Table of Contents
TRADITIONAL APPROACH TYPES OF ACCOUNTS
TRADITIONAL APPROACH OF DEBIT AND CREDIT
TYPES OF ACCOUNTS
- Personal Account
- Impersonal accounts
PERSONAL ACCOUNTS – Accounts which belong to a person, firm and Institutions are called personal accounts. Such as Ram’s account, Mohan and Sons account, Shyam & Brother’s account, Bank account, Outstanding Expenses account, government account, school account, insurance company account, capital account, drawing account etc. There are three types of personal accounts-
a. NATURAL PERSONAL ACCOUNTS-Natural persons refer to humans and accounts that belong to humans are called natural personal accounts. For Rama’s account Shyam’s account Mohan’s account, Mariya account Deepa’s account Sania’s account etc.
b. ARTIFICIAL PERSONAL ACCOUNTS- Artificial or artificial persons refers to individuals whose body form is not the same as human beings, but they behave the same as human beings. Artificial personals are personal accounts that are artificially created by law, such as accounts of corporate bodies and institutions, these accounts do not have physical existence, however, they are identified as individuals in business dealings (individual accounts that are treated as individuals in the eyes of the law) such as Reliance Industries Limited’s account , Account of Tata Company Limited, State Bank of India account, Ram and Company account, BSNL, LIC account, school account, government account, firm account, company account, Delhi University account, etc.
c. REPRESENTATIVE PERSONAL ACCOUNTS- Representative Personal Accounts are that represent a person or group of individuals. Such as capital account, Drawing account, Outstanding expenses account, prepaid Expenses account, Accrued income account, Income received in advance account etc.
RULES OF PERSONAL ACCOUNT
DEBIT THE RECEIVER,CREDIT THE GIVER.
IMPERSONAL ACCOUNTS –Impersonal accounts are those accounts which do not related to any persons. Impersonal accounts are sub-divided into two categories-
a. Real Accounts – Real accounts are those accounts which relate to business property and things which are owned by the business concern. Real accounts include tangible and intangible accounts. For example. – Building account , Land account,Machinery account, Cash account, Furniture account, Computer account, Investment account, Motor account,Fixture and fitting account,Plant account, Goodwill account, Copyright account, Patents account, Trademark account etc.
RULES OF REAL ACCOUNT
DEBIT WHAT COMES IN, CREDIT WHAT GOES OUT.
b.NOMINAL ACCOUNTS OR INCOME AND EXPENDITURE ACCOUNTS-Nominal Accounts are those accounts, which relate to the income/profit and expenses/loss of the business are called nominal accounts or income expenditure accounts. These accounts have no existence, form or size. such as salary account, commission account, wage account, rent account, ad account, interest account, discount account, Depreciation account, charity account, advertising expense account, general expense account office expense account goods account (purchase, sale, purchase return, sales return, goods) etc.
RULES OF NOMIONAL ACCOUNT
DEBIT ALL EXPENSES AND LOSSES, CREDIT ALL INCOMES AND GAINS.
MEANING OF JOURNAL-Journal is a French word meaning from a daily diary or daily book. In India, it is known as a register or a journal or a Day book.
Journal or Day book is an important book of preliminary accounts in which the trader accounts for his daily financial transaction in accordance with the principle of double accounting system with full details to find out which account has been debited and which account has been credited.
The act of recording transactions in the journal is called JOURNALISING.
Importance of Journal-
Journal is the initial and important book of accounting. This book is kept by every trader. The journal is easily aware of the transactions on a particular date. It becomes easier to account in the ledger through the journal. Journal is helpful in settling trade disputes.
FORMAT OF JOURNAL
|Date||Particulars||L.F.||Debit Amount||Credit Amount|
The journal is an important book of preliminary accounts. The draft is also fixed. It consists of five columns
- DATE- This column is for date. In this column, the year is first written in the digits upwards and then the name of the month and then the date is written.
- PARTICULARS-The complete statement of the transaction is written in this column, the account that is debited is written in the top line and the account to which the credit is credited is written in the bottom line and then the details of the deal are written.
- LEDGER FOLIO OR L.F. This column displays the page number of the respective accounts opened in the ledger. This facilitates you to know which account is opened in the account book on which page.
- DEBIT AMOUNT-is written in this column for the amount of the account that is debited in the journal entry.
- CREDIT AMOUNT- is written in this column for the amount of the account that is credited in the journal entry.
THINGS TO KEEP IN MIND WHEN RECORDING OF TRANSACTIONS IN JOURNAL
1.The first year is then written month and then date while writing the date.
2. The account that is debited while journaling is always written in the top line, and the word Dr. is written in front of the account briefly and the account credited is written in the bottom line and the English word To is written leaving the first few places of the account. Narration is followed by a statement. The word Being or For is used before the details.
3. The account that is debited is written in debit Column and the account to which the credit is credited is written in credit column.
4. The name of the trader is not written in the merchant whose books are being made.
5.The rules for debit and credit of accounts are used after identifying the transactions to find out which accounts are being affected.
6.The word ‘ account ‘ is not applied to the names of persons. Jay’s A/c is typed in this way if applied.
7 Debit is written in written briefly Dr. and credit is written briefly Cr..
8 Journal is the initial book.
9. When the person is given the name and the word ‘ cash ‘ is not given with the deal, the deal is always considered as borrowing.
10. If the person is given the name and the word ‘ cash ‘ is given, the deal is considered as cash.
11. If only it is said that the goods are purchased, the deal is considered as cash.
12. Trade discounts are made on both cash and credit transactions. It is not done in the books of accounts. But it is shown to be reduced directly.
13. Cash discounts are given only on cash transactions. It is accounted for in the books. This exemption is given at the time of payment.
14 Accounts are always done from business point of view, not from the point of view of the trader or businessman.
15 When the sum is moved to the next page, Total C/f is written and the sum brought to the next page is written by Total B/f.
16 Accounts are always used for practices which have a monetary value. Transactions which have no monetary value are not recorded in the books of account.
17. Accounts are made on the basis of bills or vouchers.
18. Modern rules are also taken into account while recording of transactions.