ACCOUNTS AND FINANCE

Golden rules of accounts (types of accounts a/c)

Real accounts
Asset, property) Nominal accounts
Personal account (

Individual (Mr.
X, Mrs. Y)
Tangible Goodwill, Expenses, losses,
Name Building, patent, income, gain
Organizational car, land, copyright,
(Tata ltd, SAIL) machinery, trademark
cash etc Etc.
Capital a/c(Mr x’s capital a/c)
a/c)

Bank A/c (SBI Bank a/c of Mr. Y)

Drawings a/c (Mr x is withdrawing money)

Representative personal a/c(prepaid rent, outstanding salary)

PERSONAL ACCOUNT REAL ACCOUNT NOMINAL ACCOUNT

Dr(Debit)= the receiver Dr(Debit)= what comes in Dr(Debit)= expenses, losses
Cr(Credit)= the giver Cr(Credit)= what goes out Cr(Credit)= income, gain
P= personal account; R= real account; N= nominal account:
CASH R; WAGES N; BUILDING R; MANCHESTER CLUB P; SBI P; RENT N; TRADEMARK R; DIVIDEND N; LAND R;
GOODWILL R; DISCOUNT N; FURNITURE R; SALARIES N; OUTSTANDING WAGES P; STATIONARY N; PREPAID EXP P;
SALES R/N; LOAN P; REPAIR TO MACHINERY N; STOCK R; INVESTMENT R; LOOSE TOOLS R; LOSS BY FIRE N;
DEPRECIATION N; BANK OVERDRAFT P; POSTAGE N; CARRIAGE N; BILLS RECEIVABLE R; BAD DEBT RECOVERED
N, OUTSTANDING EXPENSES P; ACCRUED INCOME P; SUNDRY CREDITORS P, SUNDRY DEBTORS P; BILLS
RECEIVABLE P, BILLS PAYABLE P; FURNITURE R; CAPITAL P, OPENING STOCK R, PURCHASE N/R, SALES N/R,
RETURN INWARD OR SALES RETURN N/R, RETURN OUTWARD OR PURCHASE RETURN N/R; INSURANCE N; BAD
DEBT N ETC.

ASSET: 1. getting or will be getting benefit LIABILITY: not yet paid or will be paid
2. It can be converted into cash in future

Dr any asset a/c Cr Dr any liability a/c Cr Dr any expenses Cr Dr any income a/c Cr Dr capital a/c Cr

Increase Decreas Decreas Increase Increase Decreas Decreas Increase Decreas Increase
+ e- e- + + e- e- + e- +

ASSETS= A,LIABILITIES= L, assets and liabilities can be divided into :

fixed asset=FA,current asset=CA, current liability=CL,intangible asset=IA,liquid asset=LA, fictitious assets=FIA:
LAND FA; BUILDING FA; DEBTOR CA; CLOSING STOCK CA; PLANT & MACHINERY FA; FURNITURE & FITTING FA;
BANK OVERDRAFT CL; CREDITOR CL; INVESTMENT FA/CA; PATENT IA; CASH IN HAND LA; CASH AT BANK LA;
LOAN TO Mr. A A; LOAN FROM Mr. Y L; BILLS RECEIVABLE CA; BILLS PAYABLE CL; OUTSTANDING SALARY CL;
PREPAID INSURANCE CA; CAPITAL L; PRELIMINARY EXPENSES FIA

CREDIT = C, DEBIT = D:
CAPITAL C, OPENING STOCK D, PURCHASE D, SALES C, RETURN INWARD D, RETURN OUTWARD C, WAGES D,
CARRIAGE INWARD D, FREIGHT D, ROYALTY ON PRODUCTION D, GAS AND FUEL D, DISCOUNT RECEIVED C,
DISCOUNT ALLOWED D, BAD DEBT D, RESERVE FOR BAD DEBT C, COMMISSION RECEIVED C, REPAIR D, RENT D,
SALARIES D, LOAN SECURED C, INTEREST RECEIVED C, INTEREST PAID D, INSURANCE D, CARRIAGE OUTWARD D,
 ACCOUNTS AND FINANCE
ADVERTISEMENT D, SUNDRY EXPENSES D, TRADE CHARGES D, MISCELLANEOUS RECEIPT C, INCOME TAX D,
OFFICE EXPENSES D, IMPORT DUTY D, ALLOWANCE D, SALES TAX D, PROVISION FOR DISCOUNT ON DEBTORS C,
PROVISION FOR DISCOUNT ON CREDITORS D, SUNDRY CREDITORS C, SUNDRY DEBTORS D, GOODWILL D, PLANT
AND MACHINERY D, LAND AND BUILDING D, FURNITURE FIXTURE AND FITTINGS D, INVESTMENT D, CASH IN
HAND D, CASH AT BANK D, RESERVE FUND C, GENERAL RESERVE C, BILLS RECEIVABLE D, BILLS PAYABLE C,
DEPRECIATION D, ACCRUED INCOME D, OUTSTANDING EXPENSES C, PREPAID EXPENSES D, BAD DEBT
RECOVERED C, PATENT AND TRADE MARKS D ETC.
Debit should be equal to credit.

ACCOUNTING EQUATION:
Asset=liability(including capital) or, Asset=Owners equity(capital) + external liability or, Expenses +
losses=Capital + External liability + income and gain

Transaction Asset = Liability + capital

Cash + stock + machinery + debtor + prepaid exp= Creditors +advance capital
inc
1. business started
with:
cash Rs. 10000 goods 10000 + 13000 + 30000 + 0 + 0 = 0+ 0 53000
Rs. 13000 and
machinery Rs. 30000
2. purchased goods for -9000 + 9000 + 0 + 0 + 0 = 0+ 0 0
cash Rs. 9000 1000 + 22000 + 30000 + 0 + 0 = 0+ 0 53000
3. sold goods for Rs. +3500 - 3000 - 30000 + 0 + 0 = 0+ 0 +500
3500 (cost Rs. 3000)
4500 + 19000 + 30000 + 0 + 0 = 0 + 0 53500
4.purchase goods on 0 + 4000 + 0 + 0 + 0 = 4000 + 0 +0
credit Rs. 7000 4500 + 23000 + 30000 + 0 + 0 = 4000 + 0 53500
5. paid the creditors -3800 + 0 + 0 + 0 + 0 = 4000 + 0 +200
Rs. 3800 against Rs. 700 + 23000 + 30000 + 0 + 0 = 0 + 0 53700
4000
6. sold goods on credit 0- 14000 + 0 + 14500 + 0 = 0+ 0 +500
for Rs. 14500 (cost Rs.
14000) 700 + 9000 + 30000 + 14500 + 0 = 0+ 0 54200
7. received from
debtors Rs. 14300 +14300+ 0+ 0 - 14500 + 0 = 0 + 0 -200
against Rs. 14500 15000+ 9000 + 30000 + 0 + 0 = 0 + 0 54000
8. paid business - 4200+ 0+ 0 + 0 + 0 = 0 + 0 -4200
expenses Rs. 4200 sssasasdfsdfasdfasdfasdf
10800+ 9000+ 30000 + 0 + 0 = 0 + 0 49800

9. collected rent Rs. + 3500+ 0+ 0 + 0 + 0 = 0+ 0 +3500

3500 14300+ 9000+ 30000 + 0 + 0 = 0+ 0 53300
10. drew cash from - 1700+ 0+ 0 + 0 + 0 = 0+ 0 -1700
business for personal
use Rs. 1700 12600+ 9000+ 30000 + 0 + 0 = 0 + 0 51600
11. depreciation 0+ 0 - 1500 + 0 + 0 = 0 + 0 -1500
provided Rs. 1500 12600+ 9000+ 28500 + 0 + 0 = 0 + 0 50100
12. expenses paid in -300 + 0+ 0 + 0 + 300 = 0 + 0 +0
advance Rs. 300 12300+ 9000+ 28500 + 0 + 300 = 0 + 0 50100
13.rent received in
advance Rs. 200 +200 + 0+ 0 + 0 + 0 = 0+ 200 +0

12500+ 9000+ 28500 + 0 + 300 = 0+ 200 50100