your creditors and debtors. So, the people/organizations you work with
2. real accounts= tangible & intangible assets
3. nominal accounts= the income and expense accounts of your business (sales, purchases, utilities, dividend etc)

Question 3

5 types of accounts

Answer 3

1. assets: item/value that the business owns/has rights of
2. liabilities: obligations owed by other parties
3. equity: ownership value of a company
4. revenues: mechanisms where income enters the business
5. expenses: costs of doing business

Question 4

definition business

Answer 4

= commercial organization, with a view of making profit

Question 5

5 type of business categories

Answer 5

1. sole trader= owned and operated by 1 person
2. partnership= owned by several individuals
3. companies= owned by shareholders and is operated on their behalf by board of directors
4. non-trading organisation= non-profit makers (expenditure accounts)
5. cooperative society= business entity formed for furthering the economic welfare of it’s members/society by providing them with goods/services