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Classification and rules of account
An account is used to record business transactions and has two sides: a debit side and a credit side. The type of account, whether personal, real, or nominal, determines which side a transaction is recorded on based on set rules. Personal accounts follow the rule that the receiver of an item or money is debited and the giver is credited. Real accounts debit what comes in and credit what goes out. Nominal accounts debit expenses and losses and credit incomes and gains.
Classification and rules of account
- 1. ACCOUNT An Account isa place for recording of business transaction occurring in a business. An Account has two sides. One is debit side and the other is credit side. Debit side : The left hand side of an account is called as debit side. Credit side : The right hand side of an account is called as credit side. The debit and credit rule depends upon the type of account. Dr. FORMAT OF ACCOUNT Cr. Date Particulars LF Amount Date Particulars LF Amount Prof. Gogarkar P. G. (teaching since 1992) M. Com., G.D.C. & A., N.E.T.
- 2. PERSONAL Impersonal 2. Artificial 3.Representative Assets that can be seen and touched Assets that cannot be seen and touched 1. Natural REAL (Assets and Properties) NOMINAL Tangible Intangible Expenses & Losses Incomes & Gains Prof. Gogarkar P. G. (teaching since 1992) M. Com., G.D.C. & A., N.E.T.
- 3. PERSONAL ACCOUNT 1. NaturalArtificial Representative An account of a Person is called Natural Personal Account For example Jyoti A/c., Roshni A/c., Suhani A/c., Shubham A/c. Artificial Person is a person created by Law. Such as Companies, Institutions, Corporate Bodies, Societies, etc. For example Tata Motors A/c., School & College A/c., Municipal Corporation A/c., Consumer Co-op. A/c. Oustandings or Advances representing a particular person For example Outstanding Expenses A/c., Prepaid Expenses A/c., Pre-received Incomes A/c., Payables A/c. Receivables A/c. Prof. Gogarkar P. G. (teaching since 1992) M. Com., G.D.C. & A., N.E.T.
- 4. Impersonal Account REAL ACCOUNT (Assetsand Properties) NOMINAL ACCOUNT For example Cash A/c., Machinery A/c., Building A/c., Furniture A/c. Tangible (which can be seen and touched) For example Goodwill A/c., Patent Right A/c., Copyright A/c., Trademark A/c. Intangible (which cannot be seen and touched) For example Stationery, Travelling Expenses, Salary, Wages, Carriage, Royalty, Commisision, Loss A/c. Expenses & Losses For example Salary Received, Rent Received, Discount Received Interest Received, Profit A/c. Incomes & Gains Prof. Gogarkar P. G. (teaching since 1992) M. Com., G.D.C. & A., N.E.T.
- 5. Let us nowclassify the various account into Personal, Real and Nominal Prof. Gogarkar P. G. (teaching since 1992) M. Com., G.D.C. & A., N.E.T. Name of Account Type of Account Name of Account Type of Account Cash Vinod Salary Land Creditor Discount Goods Machinery Ram Wages Goodwill Debtor Commission Loose Tools Machinery Ram Wages Goodwill Debtor Commission Loose Tools Bank Loan Travelling Expenses Stock Outstanding Salary Building Prepaid Insurance Insurance Real Personal Nominal Real Personal Nominal Real Real Personal Nominal Real Personal Nominal Real Real Personal Nominal Real Personal Nominal Real Personal Nominal Real Personal Real Personal Nominal
- 6. RULES OF ACCOUNT Prof.Gogarkar P. G. (teaching since 1992) M. Com., G.D.C. & A., N.E.T. PERSONAL Debit the Receiver Credit the Giver Debit the Receiver Credit the Giver
- 7. RULES OF ACCOUNT Prof.Gogarkar P. G. (teaching since 1992) M. Com., G.D.C. & A., N.E.T. REAL Debit what comes in Credit what goes out Debit what comes in Credit what goes out
- 8. RULES OF ACCOUNT Prof.Gogarkar P. G. (teaching since 1992) M. Com., G.D.C. & A., N.E.T. NOMNAL Debit all expenses and losses Credit all incomes and gains Debit all expenses and losses Credit all incomes and gains