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Classification of Ledger Accounts

The ledger accounts are classified into five categories namely,
  • Assets,
  • Liabilities,
  • Capital,
  • Revenues/gains and
  • Expenses / losses.
All these accounts may further be put into two groups.
They are:
  • Permanent accounts and Temporary accounts.
All permanent accounts are balanced and carried forward to the next accounting period. The temporary accounts are closed at the end of the accounting period by transferring them to the trading and profit and loss account. All permanent accounts appear in the balance sheet. Thus, all assets, liabilities and capital accounts are permanent accounts and all revenue and expense accounts are temporary accounts. This categorization is also significant for preparing the financial statements.

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