Types of Accounting

-

 An account is a summary of the record of all transactions relating to person, asset, expense or gain. It has two sides- the left hand called the Debit side and right hand side called credit side.

Accounts are broadly classified into two head:

1) personal Accounts

2) impersonal Accounts

a) Real Accounts

b) Nominal Accounts

Personal Accounts:- Personal accounts are accounts of persons with whom a concern carries on business personal accounts .

a) Accounts of natural person's such as Rahul, Naveen etc.


b) Accounts of artificial persons, such as Andhra Bank, Wipro Technologies .

c) Representative personal accounts such as outstanding salaries prepaid insurance accounts etc.

Basic Rule:-

Debit - The Receiver

Credit- The Giver

Real Accounts :

Accounts relating to properties or assets of a trader are known as real accounts. It includes tangible assets such as Buildings, furniture,cash etc and also intangible assets such as Goodwill,trade marks etc.

Basic Rule:-

Debit- what comes in

Credit- what goes out

Nominal Accounts:-

Accounts dealing with expenses, losses, gains and incomes are called Nominal Accounts. Example- Salaries Account,Rent Account, Commision Account etc.

Basic Rule:-

Debit  -All expenses and losses

Credit - All incomes gains.


Comments

Post a Comment

Popular posts from this blog

Preference Shares

-
Image
  Preference Shares:-   Preference Shares are those which carry preference over other classes of shares in the payment of dividend and repayment of capital at the time of winding up. Types of preference Shares:-   Preference Shares can be broadly divided into. 1) Redeemable preference Shares. 2)irredeemable preference Shares 3) Cumulative preference Shares 4) Non - Cumulative preference Shares 5) Convertible preference Shares 6) Non - Convertible preference Shares 7) participating preference Shares. 8) Non - participating preference Shares   Redeemable preference Shares:-   These are the shares, the capital of which is refundable after a stipulated period. Irredeemablepreference Shares:- These are the shares, capital of which is not refunded during the life time of the company. Cumulative preference Shares:- These are the shares on which a fixed rat of dividend is paid out of the current or future profits. If in any year, the company doesn't pay the dividend wil...
Read more

Need providing Depreciation

-
Image
  To know the true profits:-     We have seen that depreciation is an expense and becomes an important element of the cost of production.    Though it is not visible like other expenses and never paid to the outside party yet it is desirable to charge depreciation on fixed assets as these are used for earning purposes.   So their depreciation must be deducted out of the income earned from their use in order to calculate true net profit or loss. To show true financial position:-  Financial position can be studied from the balance sheet and for the preparation of the Balance Sheet fixed assets are required to be shown at their true value.    If Assets are shown in the Balance Sheet without any charge made for their use or depreciation, then their value must have been overstated in the Balance Sheet and will not reflect the true financial position of the business.   So for the purpose of reflecting true financial position, it is necessary t...
Read more

Accounting information

-
  Persons interested in Accounting Disclosures:-    Accounting is of primary importance to the proprietors and the managers. However, others person's such as creditors, prospective investors, employees, etc. are also interested in the Accounting information. 1) Proprietors:- A business is done with the objective of making profit. It's profitability and financial soundness are, therefore, matters of prime importance to the proprietors who have invested their money 💰 in the business. 2) Managers:- In a sole proprietary business, usually the proprietor is the manager. In case of a partnership business either some or all the partners participate in the management of the business. They therefore, act both as managers as well as owners. In case of joint stock companies, the relationship between ownership and management becomes all the more remote . In most cases the shareholders act merely as rentiers of capital and the management of the company passes in to the hands of profe...
Read more