Understand accounting | Determine the debit and credit aspect of transaction.
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| Classification of accounts |
What is account?Account is a record separately made for each type of asset, liability, revenue, expenses and equity that are used to show the begging balance and to record the increase, decrease and the end of balance during/end of the period.
3 golden rules of aacounts are
1.Debit what comes in credit what goes out.
2. Debit the receiver credit the giver.
3. Debit all ecpenses and losses credit all incomes and gains.
Classification of accounts
Accounts are classified into different kinds
1. To easily determine the debit and credit aspect of transaction.
2. And to understand the nature of balance of an account.
Now every trader need to carry on the business including the requirements such as cash, goods, furniture etc. Dealing with number of persons / firm and incurring certain expenses such as salaries, office expenses, rent etc. ad certain source of income to run the business.
So to carry the business efficiently, according to every businessman it’s necessary to maintain the following accounts.
1. Account that holds each firm or person the trader deals with.
2. Account for each property/ possession/ assets/ in which / with the help the business is carried out.
3. And the account for each head of expenses/ source of income that relates to the business.
There are mainly two types of accounts
1. Personal
a) Legal A/c b) Representative A/c c) Natural A/c
2. Impersonal
a) Real account
I. Tangible assets
II. Intangible assets
b) Nominal account
I. Expenses and losses
II. Incomes and gains
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