TRADITIONAL CLASSIFICATION OF ACCOUNTS
TRADITIONAL
CLASSIFICATION OF ACCOUNTS:
a)
Personal Accounts:-These accounts
relate to natural persons(Ram, Mohan etc.), artificial/ Legal persons( Govt.
companies, Clubs, co-operative societies etc and representative persons(
capital a/c, Drawing A/c, Prepaid a/c, outstanding exp A/c.
b)
Impersonal Accounts:
i.
Real Accounts:- These accounts relate to the
tangible or intangible real assets (i.e. accounts of properties and assets):
and
ii.
Nominal Accounts:-These accounts
relate to incomes, expenses or losses.
RULES( imp):—The following three are the basic rules ( traditional method)for recording the transaction:—
- Personal Accounts :- Debit
the receiver and credit the giver.
- Real Accounts :- Debit what comes in and
credits what goes out.
- Nominal Accounts :- Debit all exp. (and losses)
and credit all incomes & gains.
The left-hand
side of an account is called the debit side and the right-hand side of an
account is called credit side.
·
ACCOUNTING
EQUATION BASED CLASSIFICATION:
|
1.
Assets Accounts |
Ø These accounts relate to
tangible or intangible real assets. Eg. Land A/c, Building A/c, Patents,
Goodwill, trademark etc. |
|
2.
Liabilities Accounts |
Ø These accounts relate to
the financial obligations of an enterprise towards outsiders. Eg. Trade
Creditors, Bills Payable, Bank Overdraft, Loans, Outstanding Exp. etc. |
|
3.
Capital Accounts |
Ø These accounts relate to
owners of an enterprise. Eg.
Capital A/c, Drawings A/c. |
|
4.
Revenue Accounts |
Ø These accounts relate to
the amount charged for goods sold or services rendered or permitting others
to use enterprise’s resources yielding interest, royalty or dividend. Ex.
Sales A/c, Discount Received A/c, Dividend Received A/c, Interest Received
A/c. |
|
5.
Expenses Accounts |
Ø These accounts relate to
the amount incurred or lost in the process of earning revenue. Ex. Purchase
A/c, discount allowed A/c, Royalty paid A/c, Interest Payable A/c, Loss by
Fire A/c etc. |
Distinction
between Real Account and Nominal Account
Demo Class for CA/CMA/CA/B.Com for Accounts:https://www.conceptonlineclasses.com/demovideosVisit Website: https://www.conceptonlineclasses.com/
|
Real
Account |
Nominal
Account |
|
ð These accounts relate to
properties of the business. |
ð These accounts relate to
expenses, losses, income and gains. |
|
ð These accounts are shown
in Balance Sheet. |
ðThese accounts are shown
in profit and loss account. |
|
ð Closing balances of
these accounts are carried over to the next year as opening balances. |
ð Closing balance of these
accounts are closed by transfer to profit and loss account. |
|
ð These accounts indicate
financial position of the business. |
ð These accounts assist in
calculating profit and loss of the business. |
|
ð As per double entry
rule, property received is debited and property given is credited. |
ð As per double entry rule
expenses and losses are debited and income and gains are credited. |
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