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Classification of accounts heads

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Accounts Manager
54 Points Posted on 19 September 2010

Plz help me someone who post me classification of accounts heads in proper manner

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On 19 September 2010 at 21:06 Report
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Employee
23 Points Posted on 14 December 2010

Hi,

There are 2 type of classification

1) TRADITIONAL CLASSIFICATION OF ACCOUNTS :

The three types of accounts maintained for transactions with parties are as follows.

  1. Real Accounts:

    They are the accounts of all assets used in the business or belonging to the business

  2. Personal Accounts:

    They are the accounts of the all natural and artificial persons.

  3. Nominal Accounts:

    They are the accounts of the all income and expenses and gains and losses suffered in business.  

  4. Illustration 1.
    1) Mr. Bachan started a business with a cash Rs.9,00,000/-.
    2) He purchased an asset for Rs. 3,00,000/- by cash.
    3) He brought in to business furniture (personal assets) worth Rs.5,00,000/-.
    4) He purchased goods worth Rs. 75,000/- cash.
    5) He opened bank a/c with S B I by depositing cash of Rs.1,00,000/-.
    6) During the month he paid a) salary Rs. 50000/-. b) Transportation Rs. 75,000/-.
    7) He sold goods worth Rs.50000/- at Rs. 90,000/-.

 

Solution:-

Tr. No. Affected Account Type Accounting DR./CR.
1. Capital a/c Personal a/c Cr.
  Cash a/c Real a/c Dr.
2. Assets a/c Real a/c Dr.
  Cash a/c Real a/c Cr.
3. Furniture a/c Real a/c Dr.
  Drawings Personal a/c Cr.
4. Goods / purchase a/c Real a/c Dr.
  Cash a/c Real a/c Cr.
5. S B I bank a/c Personal a/c Dr
  Cash a/c Real a/c Cr.
6. Salary a/c Nominal a/c Dr.
  Transportation chg. a/c Nominal a/c Dr.
  Cash a/c Real a/c Cr.
7. Debtors a/c Personal a/c Dr.
  Cash a/c Real a/c Cr.

2) MODERN CLASSIFICATION :

 

Accounting Equation

There are two accounting equations as follows

Assets= capital + liabilities

 Income = Expenses +Profit (profit & loss A/c equation)

Concept of Debit, Credit and Duality:

  1. Debit: Any increase on the left hand side of the equation.

  2. Credit: Any decrease on the left hand side of the equation.

  3. Debit: Any decrease on the right hand side of the equation.

  4. Credit: Any increase on the right hand side of equation.

Illustration 2

  1. Business started with cash of Rs.8,00,000/-

  2. Deposited Rs.5,00,000/- in UTI Bank A/C.

  3. Purchased Plant and Machinery worth Rs.2,50,000/- from ABC & Co. By making immediate payment of Rs.50,000/-in cash.

  4. Purchased goods worth Rs. 30,000/- for cash and Rs 55,000/- on credit from Ram Traders.

  5. Issued a cheque for Rs. 2,00,000/- to ABC & Co. towards the purchase of plants and machinery.

  6. Goods sold for cash Rs.80,000/- (cost goods Rs. 50,000/-).

  7. Proprietor withdrew Rs.20,000/- cash for personal use

  8. Paid Rs. 3,000/- by cheque towards insurance

  9. Paid salary of Rs.7,500/- in cash.

  10. Purchased furniture worth Rs.20,000/- in cash.

  11. Took a loan of Rs. 20,000/- from bank.


Solution:-

Tr.No. Accounts involved Nature of Accounts Reason DR./ CR.
1. Cash A/c. Assets Increase DR.
  Capital A/c. Capital (Liability) Increase CR.
2. UTI Bank A/c. Assets Increase DR.
  Cash A/c. Assets Decrease CR.
3. Plant & Machinery A/c. Assets Assets DR.
  Cash A/c Assets Decrease CR.
  A B C & Co. A/c. Liability (Creditor) Increase CR.
4. Purchases A/c. Expenses (Purchases) Increase DR.
  Cash A/c. Assets Decrease CR.
  Ram Traders A/c. Liability (Creditor) Increase CR.
5. ABC & Co. A/c. Liability (Creditor) Decrease CR.
  UTI Bank A/c. Assets Decrease DR.
6. Cash A/c. Assets Increase CR.
  Sales A/c. Income (Sales) Increase CR.
7. Drawing A/c. Capital (Liability) Decrease DR.
  Cash A/c. Assets Decrease CR.
8. Insurance A/c. Expenses Increase DR.
  UTI Bank A/c. Assets Decrease CR.
9. Salary A/c. Expenses Increase DR.
  Cash A/c. Assets Decrease CR.
10. Furniture A/c. Assets Increase DR.
  Cash A/c. Assets Decrease CR.
11. Cash A/c. Assets Increase DR.
  Bank Loan A/c Liability Increase CR.

 


Reply
On 14 December 2010 at 15:31


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