Accounting
Accounting is a process of recording, classifying and summarizing financial transactions in a significant manner and interpreting results thereof. Accounting is both science and art.
And, accounts represents a systematic presentation of all the transactions related to their particular heads.
In accounting there are three types of accounts :-
- Real Account
- Personal Account
- Nominal Account
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1. Real Account
These type of accounts are related to assets and properties of the business.
Example : Machinery A/c, Building A/c, Etc.
These are further divided into two types:
- Intangible Real Account
- Tangible Real Account
(i) Intangible Real Account
These assets donot have physical existence. You can only see them, but you can not feel or touch them.
But they have value in Monetary terms.
Example : Patent, Goodwill, Trademarks, etc.
(ii) Tangible Real Account
These assets have physical presence and can be touched.
Example : Machinery, Furniture, Building, etc.
The Golden Rule for Real Account :
Debit what comes in.
Credit what goes out.
2. Personal Account
These types of accounts are related to persons.
Now these can be natural person.
Example : Ram's A/ C, Shyam's A/c, Komal's A/c, etc.
It can be any artificial person.
It means company or partnership form of business.
Example : A ltd.'s A/c, Tata.ltd A/c, etc
The Golden Rule for Personal Account
Debit the receiver.
Credit the giver.
3. Nominal Account
Nominal Account refers to all those expenses which are related to income or profits and expenses or losses in business organization.
Example : salary paid so, Salary A/c ; interest received (a income), Interest A/c ; etc.
The Golden Rule for Nominal Account
Debit all expenses and losses.
Credit all income and gains.
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