Types of Natural Accounts:

Types of Natural Accounts:

Accounting Definition:

A Systematic process of identifying, registering, measuring, classifying, verifying, summarizing, interpreting and reporting the financial information is called as Accounting.

It provides the profit or loss for a given period and the value and nature of a firm's assets, liabilities and owners' equity.

Accounting Equation:

Assets - What it owns

Liabilities - What it owes to others

Owner's Equity - Difference between assets and liabilities

In other words, the Accounting Equation can be rewritten as:

Balance Sheet:

Organizations which are registered under Government is obliged to disclose the above mentioned balance in a document which is called as Balance Sheet.

Types of Natural Accounts:

The types of natural accounts are:

1. Assets Account

2. Expense Account

3. Liability Account

4. Owner’s Equity Account

5. Revenue Account

In Oracle General Ledger, when we attach the “Natural Account” Flexfield Qualifier to a segment. System attaches the 5 nature on the Value form.

When we add the Natural Account Value, we have to define the nature of the account as well.

 

1. Assets Account:

An asset which is belongs to an organization used for future operations.

Example: Cash On Hand, Notes Receivable, Accounts Receivable, Other Receivable, Pre-paid Expense, Land, Equipment, Building, Bank Account, Purchase Area, etc…

Asset Account increases when it is debited and decreases when credited.

2. Expense / Cost Account:

Expenditure is incurred by the enterprise or organization to earn revenue.

Example: Salary, Wages, Repair Suppliers, Services, Rent.

Expense Account increases when it is debited and decreases when credited.

3. Liability Account:

Amounts owed by the organization to the outsiders except the owner of the organization.

Example: Bank Overdraft, Creditors, Accounts Payable, Notes Payable and Interest.

Liability Account increases when it is credited and decreases when debited.

4. Owner's Equity Account:

Owner's Equity is the total Claim by the owner against the organization.

Example: Capital.

Equity Account increases when it is credited and decreases when debited.

5. Revenue Account:

Revenue is the Monetary earning through the organization's primary business.

Example: Sale of Products, Services, etc.

Revenue Account increases when it is credited and decreases when debited.

The below table summarize the nature account credit & debit: