What is an account?
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Transcript of What is an account?
WELCOME TO THE WORLD OF ACCOUNTING
BY
SUBBU PULLELA
SUBBU PULLELA
Double Entry System:
WHAT IS AN ACCOUNT…?
Account:
It is the only scientific system of accounting. According to it,every transaction has two-fold aspects debit and credit andboth the aspects are to be recorded in the books of accounts.
A person starts his business with says ₹ 30,000; Transactionsentered into the firm will alter the cash balance in two ways,one will increase the cash balance and other will reduce it.Payments for goods purchased, Salaries, Rent, etc… willreduce it; Sale of goods for cash, Collection from customerswill increase it.
In accounting we open an account for each item inour records. The account has the following format.
Account has the format of the letter ‘T’.
SUBBU PULLELA
Date Particulars Ref. Amount Date Particulars Ref. AmountDr. Cr.
The columns are self-explanatory except that the column forReference (Ref.) is meant to indicate the sources where Information about the entry is available.
SUBBU PULLELA
Debit (Dr.) and Credit (Cr.):
A Debit is an accounting entry that either increasesan asset or expenses account, or decreases a liability orequity account. It is positioned to the left in an accounting Entry.
A Credit is an accounting entry that either increases aliability or equity account, or decreases an asset or expensesaccount. It is poisoned to the right in an accounting entry.
ACCOUNTS
Representative
Artificial
Natural
Real
PERSONAL
IMPERSONAL
Nominal
Ram, Raheem, Robert, etc…Governments, Companies,Clubs, Corporations, etc…o/s liabilities, p/p capitalCapital A/c, Drawings A/c, etc…
Assets likeCash, Building, Vehicles, Furniture, Machinery, etc…Goods likePurchases, Sales, Purchase Returns Sales Returns, etc…
Expenses & Losses likeCash, Building, Vehicles, Furniture, Machinery, etc…Incomes & Gains likeInterest Received, Commission Receivedetc…
CLASSIFICATION OF ACCOUNTS
SUBBU PULLELA
All the above classified accounts have two rules each,one related to Debit and other related to Credit for recordingthe transactions.
which are termed as golden rules of accounting, as transactions are recorded on the basis of double entrysystem.
Golden Rules of Accounting:
SUBBU PULLELA
Golden Rules of Accounts
Personal Account Deals with persons ( Artificial / Natural)
Debit the receiver Credit the giver
Real Account Deals with properties
Debit what comes in Credit what goes out
Nominal Accounts Deals with Expenditure, Losses, Incomes an gains
Debit all expenses and lossesCredit all incomes and gains