Machinery account is ______.
a real account
Classification of Machinery Account
Understanding the classification of accounts is crucial in accounting. Accounts are typically categorized into three main types: Personal, Nominal, and Real.
Types of Accounts Explained
- Personal Accounts: Represent individuals, firms, or organizations (e.g., Customer accounts, Supplier accounts).
- Nominal Accounts: Relate to incomes, expenses, gains, or losses (e.g., Rent Expense, Sales Revenue).
- Real Accounts: Represent tangible and intangible assets owned by the business. The fundamental rule is 'Debit what comes in, Credit what goes out'.
Machinery as a Real Account
The Machinery account represents a tangible asset owned by the business. Assets are resources controlled by the entity from which future economic benefits are expected to flow. Since machinery is an asset, its account falls under the category of Real Accounts. When machinery is purchased, it represents an asset coming into the business, hence it is debited. When machinery is sold or disposed of, it represents an asset going out, hence it is credited.
Therefore, the Machinery account is classified as a real account.
Important Questions from Assets & Liabilities
Which of the following needs to be excluded from current assets apart from closing stock, to get the balance as liquid assets?
_______ is the most liquid of all assets.
The freight and insurance paid for acquiring goods or for making them saleable is ________.
Which of the following is NOT regarded as a capital expenditure?
Which concept enables the accountant to carry forward the values of assets and liabilities from one accounting period to the other without asking the question about usefulness and worth of the assets and recoverability of the receivables?
