A real account is the branch of accounts that doesn’t close at the end of period or every year or else it is carried forward to the next year as the opening account balance of any company or business entity.
In simple words, such account stayed open allowing companies to accumulate their balances and carry forward it to the next year which is every year during the lifetime or existence of the company or business entity.
Real accounts are prepared to give ease in management working as they can compare the ongoing accounts of the company with initial accounts or balances of the previous accounting year.
Thus, with changing accounting year the balance of the ongoing financial year will become the initial balance for the next financial and the rest process is continued same as before every year.
The balances of these ledger accounts are transferred or carried to permanent account i.e.
Shareholders equity account– It includes retained earnings and other comprehensive accounts related to stock.
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The above mentioned transactions has to be analysed properly and recorded in a systematic way to avoid confusion of any type in future.
The concept of double entry in a business transaction is necessary and important concept to be understood by the accountant or proprietor of the business.
The various types of assets a firm or any business entity owns fall under the category of real account.
Anything that cannot be touched or felt physically is known as Intangibles.
The various types of Intangible assets included under real account are goodwill, patents and trademarks of registration firm etc.
The transactions included in personal account are debtor, creditor, banks, goods purchased from suppliers, capital or drawings etc.
