DEFINITION OF ACCOUNTS
An account is a formal record, in the ledger, of all transactions relating to changes in particular item. It is a Used to convey information on transaction.
Classification of Accounts
Accounts can be classified in two ways: (a) Traditional Classification; (b) Modern classification.
1.TRADITIONAL CLASSIFICATION OF ACCOUNTS
The three types of accounts maintained for transactions with parties are as follows.
1. Real Accounts:
They are the accounts of all assets used in the business or belonging to the business
2. Personal Accounts:
They are the accounts of the all natural and artificial persons.
3. Nominal Accounts:
They are the accounts of the all income and expenses and gains and losses suffered in business.
Illustration 1.
1) Mr. Bachan started a business with a cash Rs.9,00,000/-.
2) He purchased an asset for Rs. 3,00,000/- by cash.
3) He brought in to business furniture (personal assets) worth Rs.5,00,000/-.
4) He purchased goods worth Rs. 75,000/- cash.
5) He opened bank a/c with S B I by depositing cash of Rs.1,00,000/-.
6) During the month he paid a) salary Rs. 50000/-. b) Transportation Rs. 75,000/-.
7) He sold goods worth Rs.50000/- at Rs. 90,000/-.
Solution:-
Tr. No. Affected Account Type Accounting DR./CR.
1. Capital a/c Personal a/c Cr.
Cash a/c Real a/c Dr.
2. Assets a/c Real a/c Dr.
Cash a/c Real a/c Cr.
3. Furniture a/c Real a/c Dr.
Drawings Personal a/c Cr.
4. Goods / purchase a/c Real a/c Dr.
Cash a/c Real a/c Cr.
5. S B I bank a/c Personal a/c Dr
Cash a/c Real a/c Cr.
6. Salary a/c Nominal a/c Dr.
Transportation chg. a/c Nominal a/c Dr.
Cash a/c Real a/c Cr.
7. Debtors a/c Personal a/c Dr.
Cash a/c Real a/c Cr.
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