SUBDIVISION OF CAPITAL ACCOUNT 55 



are often called loss and gain accounts, since practically 

 every nominal account results in a loss or gain. 



There are two generally recognized classifications of ac- 

 counts, the first of which is based upon the nature of the 

 subject matter of the transaction, and the second upon the 

 ultimate use of the balance of the account in the financial 

 statements. 



CLASSIFICATION 1 



BASED ON THE SUBJECT MATTER 



A. Personal 



B. Impersonal 



1. Real 



2. Nominal 



CLASSIFICATION 2 

 BASED ON THE ULTIMATE USE OF THE ACCOUNT BALANCES 



A. Balance Sheet 



1. Resources 



2. Liabilities 



B. Loss and Gain 



1. Expense 



2. Income 



In either case, the principal use of the classification is to 

 make easier the rules governing debits and credits and the 

 treatment of account balances. In general a rule which 

 applies to one account will apply to all others in its group. 

 Accounts are usually arranged in the ledger in groups, as 

 presented in the classification. That is, all resources to- 

 gether, all liabilities together, and so on. 



Some principles have been developed in the preceding 

 pages for debiting and crediting the various types of ac- 

 counts shown in the two classifications. These principles 

 will apply in a more or less modified form in the treatment 

 of accounts in subsequent chapters. 



Personal accounts record transactions with individuals, 



