There are different types of accounts. Each of them is prepared differently. They are found in main nominal ledger and supports different features. The five types of accounts are:
- Assets: These accounts show you debit balance and they are created due to assets which can retain their value.
- Liabilities: These accounts would reflect debt of business and would come with credit balance.
- Capitals: These are the accounts which would represent investment in your business.
- Incomes: These completely reflect sales and other income which would increase profit. They show credit balance and credited to profit and loss account.
- Expenses: These accounts deal with expenditure that can reduce profit. They will show debit balance and debited to profit and loss account.
The ledger accounts can also be classified as:
- Permanent ledger accounts: It has opening balance apart from start-up business. These are the accounts which would show closing balances that happens at end of financial year and finally carried forward to next year.
- Temporary ledger accounts: These does not come up with any opening and closing balance. The accounts get closed at the end of financial year by transferring it to profit and loss accounts.