Accounting Fundamental

Definition of Accounting

Accounting is the process of identifying, recording, classifying and reporting information on financial transactions in a systematic manner for the purpose of providing financial information for decision making.

Types of Accounts

There are basically three types of Accounts maintained for transactions:

1. Personal Account
2. Real Account
3. Nominal Account

Personal Account: Any individual person or any firms or any company or a bank is considered in a Personal account.

For example:-

Rajesh Singh
Muna Enterprise
Wipro Pvt Ltd
PNB Bank
Capital etc.

The Receiver Debit (Dr)
The Giver Credit (Cr)

Real Account: Account of any physical things. The cash account or goods account are examples of Real account.

For example:-

Cash
Land
Building
Furniture
Computer etc.

What comes in Debit (Dr)
What goes out Credit (Cr) 

Nominal Account: Account of any invisible things that means that things are in terms of cash are examples of Nominal account.

Discount
Commission
wages
Salary
Freight etc.

All Expenses or Losses Debit (Dr)
All Income or Gains Credit (Cr)

Entries in Account Book

1. Ramesh started a business with cash Rs 1,80,000

Cash a/c  Dr	180000
To Capital a/c	180000

2. Cash deposited into SBI bank Rs 55000

SBI bank a/c  Dr	55000
To Cash a/c	55000

3. Purchase goods for cash Rs 22000

Purchase a/c Dr	22000
To Cash a/c	22000

4. Bought goods from Sonu Enterprise Rs 72000

Purchase a/c Dr	72000
To Sonu a/c	72000

5. Sold goods for cash Rs 16200

Cash a/c Dr	16200
To Sales a/c	16200

6. Paid rent for the year by SBI bank chequeRs 6000

Rent a/c Dr	6000
SBI bank a/c	6000

7. Withdraw cash into SBI bank Rs 40000

Cash a/c Dr	40000
To SBI bank a/c	40000

8. Purchased furniture for cash Rs 5000

Furniture a/c Dr	5000
To Cash a/c	5000

9. Sold goods to Super Rs 12700

Super a/c Dr	12700
To Sales a/c	12700

10. Received cash from Super Rs 12446 and allowed him discount Rs 254

Cash a/c Dr	12446
Discount allowed a/c	254
To Super a/c	12700

11. Paid wages Rs 1800

Wages a/c Dr	1800
To Cash a/c	1800

12. Paid cash for trade Expenses Rs 2000

Trade Expenses a/c Dr	2000
To Cash a/c	2000

13. Withdraw cash for private Expenses Rs 8000

Drawings a/c Dr	8000
To Cash a/c	8000

14. Depreciation on Machinery Rs 50000

Depreciation a/c Dr	50000
To  Machinery a/c	50000

Share this

Prince Patel