What is an Impersonal Account?
An impersonal account is a type of ledger account that does not bear the name of a specific person. Instead, it includes nominal accounts (which track revenue, expenses, gains, and losses) and real accounts (which record assets, liabilities, and equity). Impersonal accounts are fundamental for preparing accurate financial statements, as they help in categorizing transactions in an organized manner.
Examples of Impersonal Accounts
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Nominal Account Examples:
- Sales Account: Tracks income generated from sales.
- Utilities Expense Account: Records expenses related to utilities.
- Interest Earned Account: Logs interest income received.
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Real Account Examples:
- Cash Account: Represents cash on hand and in bank.
- Accounts Receivable: Shows outstanding amounts owed by customers.
- Equipment Account: Lists the value of equipment owned by the company.
Frequently Asked Questions
What is the difference between impersonal and personal accounts?
Impersonal accounts track financial transactions that do not relate to specific individuals and include categories like assets, liabilities, revenues, and expenses. Personal accounts record transactions related to specific people or entities, such as customers, suppliers, and employees.
Are all impersonal accounts nominal accounts?
No, impersonal accounts encompass both nominal accounts (related to income, expenses, gains, and losses) and real accounts (related to assets, liabilities, and equity).
Why are impersonal accounts important?
Impersonal accounts are crucial for maintaining an organized ledger system, enabling accurate financial reporting, and ensuring compliance with accounting principles.
How do impersonal accounts appear on financial statements?
Nominal accounts contribute to the income statement by recording revenues and expenses. Real accounts show up on the balance sheet, capturing assets, liabilities, and equity.
Can an impersonal account be both real and nominal?
No, an impersonal account is either a real account or a nominal account, but not both.
Related Terms
- Nominal Account: A ledger account that tracks all income, expenses, gains, and losses, ultimately used to determine the company’s net profit or loss during an accounting period.
- Real Account: A ledger account that tracks assets, liabilities, and equity. These accounts are carried forward to the next accounting period.
- Personal Account: A ledger account that tracks transactions related to individuals or entities including customers, suppliers, and employees.
- Ledger: A book or other collection of financial accounts.
- Balance Sheet: A financial statement that summarizes a company’s assets, liabilities, and shareholders’ equity at a specific point in time.
Online References
Suggested Books for Further Studies
- “Financial Accounting Theory and Analysis: Text and Cases” by Richard Schroeder and Myrtle Clark
- “Intermediate Accounting” by Donald E. Kieso, Jerry J. Weygandt, and Terry D. Warfield
- “Accounting Made Simple: Accounting Explained in 100 Pages or Less” by Mike Piper
- “Principles of Accounting” by Belverd E. Needles and Marian Powers
- “Financial Accounting: An International Introduction” by David Alexander and Christopher Nobes
Accounting Basics: “Impersonal Account” Fundamentals Quiz
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