02 nature of accounts & rulles of debit & credit

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02 nature of accounts & rulles of debit & credit

  1. 1. NATURE OF ACCOUNTS & RULES OF DEBIT AND CREDIT DEFINE ACCOUNT. A summarized record of business transactions relating to a person or thing is called account. HOW MANY NUMBERS OF ACCOUNTS ARE IN BRITISH APPROACH? There are three types of account are in British approach:  Real account  Nominal account  Personal account DEFINE REAL ACCOUNT (PROPERTY ACCOUNT). Real account deals with those things which tangible visible or which exist in reality like machinery, building etc. DEFINE NOMINAL ACCOUNT (PROPRIETARY ACCOUNT)? Nominal account deals with those things which are intangible or invisible or which do not exist in reality like salaries rent interest etc. DEFINE PERSONAL ACCOUNT? Accounts relating to persons firms companies and industries are personal account like EXPLAIN THE TERM OF DEBIT AND CREDIT. If we divided the page into two part then left hand side will be called debit and right hand side will be called credit. HOW MANY NUMBERS OF ACCOUNTS IN AMERICAN APPROACH.  Real account  Nominal account  Personal account RULES OF DEBIT AND CREDIT ACCORDING TO BRITISH/TRADITIONAL APPROACH. ACCOUNTS NAME DEBIT CREDIT Real Account Coming into Business Going out from Business Nominal Account Expenses Income Personal Account Receiving Person Giving Person HOW MANY NUMBERS OF ACCOUNTS IN AMERICAN APPROACH. There are five accounts in American approach:  Assets  Expenses  Income  Liabilities  Owner equity RULES OF DEBIT AND CREDIT ACCORDING TO AMERICAN/MODREN APPROACH ACCOUNTS NAME DEBIT CREDIT Assets account Increases Decreases Expenses account Increases Decreases Income account Decreases Increases Liabilities Decreases Increases Owner equity accounts Decreases IncreasePUNJAB COLLEGE OF COMMERCE PROF. HAFIZ MUHAMMAD NAWAZ PAGE 1

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