Go Ad-Free on CAclubindia with Daily Mobile Updates. Subscribe Now!

Classification of accounts heads

Rohit Kaushal (Accounts Manager) (54 Points)

19 September 2010

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

Reply
Follow
Share

1 Replies

Gorksh (Employee) (23 Points)
Replied 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.

Real Accounts:

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

They are the accounts of the all natural and artificial persons.
Nominal Accounts:

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

Debit: Any increase on the left hand side of the equation.
Credit: Any decrease on the left hand side of the equation.
Debit: Any decrease on the right hand side of the equation.
Credit: Any increase on the right hand side of equation.

Illustration 2

Business started with cash of Rs.8,00,000/-
Deposited Rs.5,00,000/- in UTI Bank A/C.
Purchased Plant and Machinery worth Rs.2,50,000/- from ABC & Co. By making immediate payment of Rs.50,000/-in cash.
Purchased goods worth Rs. 30,000/- for cash and Rs 55,000/- on credit from Ram Traders.
Issued a cheque for Rs. 2,00,000/- to ABC & Co. towards the purchase of plants and machinery.
Goods sold for cash Rs.80,000/- (cost goods Rs. 50,000/-).
Proprietor withdrew Rs.20,000/- cash for personal use
Paid Rs. 3,000/- by cheque towards insurance
Paid salary of Rs.7,500/- in cash.
Purchased furniture worth Rs.20,000/- in cash.
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.

Upgrade to CAclubindia Pro. Subscribe Now!

Join CCI Pro

Recent Topics

More recent discussions | Post

Related Threads

Popular Discussion

Start a New Discussion

CCI Pro

Trending Online Classes

Certification Course on GST Invoice Management System (IMS)

CA Pratibha Goyal

Enroll Now

28 November 2024
Certificate course on Income Taxation of Indians in the US

Saniya Mushrif

Enroll Now

30 November 2024
Basics of UAE Corporate Tax and VAT(With Recording)

CA Mohd Asim

Enroll Now

07 December 2024

view all classess

Subscribe to the latest topics :

Search Forum:

Forum Home

Popular Threads

Recent Posts

Unreplied Threads

Settings