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  1. 1. Dr. S.Pasupathi Associate Professor of Commerce Vivekananda College Tiruvedakam West
  2. 2. Accounting Golden Rules • Personal Accounts Accounts which are related with accounts of individuals, firms, companies are known as personal accounts. The personal accounts may further be classified into three categories: – Natural Personal Accounts: Accounts of individuals relating to natural persons such as Akhil’s A/c, Rajesh’s A/c, Sohan’s A/c are natural personal accounts. – Artificial Personal Accounts: Accounts of companies, institutions such as Reliance Industries Ltd; Lions Club, M/s Sham & Sons, National College account are artificial personal accounts. These exist only in the eyes of law. – Representative Personal Accounts: The accounts which represent some person such as wage outstanding account, prepaid insurance account, and accrued interest account are considered as representative personal accounts.
  3. 3. • Real Accounts Real accounts are the accounts related to assets/properties. These may be classified into tangible real account and intangible real account. The accounts relating to tangible assets such as building, plant, machinery, cash, furniture etc. are classified as tangible real accounts. Intangible real accounts are the accounts related to intangible assets such as goodwill, trademarks, copyrights, franchisees, Patents etc. • Nominal Accounts The accounts relating to income, expenses, losses and gains are classified as nominal accounts. For example Wages Account, Rent Account, Interest Account, Salary Account, Bad Debts Accounts
  4. 4. Rules for Debit and Credit • Personal Account Debit the receiver Credit the giver • Real Account Debit what comes in Credit what goes out • Nominal Account Debit all expenses and losses Credit all incomes and gains
  5. 5. Accounting concepts • Separate Business Entity Concept • Money Measurement Concept • Dual Aspect Concept • Going Concern Concept • Accounting Period Concept • Cost Concept • The Matching concept • Accrual Concept • Realization Concept
  6. 6. Accounting Conventions • Convention of Materiality • Convention of Conservatism • Convention of Consistency • Convention of Disclosers
  7. 7. Journal • Journal is a historical record of business transaction or events. The word journal comes from the French word “Jour” meaning “day”. It is a book of original or prime entry. Journal is a primary book for recording the day to day transactions in a chronological order i.e. The order in which they occur. The journal is a form of diary for business transactions. This is called the book of first entry since every transaction is recorded firstly in the journal.
  8. 8. Ledger • Ledger is a book which contains various accounts. In simple words, ledger is a set of accounts. It includes all accounts of the business enterprise whether Real, Nominal or Personal. Ledger may be kept in any of the following two forms: • It is common to keep the ledger in the form of loose- leaf cards these days instead of keeping them in bounded form. This helps in posting transactions particularly when mechanized system of accounting is used. Interestingly, nowadays, mechanized system of accounting is preferred over the manual system of accounting.
  9. 9. Trial balance • Trial balance is a statement containing the balances of all ledger accounts as at any given date arranged in the form of debit and credit columns placed side by side and preparing with the object of checking the arithmetical accuracy of ledger posting. Thus, the two sides of the Trial Balance tally. It means the books of accounts are arithmetically accurate.
  10. 10. Process of Accounting