Personal Accounts
How is personal account different from other forms of accounts in accounting?
Personal accounts refer to individuals, entities, or organizations, with whom an organization performs financial transactions, whereas real accounts correspond to tangible assets, liabilities, or equity, and nominal accounts record revenues, expenses, gains, and losses. Personal accounts emphasize on particular individuals engaged in transactions rather than general classifications of financial properties.
How do the personal account impact the preparation of financial statements?
Personal accounts contribute to the preparation of financial statements by giving precise information about transactions involving particular individuals or organizations. This information helps to create income statements, balance sheets, and cash flow statements, that allow stakeholders to examine the organization’s financial health and position.
Do personal accounts involve both internal and external transactions?
Yes, personal accounts involve both external and internal transactions. For example, the customers, suppliers and creditors are part of external transactions while employees or owners are part of the internal transactions. Further, proprietorships and partnerships are also included in personal account where there is a combination of both personal and business finances.
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