Question

Classify the accounts with suitable examples.

Answer 1

Classification of Accounts:

1. Asset account: Any physical thing or right owned that has a monetary value is called an asset. The assets are grouped and shown separately; for example, Land and Buildings account, Plant and Machinery account.

2. Liability account: Financial obligations of the enterprise towards outsiders are shown under separate heads as liabilities; for example, creditors account, expenses outstanding account.
3. Capital account: Financial obligations of a business enterprise towards its owners are grouped under this category; for example, capital contributed by the owner.
4. Revenue account: Accounts relating to revenues of an enterprise are grouped under this category, for example; revenues from the sale of goods, rent received.

5. Expense account: Expenses incurred and losses suffered for earning revenue are grouped under this category; for example, purchase of goods, salaries paid.