Then there are pre-defined accounting rules and procedures that govern how a transaction should be recorded. It is the difference between debit and credit, income and expenditure, asset and liability. There are then regulations governing whether it is an asset or an expense, and so forth.

Accounting is the process of documenting, analysing, and reporting financial transactions involving a firm. It describes how a business organisation documents, organises and reports these transactions to regulators and other stakeholders. It aids in translating the intangible nature of company reporting to track assets, liabilities, costs, revenue, and equity. Types of accounts are necessary for understanding financial concepts and participating in the corporate world.

Individuals may utilise a type of account in a variety of ways. For example, they may use accounting to manage their budgets, reconcile their monthly credits, and balance their cheque books for future consistency. Alternatively, a corporate entity may employ accounting procedures to assess its revenue and spending items and ascertain its financial status and performance over time. However, the scope and techniques of accounting may vary according to the nature of the company.

Different Types of Accounts: Accounting vs Accountancy

While the phrases accounting and accountancy are frequently used, there is a fine line between the two. Accountancy is the word used to refer to the profession of accountants – those who perform accounting work –. In contrast, accounting is the systematic process of recording all company activities and interpreting all conceptual reports for their intended use by a user.

Aspects

• Maintaining records: The system of recording financial transactions also necessitates using a consistent set of accounting principles, methods, and processes. It is concerned with the orderly recording of transactions in suitable books of accounts shortly after they occur.
• Financial transaction tracking: Numerous transactions are recorded in a company organisation, and each transaction has its accounting system for collection and analysis.
• Financial Reporting: Many reporting systems require a precise way for a corporate organisation’s financial transactions to be recorded and aggregated in its financial statements. It culminates in creating the Profit and Loss Statement, the Balance Sheet, and the Statement of Cash Flows, as well as the accompanying disclosures.

3 Types of Accounts

Financial accounting

The systematic procedure through which a corporate organisation generates its financial outcomes. The balance sheet, the statement of profit and loss, and the statement of cash flows describe and record the results of an entity’s financial activities.

Cost accounting

For every organisation, determining the cost of a product created is critical, and cost accounting enables firms to make cost-related decisions. The resulting data may be used to determine the price of a product.

Forensic accounting

This branch of accounting is critical since it collects, recovers, and restores financial data as part of the investigative process. In order to broaden its reach, a formal framework establishing a set of forensic accounting benchmarks is being developed.

Accounting Techniques

In general, there are two primary ways for documenting financial transactions in accounting books:

Cash-based system

Financial transactions aren’t recorded in the records until the corresponding cash sum is received or paid. This method does not keep a comprehensive record of financial transactions since credit transactions are not recorded and hence does not present a genuine picture of profit and loss at any moment in time.

Accrual system

Financial transactions are documented in the books of accounts as they occur during the time. This method provides a comprehensive picture of financial transactions made during the time since it records all transactions made during the period, regardless of whether cash is received or paid.

Types of Account in Accounting

We reviewed the five main types of accounts in accounting in this part and provided instances of accounting.

Assets

There are many types of property (visible and intangible) that contribute value to a firm. The investment budget includes everything that the firm owns. Over time, investments are depreciated or ‘sold down’, utilising depreciation procedures due to their higher pricing and longer duration.

Expenses

These are the losses incurred by your business when it is running. An expense or ‘cost’ is a commodity or service acquired by a business to generate income or import items. It might include but is not limited to campaign expenditures, utilities, leases, and labour. Any deductions are tax-deductible, which reduces taxable earnings.

Revenue

It is, also referred to as earnings, is the amount of money your firm earns. Your income accounts keep track of revenue generated by activities and non-operations. Income accounts are ephemeral or nominal accounts, as their values are reset to zero at the beginning of each new accounting year, which is usually a fiscal year. It is a task that accounting software often handles automatically.

Liabilities

Liabilities are the debts owed by the business and include bank loans or obligations and money owing to other third parties by your firm. Examples include loans, past-due utility bills, bank overdrafts, vehicle loans, mortgages, and other obligations.

Equity

Possession of a valued commodity is referred to as equity. It is the remaining interest in the company’s assets after subtracting commitments. The term “equity” refers to common stock, dividends, and deferred earnings. ‘Net Worth’ is another way of saying ‘equity.’ The fundamental accounting equation corresponding to the above rule is Assets = Liabilities + Owners Equity.

Types of Accounts in Accounting: Fundamentals

The separate idea of business entity

We draw a clear separation between the business and the owner when accounting for a commercial organisation. All business transactions are documented from the business’s perspective rather than the owner’s perspective. To the degree that he acquires capital, the proprietor is regarded as a creditor of the organisation.

Concept of dual entry

Each financial transaction requires the recording of two accounting elements. For example, if a business sells items valued at Rs. 6,000, this transaction requires the recording of two accounting aspects. One is a 6,000-rupee stock decrease, while the other is a 6,000-rupee cash receipt. A double-entry system is used to track these two facets of a single transaction. The entire amount deducted will always equal the total amount credited under this rule.

Concept of a continuing concern

Accounting is predicated on the assumption that businesses will continue to function for an extended length of time in the future. In other words, it is presumed that the organisation has neither the purpose nor the need of curtailing its commercial activities. This is the basis upon which a business entity’s financial statements are created and upon which investors agree to participate in the firm.

Concept of congruence

This notion stipulates that income and costs must be documented concurrently with their occurrence. In general, we reconcile revenues and costs within an accounting period. In general, revenue gained over time may be quantified only when it is compared to associated costs. Numerous adjustments are made for prepaid costs, accrued earnings, and so on while producing a period’s financial statements based on this idea.

Final Words

Accounting may be thought of broadly as a business language used to make financial choices. It is the process of assessing a business’s financial performance and condition and communicating the results to its users, who may be internal management. Accounting may be categorised according to its purpose and approach as financial accounting, cost accounting, forensic accounting, and so on. Well-defined ideas and processes frame financial decisions.

FAQs

How many types of accounts are there?

In accounting, there are three distinct sorts of accounts: real, personal, and nominal. The term “real account” includes two subtypes: intangible and physical real accounts. Additionally, there are three distinct subtypes of personal accounts: natural, representative, and synthetic.

Purchase account is which type of account?

A nominal account is a purchase account. The nominal account is the account in which costs and losses are recorded and income and gains. Any business or organisation incurs expenses when it makes a purchase.

Sales account is which type of account?

The sale account is classified as a Nominal account, whereas the debtor’s account is classified as a Personal account. As a result, the Golden Rule that must be followed is: Debit the receiver. Credit the gain or income. Also known as revenue, sales or net sales are directly reported on the income statement. When financial ratios are calculated using income statement sales data, “sales” refers to net sales rather than gross sales.

A cash account is which type of account?

The term “cash” encompasses more than paper currency and coins. A cash account is an account backed by cash. For instance, when you go to the campus bookstore and write a cheque to cover the cost of your huge intermediate accounting textbook (1,800 pages), your cheque is treated the same as currency.

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Who says women can’t be achievers? Or lead from the front? Women in Corporate India have been celebrated year after year, but this Women’s Day, let’s put the focus on those women who are changing our lives through their ventures and business ideas.

In an age where women are slowly disrupting the start up gender balance, it’s time we celebrate the women who are here to stay.

These women have pushed boundaries to start businesses, which have proved themselves. Some names are known, while some are at the cusp of becoming big.

Here are 16 startups with Women founders that FlexiLoans celebrates:

Women Only Founders:

Richa Kar: Zivame.com:
Many would shirk at the thought of buying lingerie online, given that this is a personalized shopping decision. But with Zivame, the age old way of buying lingerie is completely out of the window. Richa realized there was an underserved market in terms of lingerie. Despite not having any retail experience, she started Zivame. It now boasts of selling one bra every minute. Here’s to womanpower!

Shraddha Sharma: Yourstory.com
Shraddha’s passion for supporting small enterprises led her to junk the conventional route and start YourStory.com. She started YourStory with the intention of bringing out stories of entrepreneurs. YourStory has completed 8 years and is now a reputed source for reliable information about startups.

Falguni Nayar: Nykaa.com
Investment banker turned entrepreneur, Falguni Nayar started Nykaa as a website selling beauty and wellness products. While many have given up, Nykaa is looking at operational profitability in 2017. Having launched their own private label, Nykaa is looking to change the way women buy beauty products. Cheers to this beautiful dreamer!

Suchi Mukherjee: LimeRoad.com
Suchi believed product discovery in clothing was difficult to achieve without a great interface. With India being such a huge market, she jumped to fill in the need with LimeRoad. Users can design their own looks on LimeRoad with the different products, much like Pinterest.

Sairee Chahal: Sheroes
Many women let go of their career aspirations once they begin a family and lose the chance to be a part of the workforce. To bridge this gap, Sairee started Sheroes where the woman is celebrated through and through. Sheroes curates work from home jobs, helping women find mentors and a satisfying career.

Niharika Jhunjhunwala: SugarBox:
SugarBox is a themed subscription based service where you can gift yourself a box every month. Started by 25 year old Niharika, the company wants to have people pamper themselves and be surprised every month!

Shubhadra Dravida: Transcell Biologics
Transcell Biologics was set up to meet a need for stem cell based platforms in therapeutic and non therapeutic areas. The company is a stem cell bio bank, where people can use the stem cells for treatments in the future. Here’s to changing the way Indians view medical treatment!

Rashmi Daga: FreshMenu:
The N-Gen’s demands for exotic and contemporary food drove Rashmi to start FreshMenu in Bangalore where the company focuses on providing freshly made, chef cooked gourmet meals in a box. The startup has expanded from Bangalore to other metros and the chefs curate a different menu everyday! So the next time you want a gourmet meal, this is the place to go!

Women as Co- Founders:

Upasana Taku: Mobikwik:
Mobikwik is the other wallet vying for our attention after PayTM and FreeCharge. The wallet has gained relevance especially after demonetization. By bringing on over 10,000 merchants, MobiKwik’s focus on the wallet has helped earn it a loyal fanbase.

Radhika Aggarwal: Shopclues.com

ShopClues, an online marketplace, is a unicorn which is not much in the news. And despite that, it is going strong, with more than 70% of its revenues coming from Tier II and Tier III cities. Radhika knew the future for retail was online and that prompted her to take on the mammoth task of setting up an online platform largely backed by word of mouth. Inspite of the severe competition, ShopClues has its sight set on growth and it is a strategy that has paid off.

Shreya Mishra: Flyrobe:
Shreya started Flyrobe with Pranay Surana and Tushar Saxena, colleagues from IIT. Shreya worked with designers and realized that many people aspired fashion but the prices made it very out of league for many. Flyrobe works on the concept of sharing where people can rent an item for a few days. Way to go with changing the way women look at clothing!

Aditi Balbir: V Resorts:
Aditi started V Resorts to manage weekend homes and resorts that are mismanaged. Since then, the venture has turned into a travel outfit that focuses on providing an offbeat experience to travellers. Aditi worked at the venture capital company but fell in love with the idea of V Resorts and jumped to co-founding it with her own money! That’s some serious wanderlust!

KM Vani: Swagene:
Swagene was started to focus on genes to provide personalized medicine to patients. A mother-son duo works at decoding our genes and bringing personalized medicine to the doorsteps of people. The doctor-scientist duo focus on core research to provide solutions to people.

Neha Juneja: Greenway Grameen:
Neha took on the difficult task of changing the way rural women used their stoves! Greenway Grameen is one of the largest stove manufacturers in India now, producing stoves which reduce the smoke produced while cooking. It is making women healthier and reducing India’s carbon footprint. Talk about making a difference in every way possible.

Richa Singh: YourDost:
YourDost is an online counseling website that aims to strip the stigma attached to mental problems in India. It anonymously connects individuals to experts who can understand and guide them. The firm plans to introduce personalized services in the future. Here’s to making the world a brighter place!

FlexiLoans lauds these women for breaking barriers and making a difference. Supporting women enterprise is a passion at FlexiLoans because women can and DO achieve everything!

To all the women entrepreneurs, FlexiLoans wishes you an empowering womens day. Check our platform www.flexiloans.com and sign up, and let us help fuel your business dreams.

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